Perhaps we should take a wider view?
«Notariat» № 9, April, 2010
The president of the Lithuanian Chamber of Notaries, Notary of the 1st Notary Bureau of the city of Klaipeda Marius Stračkaitis: “Perhaps we should take a wider view?”
After a long, intensive and productive work the project of hypothec and mortgage registration reform has finally reached the Seimas. The Chamber of Notaries said its definite “yes” to the mentioned reform, although it drew the legislators’ attention to certain aspects of the suggested reform which should be discussed before making a political decision to enter changes into the Civil Code and legislative enactments connected with it.
In accordance with the applicable legislation, Notary in the process of hypothec and mortgage performs legal study of transactions and documents in this sphere, explains the parties essence and consequences of a transaction, rights and obligations of each party, makes sure interests of persons and the state are taken into account, confirms hypothec and mortgage letters. At present competences of notaries do not include filing of the transaction for registration, registration of hypothec and mortgage, making decision regarding exaction from the mortgaged property.
If the Seimas approves the reform suggestions, notaries shall have such functions as legalizing transactions, registration of the legalized transactions, filing information about a transaction to the hypothec registry and making an executive endorsement. This may have a number of positive consequences. First of all, the state legislative system and, in particular, notariat shall offer “one window” services. After we get rid of a double legal study the time of registration of a hypothec transaction will be reduced. Moving the hypothec and mortgage process to notary bureaus will reduce workload of courts and, probably, will help to save some funds.
The Chamber of Notaries also approves extension of the institute of a notary’s executive endorsement, at the same time simplifying and accelerating the process of exaction from mortgaged property. Although this certainly wide new area of activities will increase notaries’ workload and labor costs, it will also help to generate additional income. We believe that non-judicial exaction from property mortgaged under hypothec against an executive endorsement made by a notary will be cheaper, more efficient, quicker and will to a greater extent correspond to interests of parties in honest civil law relations.
Besides, it should be pointed out that in the process of reforming the procedure of exaction from mortgaged property it is necessary to ensure the balance of creditor’s and debtor’s interests. In order to start non-judicial exaction from a debtor’s property it is necessary to ensure legality of the agreement on the basis of which such exaction is initiated. We believe that a notary’s executive endorsement may be issued only in accordance with a notarized transaction.
Considering the reform project we also see significant functions that are going to be excluded from a notary’s competences. It is suggested to abandon notarized form of mortgage transaction affirming at the same time in paragraph 4.209 of the Civil Code an ordinary written form of a mortgage agreement. In our opinion, requirement of a notarized from of a mortgage agreement is justified not only for the reason of complexity of the transaction, but also because of efficiency, quickness and simplicity of execution of rights (in case of registration of the transaction or exaction). This is why we suggest to leave this requirement adopting the amendments. We would also like to draw attention to the fact that, in case of abandonment of a notarized form of mortgage transaction not only the goals of the hypothec reform concept would not be reached, but there would be no sufficient state budget savings, since during the registration of a mortgage transaction legal study should be performed at the expense of the state budget. Should a decision be made that such study is unnecessary, this will only further encumber the rights of a debtor and will not ensure the principle of equality of the parties concluding a movable property mortgage agreement. On the other hand, we are afraid that after abandonment of a notarized form of such transactions no proper protection of creditors’ rights would be ensured, the “one window” service would not work, it would not be possible to transfer the information to the hypothec registry by electronic means. A mortgage transaction would become more complicated, there would be no possibility to make a notary’s executive endorsement.
In accordance with the project it is suggested to abandon the standardized form of a mortgage list. We think that such suggestions would not ensure simplicity and clearness of conclusion of hypothec transactions, it would also make it more difficult to register them electronically.
Adopting the amendments we offer to leave the requirement of a notarized form for a mortgage transaction, when the object of mortgage is transferred to a third person or stays in the mortgager’s ownership. We believe that this requirement is especially important in those cases when movable objects liable for registration are mortgaged.
Conclusion. From the point of view of notariat we are positive and constructive about the hypothec reform. Yet, it does not eliminate the possibility or relieve from responsibility to set more radical questions, for example, whether this reform is too “narrow”? Perhaps we should take a wider view of it, including a reform of the bank note law, connecting and most efficiently regulating the connection of hypothec and bankruptcy important under any economical conditions?