Double Encumbrance on an Apartment with a Mortgage

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Published: 01/27/2018

Reading time: 3 min

The purchased apartment may be limited in its turnover. This may be caused by the imposition of any encumbrances on such housing.

What is an encumbrance?
Purchase procedure
Where can I check existing encumbrances?

Often, an apartment purchased with a mortgage can be sold by its owner for various reasons. One of the main ones is the inability to pay the mortgage. There is a specific acquisition procedure for such apartments.

What is this?

An encumbrance is a certain restriction or prohibition that relates to the ability to sell real estate, as well as its full use.

The encumbrance status of the apartment is necessarily recorded in the Unified State Register, as well as in the certificate establishing ownership.

When an apartment is sold, the encumbrance does not disappear, but is transferred from one owner to a new one - the direct buyer, if this encumbrance was not previously paid off before the purchase.

The most common type of encumbrance is a mortgage, although other types can also be found in practice.

Two encumbrances on the developer’s apartment

certificate of registration of the house with the Registration Chamber;
the act of transferring the building to the balance of the local administration;
protocol on assigning commercial status to a new building;
technical specifications worked out by BTI;
permission from the local administration to put the house into operation;
cadastral address of the property.

An encumbrance is the imposition of certain restrictions and prohibitions on the property rights of the owner of real estate regarding its use and alienation. Without the permission of third parties who have imposed one or two bans on the apartment, it cannot be sold, exchanged, rented or leased. In some cases, registration and redevelopment are prohibited. Sometimes the living space becomes closed to the owners themselves.

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Kinds

The main type of encumbrance on real estate is a mortgage. This is due to the fact that an apartment for which the mortgage has not been repaid is presented as collateral to the bank.

In this case, any manipulations with property can only be carried out with the permission of the financial organization.

In some cases, conditions are established regarding the payment of a certain amount of debt by the borrower and some others, without which the sale is impossible.

Arrest

Seizure refers to special measures that are applied to real estate for serious misconduct by the owner - for example, long-term failure to pay utility bills.

Seizure is one of the most severe encumbrances, due to which any transactions with the seized apartment will be automatically declared invalid.

To remove the arrest from an apartment, it is necessary to eliminate the reason - in the case of debts, pay them, in the case of minor children, wait until they reach adulthood or change their place of registration.

Rent

If the owner of the property enters into a rental agreement (aka lifelong maintenance), then the apartment automatically receives an encumbrance - it cannot be resold to another person, since this operation requires the preparation of a purchase and sale agreement, which is invalid for apartments with an encumbrance.

The encumbrance is removed only if the owner of the property passes away - in this case, ownership passes to the renter, who automatically becomes the new owner of the property.

Hiring

According to the agreement drawn up when renting out real estate, the sale of the apartment is impossible until the end of the lease term.

To remove the encumbrance and further sell the area, the owner can use two ways:

wait until the contract expires;
terminate the contract prematurely.

It is worth saying that the tenants themselves will not be able to provide legal resistance to the sale of the encumbered living space, but from the legal side such a transaction will be invalid.

Registered residents

If, in addition to the owner of the apartment, other individuals are registered in it, an encumbrance is imposed on such real estate, which operates according to the general rules.

In most cases, the sale of such an apartment does not cause problems, since as a rule there is always only one owner, and this does not depend on the total number of registered people.

However, difficulties may arise if the registered persons are minors and incompetent persons.

It is impossible to discharge such persons without providing alternative housing, which should be taken into account.

emergency house

It is quite logical and obvious that it is impossible to sell an apartment in a dilapidated building subject to eviction.

This not only contradicts common sense, but also puts people’s health and lives at risk, so you should forget about emergency real estate, but never sell it.

Easement on a land plot

An easement is a certain restriction that does not apply to the apartment itself, but to the land plot within which it is located.

As a rule, an easement is established under the influence of several parties if a question arises about the comfortable and safe living of neighbors.

Such an encumbrance is quite often registered with the authorities of the Unified State Register, and to legitimize the easement, a special application is drawn up and submitted to the Unified State Register.

Double encumbrance on an apartment with a mortgage

Hello! I really liked the apartment, which was mortgaged for 40% of the cost to a third-party bank (not the one that approved our mortgage). Today we found out that the apartment has utility debts. payments about 300 thousand. rubles, + the seller does not have money to collect various certificates :) There is an idea to give the necessary amount as collateral to pay off debts and prepare certificates. In this case, the deposit will be almost 10% of the transaction. We will be left completely without cash and it will not be possible to confirm to the bank that we have the required 10% of the cost of housing. If this amount is specified in the preliminary agreement, will the bank accept it? Are our risks high? The seller's realtor assures that the removal of the encumbrance can be arranged simultaneously with the issuance of a loan to us. What is the workflow in such a situation? Do we take documents for an apartment against an advance deposit?

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The first thing a buyer should remember is to obtain permission from the bank for the subsequent sale of square meters. The financial institution is one of the parties that entered into a mortgage loan agreement, and therefore has certain rights, especially when the other party (the primary debtor) fails to fulfill its obligations.

Examination

Buying unencumbered real estate without problems is a normal desire of every person.

