In the case of non-accessory abstract security rights, such as the land charge, the purpose of the security purpose statement creates the connection between the mortgage and the secured loan claim. In the declaration of the obligation under security law, it is agreed which claims will be secured by the land charge. Thereby, e.g. only one or more specific claims of the creditor against the debtor (“close security purpose statement”) or also all present and future claims of the creditor against the debtor (“wide security purpose statement”) are secured.
Banks and credit unions often use large security purpose declarations, as these are provided, for example, in No. 14 AGB Banken and at Kreditgenossenschaften in No. 21 AGB Sparkassen. These broader declarations of assurance may become problematic, in particular in the event of the assignment of the mortgage and in the event that a subordinate creditor assigns the rights to reimbursement of the mortgage and the debtor becomes insolvent.
1. Assignment of the mortgage
If the loan secured by the mortgage has become ailing, the sale of the loan and the cession of the mortgage will not infringe banking secrecy, as it would be unlawful for the borrower to invoke bank secrecy. However, the assigning credit institution is obliged to transfer the earmarking to the assignee. In the case of non-defaulting loan receivables, it is disputed whether the sale of the loan and the assignment of the mortgage against the banking secrecy. Therefore, in banking practice, it is usually agreed with the borrower that the necessary information may be passed on.
With regard to the extent of the assignment, the declaration of consent customarily used by banks in the case of narrower security purpose statements covers the process of transferring the claim and the mortgage to the assignee. In the case of extensive statements on hedging, on the other hand, there are many questions with regard to the claims secured by the mortgage. Therefore, it is advisable that the landlord and the assignee agree on the extent of liability.
However, if the lessee can not agree on the scope of liability, various problems arise. The cedant should therefore at least agree with the assignee that the mortgage does not secure any claim that the assignee made before ordering the mortgage against the mortgagee. It should also be agreed that the mortgage does not secure future claims of the assignee. These agreements should be made in order not to extend the liability of the landlord. However, in spite of these agreements, the question of how far old claims, which are not covered by the assignment, are secured by the cedant of the mortgage and to what extent can be dealt with, remains legally complicated.
2. Subordinated creditors in bankruptcy
Subordinated creditors are usually assigned the right of repayment which the debtor has against the senior creditor if the security purpose ceases to exist. However, this claim for reimbursement is subject to the risk of insolvency contestation on the basis of the prohibition of acquisition pursuant to Section 91 InsO. Whether § 91 InsO applies depends on whether the assignee has achieved a secure legal status or not. A secure legal status exists if the debtor can no longer freely dispose of the rights under the underlying contractual relationship. This is the case when the debtor has settled the obligations to the senior secured creditor and the debtor can not use the mortgage debt for new loans. For this purpose, the hedging purpose agreed between the primarily secured creditor and the debtor must have ceased. If the senior creditor issues a one-time value-for-money explanation, the hedging purpose of the wide security purpose declaration no longer applies. Also, as a rule, the elimination of the purpose of the collateral exists when the insolvency proceedings have been initiated on the borrower’s assets and the loan has been terminated.
There is a risk for both the close and the long hedge declaration with a one-time value-for-money explanation that the subordinated creditor can not use the mortgage in satisfaction of his claim because of the possible contestation for incongruent cover.
Banks should always be aware of all the advantages and disadvantages of wide and narrow declarations of collateral when declaring declarations of collateral. This is the only way to decide on a case-by-case basis whether a broader security purpose declaration or a narrow purpose statement should be used.
Philipp-Christopher Goltz (Hamburg, July 2017)