The long-anticipated amendments to the Serbian Mortgage Act ("Mortgage Act"), published in the Official Gazette of RS no. 60/2015, entered into force on 16 July 2015. We would like to highlight the following changes:
1. Reaffirmation of out-of-court foreclosures
One of the aims of the Mortgage Act is to improve the out-of-court foreclosure procedure against the mortgaged real estate. In order to achieve this improvement, several deficiencies of the former law have been repaired.
1.1 Under the former law, for a mortgage to be qualified as an out-of-court mortgage (enforceable instrument), the consent of the person having direct possession (neposredna državina) over the mortgaged real estate (e.g. lessee) was required. Such consent is now no longer necessary.
1.2 The amended Mortgage Act now allows for the property's direct sale prior the announcement of the auction – for at least 90% of its estimated value. However, for properties which did not sell at first auction, this minimum for the property's direct sale may be adjusted to 60% of the estimated value.
1.3 In order to prevent the many abuses which occurred under the former system, out-of-court enforcement may only take place within a period of 18 months as of the day the decision on the annotation of the mortgage sale (rešenje o zabeležbi hipotekarne prodaje) becomes final and binding.
1.4 Finally, the amended Mortgage Act determines that, upon the sale of the mortgaged real estate, all lower-ranked mortgages will be deleted.
2. The abolishment of the Central Register of Mortgages
The new Mortgage Act has furthermore abolished the Central Register of Mortgages constituted in the previous Mortgage Act, as it was not operable in practice. This was due to the fact that the well-established practice of the Real Estate Cadastre had rendered the Central Register of Mortgages superfluous.
3. Harmonisation with the Notary Public Act
The Mortgage Act's provisions are fully harmonised with the Notary Public Act (Zakon o javnom beležništvu) (Official Gazette of RS nos. 31/11, 85/12, 19/13, 55/14, 93/14, 121/14, 6/15). This means that a Mortgage Agreement must either be made as a Notary Public deed or in a (private) written form that must be solemnized by a Notary Public.