Statutory mortages

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Statutory mortages

Statutory mortgages protect the interest of a company that has not yet been compensated for its works or services on a real estate property.

Let us distinguish between two types of statutory mortgages: those without specification that do not need to be registered at the land register and those without specification but do need to be registered. Contractual mortgages in favour of banks (mortgage, mortgage note, bill of annuity) can compete with statutory mortgages.

If no other agreement can be reached, the contractual right of emption is able to be passed on via inheritance, but it is not assignable.

Unregistered statutory mortgages

Statutory mortgages that are not entered at the land register take precedence over all contractual mortgages. Unlike contractual mortgages, statutory mortgages are not ranked.

Statutory mortgage coverage:

  • costs allowed by the secured creditor to avoid a decrease in the value of the encumbered property (CCS (Swiss civil code) art. 808) and/or for the maintenace of the real estate, namely those paid in insurance premiums (CCS art. 819).
  • Amounts to be paid under cantonal public law (CCS art. 836): property taxes, fire insurance primes, communal charges for road maintenance, piping, and sewage, inheritance tax, gift tax, and property gain tax due to the State Treasury insofar as such levies apply to the real estate in question

In their laws introducing the CCS, cantons reserve the right to dictate which statutory mortgages must be registered at the land register (only after a certain amount of time) and which do not need to be registered.

Registered statutory mortgages

This category includes the mortgages of sellers, contractors and entrepreneurs.

Seller's mortgage

The seller's mortgage is the property seller's right of lien that guarantees his claim. It will be registered within three months at the latest following the property transfer (CCS 838). This is not to be confused with the closing date of the sale.

The lien will become effective on the date it is registered, after previously registered liens.

Contractor and Entrepreneur's mortgage

This mortgage serves as a guarantee to contractors and entrepreneurs who provide work and/or material only during the construction or renovation of a property. In principal, the statutory mortgage of contractors and entrepreneurs does not guarantee their debts. Architects and engineers cannot use this mortgage because according to the jurisprudence of the Federal Court, they act by order and not under a contract for services.

The contractor's mortgage is not applicable when construction materials are supplied under a purchase contract. For example, a purchase contract is assumed to be present, which does not offer the possibility of registering a statutory mortgage when delivered construction materials are made of fungibles, which are considered to be mass produced articles.

On the contrary, there is a contract for services that justifies the registration of a statutory mortgage when materials are specially made to measure for the property in question. Thus, the delivery of fresh concrete or a specially prepared metal framwork makes it possible to require the registration of a statutory mortgage.

To be enforceable against third parties, the statutory mortgage of contractors and entrepreneurs has to be entered at the land register within 4 months of work completion at the latest (CCS art. 839).

The registration date determines the rank of the contractor's mortgage. If several mortgages are registered for the same property, they compete with each other on equal terms, that is, they are ranked as the contractor's mortgage that will be registered first even if the registrations are made on different dates (CCS art. 840).

According to their rank, existing mortages take precedence over the contractor's mortgage. However, if the fulfillment of the lien already intervenes during construction and if the entrepreneurs are subject to a loss, the bank will have to pay their damages and interest, thus creating payments debited to the construction account that are not associate with construction.

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