Russian Federation: Changes To The Federal Law "On Mortgage (Pledge Of Immovable Property)"

Last Updated: 12 February 2009
Article by Vladislav Sourkov

The end of 2008 was marked by two important events that took place within about a week from each other: on 22 and 30 December 2008 two federal laws were adopted and these led to considerable changes in the Federal Law "On mortgage"* (the "Law").

The new legislation has considerably changed the regime regarding the use of a mortgage bond which, we believe, has become a much more attractive instrument since these changes were implemented. Another important new aspect is that the Law now provides for the possibility of concluding agreements on levying execution on mortgaged property without obtaining a court order (extrajudicial levy of execution) not only after the mortgagee becomes entitled to levy execution, but at the time of execution of a mortgage agreement or at any other time before the enforcement of the mortgaged property. Besides, a number of other more technical changes, which are summarized below, have been introduced.

1. Mortgage bond

1.1. The mortgage bond can now be used as an independent document governing all the relations among the mortgagor, the mortgagee and the debtor

The changes to the Law now make the mortgage bond an independent document that can regulate all the relations between the mortgagor and the mortgagee. The mortgage agreement, on the basis of which the mortgage deed is issued, now provides that from the issue date of the mortgage bond to the mortgagee, the mortgage agreement and the agreement the obligations under which are secured by the mortgage ceases to have any force and effect and that all the relations between the parties shall be governed by the terms and conditions of the mortgage bond. This change considerably simplifies the paperwork required for establishing mortgage relations and eliminates possible contradictions between the text of the mortgage bond and that of the mortgage agreement.

1.2. The mortgage bond has become more negotiable thanks to the possibility of its depository registration and storage

Being a security, the mortgage bond may be submitted to a depository for its depository registration and storage, which can be temporary or obligatory. In this case, the rights of the owner of the mortgage bond shall be confirmed by an extract from its depository account and certified with the signature of an authorized depository officer, whereas any transfers of rights to the mortgage and any other transactions involving the mortgage may be carried out by making the required entries in the said depository account.

As a result of such changes, the mortgage bond owner is no longer required to register any changes to the mortgage owners with the state authorities.

2. Extrajudicial levy of execution (levy of execution without obtaining a court order)

2.1. It is now possible to enter into an agreement on an extrajudicial levy of execution at any time and such an agreement is no longer required to be notarized

Prior to the changes being made to the Law, the parties were allowed to enter into an agreement on an extrajudicial levy of execution on mortgaged property only after the mortgagee had become entitled to levy execution on such property. Banks and other creditors reasonably regarded the likelihood of such agreements being concluded as negligible.

The amended Law provides for the possibility to conclude an agreement on an extrajudicial levy of execution at any time, regardless of whether or not there exist any grounds for levying execution on mortgaged property. Such an agreement may be executed either by including the relevant provisions in the text of the mortgage agreement or as a separate agreement. The agreement proper does not require notarization, although this is required for the mortgagor's consent to an extrajudicial levy of execution on mortgaged property.

2.2. Detailed description of the extrajudicial procedure for the levy of execution and for the sale of mortgaged property

The procedure for the levy of execution and the sale of mortgaged property by an auction organizer and the mortgagee consists of several stages. The auction organizer or the mortgagor is first required to send a registered letter to the mortgagor notifying the latter of the need to fulfill an obligation. If the mortgagor refuses to fulfill the obligation or does not respond to the notification within 10 days of receipt thereof** by the mortgagor or within 45 days of the dispatch of the said notification (whichever is earlier), the auction organizer notifies the mortgagor and the mortgagee of its intention to hold an auction for the sale of the mortgaged property and publishes an announcement about the auction. The auction may not be held until 10 days have expired following the date of first publication of the auction announcement.

From the first publication date of the auction announcement the mortgagor is prohibited from carrying out any transactions involving the mortgaged property, except for transactions aimed at discharging the obligations secured by the mortgage. Any transactions carried out in contravention of this prohibition may be contested by interested persons by filing a lawsuit to recognize such transactions as null and void.

If it is necessary to resort to the services of an appraiser (a list of potential cases is provided in the Law), the starting auction price is fixed at 80% of the value of the mortgaged property as determined by the appraiser. However, the parties have the right to establish other terms and conditions in their agreement on an extrajudicial levy of execution on mortgaged property.

3. Other changes

3.1. The criteria for a court's refusal to levy execution have been defined more precisely

Among the grounds for a court's refusal to issue an order on the levy of execution, the previous version of the Law stated the insignificance of a debtor's violation of an obligation secured by a mortgage and the obvious incommensurability of the value of the claim made by the mortgagee for the value of the mortgaged property. The Law did not specify the criteria subject to which the courts were to determine whether the aforementioned grounds were applicable, and this gave rather broad discretional powers to the courts in resolving this kind of dispute. The amendments to the Law fill this gap in the legislation by establishing clear criteria for applying such grounds. The Law provides that a violation is considered insignificant and the claim - incommensurable if the amount of unfulfilled obligation is less than 5% of the estimated value of the mortgaged property under the mortgage agreement and if a period of delay in the fulfillment of an obligation is less than three months. Such criteria are identical both for the judicial and for the extrajudicial procedures for levying execution.

A court's refusal to levy execution does not constitute a ground for terminating the mortgage, nor does it prohibit the mortgagee from filing the same claim again if the grounds upon which its original claim was denied cease to exist.

3.2. Additions have been made to the list of property on which execution may be levied only judicially (i.e. by obtaining a court order to that effect)

The new version of the Law expands the list of property on which execution may be levied only judicially (i.e. by obtaining a relevant court order). This property includes: (i) residential premises owned by individuals; (ii) property owned by state or municipal authorities; (iii) property owned by an individual for whom the consent or authorization from another person or entity was necessary to obtain the mortgage.

3.3. Changes to the length of notice of public auctions

The time period within which a public auction organizer is required to give notification of a forthcoming auction has been changed in the amended version of the Law. Notification must now be given not earlier than 30 days (the former version indicated 60 days) and not later than 10 days (the former version indicated 30 days) before the auction date. The new version of the Law also obliges the public auction organizer to provide information on the auction so that it can be published on the Internet.

3.4. The criteria have been specified for the mortgagee to be able to keep the mortgaged property in the event of the failure of a repeated public auction

If the first public auction fails, a repeated auction must be held. If the repeated auction also fails, the mortgagee shall have the right to keep the mortgaged property. The new Law provides that the mortgagee shall have one month from the date that the repeated public auction is recognized as having failed to submit a written statement to the auction organizer and to the court bailiff to the effect that it wishes to keep the mortgaged property. To register its ownership right to the mortgaged property, the mortgagee is required to submit the following documents to the registration authorities: a document (protocol) recognising the failure of the repeated auction, a statement that it wishes to keep the mortgaged property and a document confirming that the said statement has been sent to the auction organizer.

* Federal Law No. 264-FZ dated 22 December 2008 "On amendments to the Federal Law "On mortgage (pledge of immovable property)" and to certain legislative acts of the Russian Federation"; Federal Law No. 306-FZ dated 30 December 2008 "On amendments to certain legislative acts of the Russian Federation for the purpose of improving the procedures for levying execution on mortgaged property".

** Please note that the new version of the Law contains some technical inaccuracies in the determination of the type of notices.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 11/02/2009.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions