Mortgage of property

The regulations on mortgage of property under the 2015 Civil Code.

Subsection 3. Mortgage of property

Article 317. Mortgage of property

1. A mortgage of property means that one party (hereinafter referred to as the mortgagor) uses property under its ownership to secure the performance of an obligation without delivering the property to the other party (hereinafter referred to as the mortgagee).

2. The mortgaged property shall be retained by the mortgagor. The parties may agree to entrust the mortgaged property to a third party for safekeeping.

Article 318. Mortgaged property

1. Where the entire immovable or movable property with appurtenances is mortgaged, the appurtenances also constitute mortgaged property, unless otherwise agreed.

2. Where part of an immovable or movable property with appurtenances is mortgaged, the appurtenances attached thereto also constitute mortgaged property, unless otherwise agreed.

3. Where land use rights are mortgaged and the mortgagor also owns property attached to the land, such attached property also constitutes mortgaged property, unless otherwise agreed.

4. Where the mortgaged property is insured, the mortgagee must notify the insurer that the insured property is subject to mortgage. In the event of an insured event, the insurer shall pay the insurance proceeds directly to the mortgagee.

If the mortgagee fails to notify the insurer, the insurer shall pay the insurance proceeds under the insurance contract, and the mortgagor must fulfill its obligation to the mortgagee.

Article 319. Effectiveness of mortgage of property

1. A mortgage contract shall take effect from the time of its conclusion, unless otherwise agreed or otherwise provided by law.

2. The mortgage of property shall be effective against third parties from the time of registration.

Article 320. Obligations of the mortgagor

1. To deliver documents relating to the mortgaged property where agreed by the parties, unless otherwise provided by law.

2. To preserve and maintain the mortgaged property.

3. To take necessary measures to remedy, including suspending exploitation of the property’s utility if such exploitation risks loss or devaluation of the mortgaged property.

4. Where the mortgaged property is damaged, within a reasonable time the mortgagor must repair or replace it with another property of equivalent value, unless otherwise agreed.

5. To provide information on the condition of the mortgaged property to the mortgagee.

6. To deliver the mortgaged property to the mortgagee for disposal in cases specified in Article 299 of this Code.

7. To notify the mortgagee of any third-party rights over the mortgaged property, if any; failure to notify entitles the mortgagee to cancel the mortgage contract and claim damages, or to maintain the contract and accept such third-party rights.

8. Not to sell, replace, exchange, or gift the mortgaged property, except as provided in Clauses 4 and 5 of Article 321 of this Code.

Article 321. Rights of the mortgagor

1. To exploit the utility and derive fruits and profits from the mortgaged property, unless such fruits and profits are also mortgaged under agreement.

2. To invest in improving the value of the mortgaged property.

3. To reclaim the mortgaged property held by a third party and documents held by the mortgagee when the secured obligation terminates or is replaced by another security measure.

4. To sell, replace, or exchange the mortgaged property if it is circulating goods in the course of production or business. In such case, the right to claim payment from the buyer, proceeds, assets formed from such proceeds, and substituted or exchanged assets shall become mortgaged property.

   Where the mortgaged property is a warehouse of goods, the mortgagor may replace the goods therein but must ensure the value of the goods as agreed.

5. To sell, exchange, or gift mortgaged property that is not circulating goods in the course of production or business, with the consent of the mortgagee or as provided by law.

6. To lease or lend the mortgaged property, provided that the lessee or borrower is notified that the property is mortgaged, and the mortgagee is informed.

Article 322. Obligations of the mortgagee

1. To return documents to the mortgagor upon termination of the mortgage, where the parties have agreed that the mortgagee holds such documents.

2. To carry out the disposal of mortgaged property in accordance with the law.

Article 323. Rights of the mortgagee

1. To examine and directly inspect the mortgaged property, but not to obstruct or cause difficulties for its formation, use, or exploitation.

2. To request the mortgagor to provide information on the condition of the mortgaged property.

3. To request the mortgagor to take necessary measures to preserve the property and its value where exploitation or use risks loss or devaluation.

4. To register the mortgage in accordance with law.

5. To request the mortgagor or the third party holding the property to deliver it for disposal when the mortgagor fails to perform or improperly performs the obligation.

6. To hold documents relating to the mortgaged property if so agreed, unless otherwise provided by law.

7. To dispose of the mortgaged property in cases specified in Article 299 of this Code.

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Article 324. Rights and obligations of the third party holding the mortgaged property

1. A third party holding the mortgaged property has the following rights:
   a) To exploit the utility of the mortgaged property, if so agreed;
   b) To receive remuneration and expenses for preservation and safekeeping of the mortgaged property, unless otherwise agreed.