To avoid mistakes and to avoid getting into a difficult situation, it is recommended to check the apartment for encumbrances.

This can be done in one of several ways:

Applying to the Unified State Register of Registers for an extract on the property of interest. In this document you can find out all the necessary information, including the encumbrance.
Sending an online request to the Unified State Register if a personal visit to the authority is not possible.

Before receiving an extract, you must fill out a special application and pay a small state fee.

Rest assured that paying the fee will not compare with the problems that you may encounter if you accidentally buy an apartment with an encumbrance.

Double encumbrance on an apartment with a mortgage

Without the consent of the mortgagee, the owner can live in the apartment or rent it out, but any transaction aimed at alienating the property, including the sale, will require written approval from the bank . The mechanism for approving the transaction is established by the mortgagee bank.

Therefore, the buyer of an apartment must carefully check all documents for the apartment and its history. It is especially necessary to check the presence of encumbrances on the apartment, that is, any obligations of the apartment seller to organizations or individuals who, as a result, can claim their rights to the apartment you are purchasing.

Buying an apartment with a mortgage encumbrance

The main difference that characterizes the purchase of an apartment encumbered with a mortgage is the purchase of real estate not from the individual owner, but from the bank.

This is due to the fact that the encumbered apartment is pledged to a financial institution, and therefore the purchase procedure is slightly modified compared to the standard registration procedure.

With maternal capital

Using maternity capital when buying an apartment with an encumbrance will eliminate the latter.

The procedure for obtaining a mortgage in this case is similar to the standard one, except for the following - the encumbrance is removed after the amount of maternity capital is transferred to the account of the owner bank.

Until this action is completed, the encumbrance remains in favor of the seller. Please note that the transfer of funds takes up to 60 days.

The procedure for purchasing an apartment with a mortgage will help you complete the transaction correctly. How much do realtor services cost to buy an apartment in 2020? See here.

Main risks

Buyers who plan to buy an apartment on the primary market have a much lower risk of falling into encumbrance, which cannot be said about lovers of secondary housing.

The main risk associated with encumbering an apartment is the possibility of declaring the purchase and sale transaction invalid, which can lead to loss of time and a lot of money.

If we ignore this risk (which is reduced by checking the apartment), this procedure is not so bad.

Registration procedure

To purchase an encumbered property with a mortgage, you can pay off the debt of the previous owner by transferring to him or directly to the bank the funds necessary for this.

After full payment, the encumbrance is automatically lifted, and after the purchase and sale transaction, the apartment becomes the full property of the new buyer.

This option does not apply to seized apartments - it is simply impossible to purchase such real estate.

With the exception of the procedure for removing the encumbrance, buying an apartment on credit is practically no different from the standard case. This will also require certain documents and time.

Required documents

For the primary procedure – removal of the encumbrance – the following documents will be required:

completed application form;
passport of the owner of the encumbered property;
documents establishing the right of ownership of the apartment;
letter from the bank about the loan agreement;
contract of sale;
extract from the Unified State Register of Legal Entities.

Here is a sample application for the removal of encumbrances from an apartment, a sample agreement for the purchase of an apartment.

The document required to remove the encumbrance is usually prepared within 5-7 days after the above documents are sent to the relevant authority.

In this case, you will only have to pay a small state fee - otherwise the procedure is free.

Completing documents when purchasing an apartment is an important step before completing the transaction. What is the difference between an advance and a deposit when buying an apartment? Read here.

What does a buyer need to know when buying an apartment? Useful information in this article.

How to buy an apartment with a mortgage with an encumbrance

If the housing is simply re-registered to a new owner, then he also receives an encumbrance along with the meters. This will not happen with a normal operation. The apartment or house is immediately at the disposal of the individual.
Registration and receipt of papers in this matter are more time-consuming and labor-intensive.
When re-registering property, it will not be possible to get rid of the lender, whose employees will visit the new client several times a year. Thus, they monitor the liquidity of housing.

To remove the seizure, it is necessary to sign a preliminary agreement, which states that during the purchase process, the future owner will pay off the borrower’s obligations for the borrower. All this is endorsed by a notary.
Having passed this stage, the bank client and the buyer enter into a purchase and sale agreement.
Bankers quickly prepare the relevant documents stating that the debt has been repaid by the previous owner.
Then the sale of the property takes place according to the standard.
The amount of the apartment under the purchase and sale agreement must exceed the cost specified in the mortgage (most often this happens). The difference is placed in a safe deposit box.
After the transaction, the money is given to the seller when the contract passes state registration.

Advantages and disadvantages

Buying an encumbered apartment has both advantages and disadvantages.

The first include:

the opportunity to choose an excellent option if other apartments are not suitable;
better value of real estate due to the loss of most of the price;
complete absence of third parties laying claim to the property.

Despite significant advantages, encumbered apartments also have some disadvantages:

material risks, which, however, are reduced with proper home inspection;
the opportunity to fall for scammers who stubbornly hide the fact of the encumbrance.

Due to the ambiguous balance of advantages and disadvantages, everyone must decide for themselves whether it is worth purchasing an apartment with an encumbrance, or paying attention to “clean” real estate.

In any case, this common option of acquiring your own home has the right to life.