Property Finance

Chapter 11France¹

1. What are the principal securities which lenders will require borrowers to provide?

• mortgage and special real estate privilege;
• pledge on intangible personal assets;
• providing of a surety;
• comfort letter;
• assignment of property as a security;
• assignment of professional claims;
• trust.

2. What statutory provisions apply to such securities?

Mortgages or “hypothèques”

Articles 2393ff. of the French Civil Code (hereinafter “FCC”) provide that a mortgage gives a creditor, which has proceeded to a registration, the right to sell the property of the debtor even if a third party is in possession thereof or to become owner of the real property if the debtor defaults, in order to secure his claim.

The mortgage can be conventional (Art. 2393 FCC), legal (Art. 2396 FCC), or judicial (Art. 2412 FCC).

The mortgage is an accessory, indivisible right without loss of possession. The grantor of the mortgage shall be the owner of the property and have the legal capacity to alienate.

A mortgage can be registered on real estate and all its accessories and on the usufruct and the bare ownership of such real estate and accessories (Art. 2397 FCC). A mortgage can also be registered on the right of superficie and on the right of the emphyteutic tenant. It covers any improvement on the real estate made by the owner or a third party.²

In principle, the mortgage must be registered on present real estate and so cannot be registered on future real estate. But French law provides ...