The Mortgage Over a Flat That Was Already Promised
A bank asks Notary Katsiaryna to certify a mortgage over a flat owned by a borrower, Andrei. The bank's draft lists the loan at 60,000 BYN and the flat's value at 90,000 BYN. Andrei mentions, almost in passing, that he signed a preliminary contract to sell the same flat to a third party last month, took a deposit, and that the buyer has already paid 20,000 BYN. The bank's officer says the preliminary contract is 'just a promise' and does not affect the mortgage. Andrei's wife is abroad and cannot sign; he produces a handwritten note purporting to be her consent, without notarisation. A second bank has already registered a prior mortgage over the flat for 15,000 BYN, which Andrei did not mention until asked.
1. Can the notary certify the mortgage? Identify every obstacle and how each should be resolved.
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The notary should not certify on the present documents; several obstacles must be cleared first.
Prior registered mortgage. A mortgage over the same immovable property can secure several claims, but their ranking is determined by the order of registration. The notary must verify the register, disclose the prior 15,000 BYN mortgage to the new creditor, and ensure the deed states the ranking. Concealing it would mislead the bank. If the bank accepts second rank, the deed may proceed with an express clause; if not, it must decline.
Preliminary sale contract and deposit. A preliminary contract does not transfer ownership, so the flat remains Andrei's and can in principle be mortgaged. But the notary must warn both sides that the prior buyer may have claims, that a deposit creates obligations, and that the mortgage may frustrate the sale. The notary should record the disclosure and the bank's acknowledgement. The bank's dismissive attitude does not relieve the notary of the duty to explain.
Spousal consent. If the flat is common property of the spouses, the mortgage requires the spouse's notarised consent. A handwritten note is not a valid substitute. The notary should require a properly executed and, where the spouse is abroad, legalised or apostilled consent, or a power of attorney in the correct form.
Value and amount. The loan of 60,000 BYN against a 90,000 BYN value is within limits, but the notary must verify the valuation and check that prior encumbrances are deducted.
Conclusion: refuse until the register check is documented, the ranking is agreed, the spouse's consent is properly executed, and the preliminary contract is disclosed on the record.
2. What are the notary's duties if the bank insists on proceeding and Andrei refuses to disclose the prior mortgage in the deed?
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The notary's duty is to the law and to the integrity of the register, not to the bank's convenience.
Refusal. If a participant refuses to allow a material fact to be recorded, the notary must refuse to perform the act. A mortgage deed that omits a known prior encumbrance misstates the security and could facilitate fraud. The refusal must be reasoned and, on request, issued in writing with an explanation of the grounds and of the right to appeal.
No 'private' workaround. The notary cannot certify a version for the bank and keep the truth in a side letter; the deed must reflect the register. Nor can the notary accept an indemnity from the bank as a substitute for disclosure.
Reporting. If there are indications of intent to defraud a creditor, the notary should consider a report under anti-money-laundering and fraud-prevention duties, and must not tip off the parties.
Documentation. The refusal, the register extract, and the parties' statements should be preserved in the file. If the bank later complains, the file is the notary's defence. The notary should also note that certifying a knowingly false deed could expose her to disciplinary and civil liability, and potentially to criminal liability if intent were shown.