The Essence and Legal Significance of a Mortgage Agreement
A mortgage agreement secures the performance of a creditor's claim with immovable property: if the debtor fails to perform the obligation, the creditor is entitled to demand the realization of that property and to receive the proceeds towards satisfaction of the claim. The Civil Code of Georgia regulates this field through the norms on registration of a mortgage (Article 289), multiple encumbrance of one immovable item with mortgages (Article 290), transfer of the mortgage and the claim it secures (Article 295), submission of the transaction to the public registry (Article 311¹), and the demand for realization of the mortgaged immovable (Article 301).
In practice a mortgage agreement is most often concluded when a loan or credit is extended: a bank or other lender provides money on condition that the borrower's immovable property is encumbered with a mortgage. It is at that moment that the parties decide what the agreement will contain, how and when it enters into force, and what follows from a breach of the obligation — and all three questions are settled precisely by the Code.
Registration and Notarial Form: When the Agreement Takes Effect
A mortgage acquires legal force from the moment of its registration in the public registry (Article 289). Registration takes place on the basis of the submission of the transaction by one of the parties, under the procedure the Civil Code establishes for submitting transactions to the public registry: a transaction made in written form must be submitted, and the transaction or the authenticity of the parties' signatures must be certified in the manner established by law; where the parties sign at the registering organ in the presence of an authorized person, certification is no longer required.
The transaction must indicate the owner of the immovable, the mortgagee and the prospective third-party debtor. By the parties' agreement it is also possible to indicate the amount of the secured claim, the interest, the term of performance and other conditions — which increases the completeness of the agreement and fixes the parties' positions.
As to form: a mortgage agreement concluded to secure a claim arising from a loan agreement must be certified notarially, and the notary is obliged to explain to the parties the legal consequences of a breach of the obligations under the loan and mortgage agreements. This requirement does not extend to mortgage agreements securing the claims of a commercial bank, micro-bank, microfinance organization, credit union, or an authorized or registered investment fund under the law on investment funds. By the parties' agreement, at the creditor's request the public registry issues a mortgage certificate, the issuance of which is registered; such an agreement also requires notarial certification, and any subsequent notarized action derived from it must be certified by the same notary. Only one certificate is issued for a joint mortgage.