Mortgage and Pledge - When the Security for a Debt Is Your Home
Mortgages in Georgian practice fall into two worlds: bank mortgages, where the rules are regulated and the bank still treats foreclosure as a last resort, and private ones, where a loan "from an acquaintance" at 5% a month turns into losing the house within a year. In both, the mortgage works the same way: a right registered in the registry follows the property and, on default, entitles the mortgagee to sell it. But the debtor's protective tools exist in both cases, and are rarely used.
This page describes mortgages from the debtor's and the creditor's side: what a mortgage contract should and should not say, what restrictions a private lender faces when lending to an individual, how foreclosure proceeds and where it can be stopped, what the only home means at eviction, how a mortgage is voided and released, and how a pledge over movable property differs.
Updated · Practice area: Real estate lawyer
Which Mortgage Works How - Bank, Private, Notarial, Judicial
The source of the mortgage determines how fast and by what procedure the property can be lost, and which protective tool applies.
From Default to Foreclosure - Where and How the Process Is Stopped
Recalculating the debt and interest
The mortgagee's demand often includes interest and penalties above the cap; recalculation to the effective rate sometimes cuts the debt by a third. A private lender's "interest hidden in the principal" is a void part. This calculation is the starting point of every negotiation and claim.
Checking the contract and the mortgage for voidness
Breach of the restriction on lending to individuals, no spousal consent over joint property, a minor's or incapable person's property without the guardianship authority's consent, a mortgage by forged power of attorney, a "sale" instead of a mortgage (disguised security): each is a ground to void the mortgage or reclassify the transaction.
Negotiating restructuring
With a bank: deferral of the schedule, extension of the term, a reduced rate, a voluntary sale at market price instead of an auction. With a private lender: on the basis of the recalculated lawful sum, often against the prospect of a voidness claim. A lawyer's letter changes the mortgagee's position.
Stopping the foreclosure
In judicial foreclosure: a defence and a counterclaim for voidness; in notarial enforcement: a separate claim and a motion to suspend enforcement as interim relief; challenging the auction valuation. The deadlines run in days; the lawyer counts from the day the notice is received.
Controlling the auction
The valuation against the market price, the auction terms, return of the surplus to the debtor after sale (where the price exceeds the debt, the difference is the debtor's), the debtor's right to sell the property before the auction. An undervalued auction is the debtor's main loss.
Releasing the mortgage
After repayment the mortgagee must consent to release; on refusal, through court. A mortgage for a time-barred debt, a deceased mortgagee, a liquidated corporate mortgagee: typical "stuck" mortgages that block a sale and are released by court.
The House Is Your Only Home - What That Means at Foreclosure and What It Does Not
The common belief that "they cannot take your only home" does not apply to a mortgage: the debtor encumbered the house as security himself, and the mortgagee's right of sale is over exactly that house. The law gives the only home extra protection in ordinary enforcement, not in foreclosure. That is why private lenders demand the home as security, and why the lawyer assesses this clause most strictly before the loan is taken.
What remains: eviction only by court judgment and through the bureau, with a period to leave voluntarily; the presence of children and members unable to work brings in the social service and extends the period, but does not cancel the eviction; return of the surplus if the property sold for more than the debt; the debtor's right to sell the property himself, at a better price, before the auction and repay the debt. And the grounds for voidness that exist especially often for a mortgage over the only home: spousal consent, a child's right of residence, breach of the restriction on lending to individuals.
The practical advice the lawyer always gives: negotiate in the first month of default, not the sixth. For the creditor, restructuring is cheaper than foreclosure while the debt has not doubled with penalties and no auction has begun; for the debtor, this is the only moment when keeping the house is realistic.
A Mortgage That Gets Enforced - What the Lawyer Checks for the Lender
- Form and registration
- A mortgage exists only by registration in the registry; a receipt saying "the flat is security" is not a mortgage. A written contract, registered the same day, with the ranking checked: a second-ranking mortgage is satisfied after the first.
- Statutory restrictions
- When lending to an individual: limits on number and terms, the interest cap, the currency rule. A mortgage created in breach carries a risk of voidness; a creditor who ignores the law loses the security.
- Consents
- A spouse's notarised consent for joint property, the guardianship authority's consent for a minor's property, co-owners' consent for a share. One unconfirmed consent means a void mortgage.
- Enforcement rule in the contract
- A notarial enforcement clause or a direct-sale rule with independent valuation shortens the court stage, but the form and the debtor's notification must be strictly observed, or that becomes the ground for challenge.
