How to choose the right mortgage foreclosure method?

In the event of a default, financial institutions are primarily interested in returning funds as quickly as possible. Therefore, in the majority of cases, creditors are very reluctant to go to the court, because trials may last for years.

In the event of a default, financial institutions are primarily interested in returning funds as quickly as possible. Therefore, in the majority of cases, creditors are very reluctant to go to the court, because trials may last for years.

Ukrainian legislation provides for several ways how the creditor can do this. The most common mortgage foreclosure methods are: 1) selling the property by the bank to a third party, or 2) acquiring the ownership of the mortgage by the bank and then selling it.

The first method – selling the mortgaged property by the creditor to the third party – has its own advantages. Firstly, the creditor does not need to become the owner of the real estate and account it in its book of records. Secondly, the creditor may receive the monetary funds directly from the buyer.

The risks connected with such type of foreclosure are the following:

  1. review of the mortgage agreement. If it is written that such foreclosure method may be executed only through a court, the creditor cannot do so in out-of-court procedure (that was stated in the Resolution of the Supreme Court of 29 May 2019 in Case No. 310/11024/15).
  2. the price of the real estate shall be determined by the independent certificated appraiser. Such price shall not be lower than the market price for the same property. In other case, the creditor will be liable to the debtor for compensating the difference between the sale price of the mortgaged property and the market price for it.

The second method is acquiring the ownership of the mortgage by the bank. This is the fastest and the most secure way for the creditor. Firstly, the bank becomes the legal owner of the property and can be sure that nothing will happen to it, like potential unauthorised actions with the real estate. Secondly, such type of foreclosure may be initiated only in out-of-court procedure (that was stated in the Resolution of the Supreme Court of 18 October 2018 in Case No. 910/17423/17).

It is worth noting that the price of the real estate should be also determined by the independent certificated appraiser. In such a case, it is important to ensure that price is equal to or lower than the amount of a debt. Otherwise, the creditor will have to return the price difference to the debtor.
There are other issues that need to be taken into account by the creditors before choosing the appropriate foreclosure method, for example, obtaining permission from the Antimonopoly Committee of Ukraine, taxation, currency regulation, etc.

217

Related insights

Ukrainian Parliament simplifies change of land designation for industry and energy

28 February 2024 Publication

Ukrainian Parliament simplifies change of land designation for industry and ener...

Read
Guarantees and insurance of foreign investments in Ukraine in 2024

26 January 2024 Publication

Guarantees and insurance of foreign investments in Ukraine in 2024

Read
TAX ALERT 05.10.2023 | Digest of top tax news

22 November 2023 Publication

TAX ALERT 05.10.2023 | Digest of top tax news

Read
View all

We use cookies to improve performance of our website and your user experience.
Cookies policy Cookies settings

Please read the provisions of the privacy policy and the processing of personal data carefully Cookies policy.

I consent to the processing of personal data in accordance with the privacy policy and the processing of personal data

I want to receive a mailing

We use cookies to improve performance of our website and your user experience. Cookies policy Hide settings

Thank you for your trust!

Your request for a consultation has been received, and our experts will be in touch with you shortly.

Go to main page
Thank you for subscribing to our newsletter!

Going forward, you will remain informed about the latest and most significant legislative updates, expert publications, and forthcoming event announcements.

Go to main page