2. A third party holding the mortgaged property has the following obligations:
   a) To preserve and safeguard the mortgaged property; if it is lost, devalued, or reduced in value, compensation must be made;
   b) Not to continue exploiting the property’s utility if it risks loss or devaluation;
   c) To return the mortgaged property to the mortgagee or mortgagor as agreed or as provided by law.

Article 325. Mortgage of land use rights without mortgaging property attached to the land

1. Where land use rights are mortgaged without mortgaging property attached to the land, and the land user is also the owner of such property, the property attached to the land shall also be disposed of, unless otherwise agreed.

2. Where land use rights are mortgaged and the land user is not the owner of property attached to the land, upon disposal of the land use rights, the owner of the attached property shall continue using the land within his/her rights and obligations. The rights and obligations of the mortgagor vis-à-vis the property owner shall be transferred to the transferee of the land use rights, unless otherwise agreed.

Article 326. Mortgage of property attached to land without mortgaging land use rights

1. Where only property attached to land is mortgaged without mortgaging land use rights, and the owner of such property is also the land user, the property disposed of shall include land use rights, unless otherwise agreed.

2. Where only property attached to land is mortgaged without mortgaging land use rights, and the property owner is not the land user, upon disposal of the attached property, the transferee shall continue to use the land within the scope of the rights and obligations transferred, unless otherwise agreed.

Article 327. Termination of mortgage of property

A mortgage of property terminates in the following cases:

1. The secured obligation terminates.

2. The mortgage is cancelled or replaced by another security measure.

3. The mortgaged property has been disposed of.

4. As agreed by the parties.

At the same time, the provisions on mortgage under the 2015 Civil Code are guided by Subsection 3, Section 1, Chapter III of Decree No. 21/2021/ND-CP, effective as of May 15, 2021.

Subsection 3. MORTGAGE OF PROPERTY

Article 33. Mortgage by receivables, accounts receivable, and other payment claims
A mortgage by receivables, accounts receivable, or other payment claims does not require the consent of the obligor, but the obligor must be notified by the mortgagee prior to performing the obligation, in accordance with the agreement or as prescribed by law.

Article 34. Mortgage related to leased or lent property

1. Where property under lease or loan is used as collateral, the mortgagor must notify the mortgagee.

2. The handling of leased or lent mortgaged property under the circumstances provided in Article 299 of the Civil Code does not terminate the lease or loan contract; the lessee or borrower shall continue to lease or borrow until the expiration of the contractual term.

3. Where the mortgage has become effective against third parties and the mortgagor leases or lends the mortgaged property without notifying the mortgagee, the lease or loan contract shall terminate at the time of the enforcement of the mortgaged property. Rights and obligations between the mortgagor and the lessee or borrower shall be resolved in accordance with the lease or loan agreement, the provisions of the Civil Code, and other relevant laws.

Article 35. Acceptance of mortgage by individuals and economic organizations other than credit institutions with respect to land use rights and property attached to land of households and individuals
The acceptance of mortgage by individuals and economic organizations other than credit institutions with respect to land use rights and property attached to land of households and individuals must meet the following conditions:

1. The mortgagee must be an economic organization as prescribed by the Land Law, or an individual who is a Vietnamese citizen with full legal capacity;

2. The acceptance of mortgage to secure obligations must not contravene prohibitions under the Civil Code or other relevant laws, and must not contravene social morals in contractual relations concerning investment projects, construction, lease, sublease, services, or other transactions;

3. Where the secured obligation includes interest payment, the applicable interest for late payment, interest on principal within term, interest on overdue principal, interest on unpaid interest, or any other interest rate must not exceed the limits agreed upon under Clause 2 of Article 357, Clause 5 of Article 466, and Article 468 of the Civil Code. Where there is an agreement on handling acts of default by the obligor and no other legal provisions apply, such handling may only be imposed once for each act of default;

4. Other validity conditions of civil transactions as prescribed by the Civil Code and other relevant laws.

Article 36. Settlement of cases where mortgaged property is subject to a void civil transaction

1. Where mortgaged property is subject to a void civil transaction but has been transferred to a bona fide mortgagee in cases provided under Clauses 1 and 2 of Article 133 of the Civil Code, the mortgage contract shall not be void; the rights and obligations of the parties concerned shall be performed in accordance with Clause 3 of Article 133 of the Civil Code.

2. The transfer of mortgaged property as prescribed in Clause 1 of this Article means that the mortgagor has not physically delivered the mortgaged property, but the mortgagee has retained the Certificate of ownership of the mortgaged property under the agreement, or has taken other necessary practical measures to prevent the mortgagor from breaching obligations under Article 320 of the Civil Code.