K&A takes part in a Roundtable on Peculiarities and Advantages of Mortgage by Operation of Law

A Roundtable on Peculiarities and Advantages of Mortgage by Operation of Law was organized by К&А jointly with IFC, State Registrar and Bank Union of Kyrgyzstan for the banking and microfinance sector on November 26, 2013. Mortgage by operation of law, as a relatively new and effective tool for enforcing creditors’ rights, was introduced in 2009, but has not become widely used among the professional financial market participants. The first real estate transaction involving mortgage by operation of law occurred in March 2013, resulting in the simultaneous registration of title in the name of the real estate owner and of encumbrance on this title in the form of pledge (mortgage) in favor of one of the banks which provided the mortgage loan.

As the organizers of the roundtable pointed out, being primarily aimed at promoting mortgage loans, mortgage by operation of law is beneficial for all interested parties as it helps avoid executing preliminary and principal pledge agreements. Thus, mortgage/pledge arises by operation of law when a real estate is acquired with the borrowed/lent funds of certain creditors which fact should be stated in the sale and purchase agreement. This instant security instrument presumes a more simplified sequence of actions, automatic charge free registration of pledge and lesser risk of contesting a transaction, which is quite important at this moment.