- Valuation and insurance
- An independent valuation before the mortgage, the loan at a reasonable percentage of value, insurance of the property in the creditor's favour. Devalued or damaged property wipes out the security.
What to Collect If the Mortgagee Threatens Foreclosure
- The mortgage and loan contracts, a registry extract with the mortgage entry and ranking: exactly what is encumbered and on what terms.
- The full payment history with transfers and receipts, to recalculate interest and establish the real balance.
- The mortgagee's notices of default, foreclosure and auction, with dates; the challenge periods run from those dates.
- Consent documents or their absence: the spouse's, the guardianship authority's, the co-owners', to check for voidness.
- An independent valuation of the property at market price, for challenging the auction valuation and claiming the surplus.
- Documents on the family's situation: registered and resident minors, members unable to work, for the eviction period and the social service's involvement.
Three Mortgage Cases
A private lender and a "sale" instead of a mortgage
For a 30,000 lari loan the debtor "sold" a 180,000 flat to the lender with a verbal buy-back promise; on default the lender treated the flat as his. Lawyer: reclassification of the disguised security as a mortgage, the obvious price mismatch, correspondence on the buy-back. The court found the sale a sham; the flat returned and the debt was repaid at recalculated interest.
A bank auction at half the market price
The bank valued a flat at 95,000 and put it up for auction; the market price was 160,000. Lawyer: a challenge to the valuation with an alternative appraisal, a motion to suspend the auction, and in parallel a voluntary sale by the debtor at 150,000 with the bank's consent. The debt was cleared and the debtor kept 40,000; at auction he would have been left owing money.
A mortgage that could not be released for 15 years
A 2009 mortgage over a flat in favour of a liquidated company, the debt long repaid, the receipts lost, the flat unsellable. Lawyer: a claim to release the mortgage on the grounds of limitation and the creditor's non-existence, archival evidence of repayment. The mortgage was released by court in 5 months.
Questions About Mortgages and Pledges
The bank has sent me a foreclosure notice. How much time do I have?
It depends on the type of notice: a default warning, service of a claim, a notarial writ, the bureau's proposal for voluntary compliance; each has its own period, often a few days, to respond or challenge. Contact a lawyer on the day you receive the notice; negotiation with the bank is still possible at this stage, before the auction.
I mortgaged our joint flat without my spouse's consent. Is it void?
A mortgage over joint property requires the other spouse's consent; without it the spouse may seek voidness if the mortgagee knew or should have known of the missing consent. Banks always require the consent; private lenders often do not, and that is the typical weakness of their mortgages.
The car-loan company "took" my car from the yard for one month's delay. Is that lawful?
A registered pledge gives the creditor a right of sale, but by procedure: notice, a deadline, a demand for handover, and the bureau on refusal; taking the car by force and "crediting" its value against the debt goes beyond the law. The lawyer checks the pledge contract, the notices and the sale price; often the car's value far exceeds the debt and the difference belongs to the debtor.
I want to buy a mortgaged flat; the seller says he will repay the debt with my money. Is that safe?
Only with a scheme: part of the money paid directly to the bank to clear the debt, a bank letter on release of the mortgage, release and registration of title on the same day, the balance to the seller after registration. Money in the seller's hands "to repay the debt" is the maximum risk. The lawyer draws up a three-party agreement with the bank.
I am a lender; the debtor does not pay and lives in the flat. How long until I get my money?
With a registered mortgage and a properly drafted contract: the court route takes 6-12 months to judgment, then the bureau and auction another 4-8 months; with a notarial enforcement clause, without the court stage unless the debtor challenges it. Restructuring with the debtor is often the fastest route to full repayment, before an auction devalues the property.
Lawyers for Mortgage and Pledge Cases
A mortgage case is won by recalculating the debt, checking the grounds for voidness and counting the deadlines from day one, for either side. Within 15 minutes the coordinator connects you with a lawyer who handles foreclosure and mortgage voidness on the debtor's or the creditor's side.
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Call: 568 330 318The Mortgagee Threatens Foreclosure, or Your Secured Loan Is Not Being Repaid?
In a free consultation the lawyer recalculates how much of the debt is actually lawful, checks whether the mortgage is void, and tells you what deadline you have and where the process can be stopped - or, for a creditor, which route gets your money fastest. The coordinator is on the phone within 15 minutes.