On 16 July 2015, amendments to the Serbian Mortgage Act (the “Mortgage Act”) came into force. The Government expects these amendments will create greater certainty for creditors and owners of mortgaged properties, and foster financial and commercial activity in Serbia.
Perhaps the most important change is the possibility for creditors to appoint a security agent to undertake all legal actions on their behalf toward all persons, including the mortgage holder, for the purpose of protecting and enforcing the secured claim. It is expressly envisaged that the security agent will be registered with the real estate cadastre as the mortgagee. This will enable creditors of syndicated loans to appoint one of the syndicate’s members, or a third person, to act on their behalf as security agent, a change that will certainly be welcomed by the banking community as it will enhance the certainty and flexibility of security arrangements for syndicated loans.
Changes to enforcement procedures
The amendments introduce several changes to extra-judicial mortgage enforcement proceedings, including:
- the process of registering the sale of mortgaged property under extra-judicial enforcement proceedings with the real estate cadastre is clarified;
- direct sale of mortgaged property by a creditor is possible until the announcement of the auction price, which cannot be less than 90% of the property’s estimated value. In the event of failure of the first public auction, the creditor may continue trying to sell the property by direct sale, in which case the price cannot be less than 60% of its estimated value;
- the duration of extra-judicial enforcement proceedings is limited to 18 months, after which the property can only be sold under a judicial enforcement procedure.
The amendments require that an agreement on the sale of mortgaged property must provide for payment of the purchase price to a specific account (escrow account, notary public account) which will be immune from enforcement by creditors of the mortgage creditor.
Additionally, the amendments prescribe that the mortgage agreement, the mortgage statement and the agreement on pledge of a claim secured by a mortgage must be executed in the form of a notarial deed (javnobeležnički zapis) or a document certified by a notary public (solemnizovana isprava). These documents are considered as enforcement deeds only if they are executed in the form of a notarial deed and contain specific provisions from the Mortgage Act.
Central Register of Mortgages now defunct
All provisions of the former Mortgage Act regarding the Central Register of Mortgages have been repealed, reflecting the fact that such a register is now redundant since all rights related to immovable assets (including mortgages) are now registerable in the real estate cadastre.