Article 196: If a mortgage is established in accordance with the provisions of Article 181 of this Law, the mortgaged property shall be determined under any of the following circumstances: (1) When the debt expires, the creditor's rights are not realized; (2) The mortgagor is declared bankrupt or revoked; (3) The circumstances for realizing the mortgage agreed by the parties; (4) Other circumstances that seriously affect the realization of creditor's rights. Article 198: After the mortgage is discounted, auctioned or sold, the part of the price exceeding the amount of creditor's rights shall be owned by the mortgagor, and the insufficient part shall be paid off by the debtor.
Relevant provisions Article 56 of the Guarantee Law: The mortgagee has the priority to be compensated for the proceeds from the auction allocation of state-owned land use rights after paying the amount equivalent to the land use right transfer fee that should be paid according to law.
Article 74 of the Interpretation of the Guarantee Law: If the parties have no agreement on the discount of collateral or the proceeds from auction or sale, they shall pay off in the following order: (1) the expenses for realizing the mortgage right; (2) Interest on the principal creditor's rights; (3) Principal creditor's rights.
Article 75 If there are more than two mortgagors for the same creditor's right, and the creditor waives the mortgage guarantee provided by the debtor, the other mortgagors may request the people's court to reduce or exempt their guarantee liability. If there are more than two mortgagors for the same creditor's right, if the parties have not agreed or clearly agreed on the share or order of the creditor's right secured by the mortgaged property provided by them, the mortgagee may exercise the mortgage right over some or all of the property. After the mortgagor assumes the guarantee responsibility, he may recover from the debtor or ask other mortgagor to pay off his share.
Generally speaking, the realization of mortgage should generally meet the following four conditions:
1. The mortgage exists legally and effectively.
Second, the creditor's rights secured by mortgage have expired. However, according to Article 196 of the Property Law, the mortgagee can realize the mortgage even if the debt is not due, under the circumstances that the mortgagor is declared bankrupt or revoked, under the circumstances that the mortgage agreed by the parties is realized, and under other circumstances that seriously affect the realization of the creditor's rights, if the value of the collateral is reduced due to the mortgagor, and the mortgagor cannot restore the original state or increase the guarantee.
Third, the debtor's outstanding debts include all outstanding debts and some debts, because according to the principle of indivisibility of mortgage, although the debtor only partially fails to perform the debts, the mortgagee can still claim to realize the mortgage on all the collateral.
Fourth, the outstanding debts are not caused by the creditors. If the debtor fails to perform the debt due to one of the creditors, the mortgagee shall not realize his mortgage right. For example, the creditor refuses to accept the debtor's complete and proper performance.
There are three main ways to realize mortgage, namely auction, sale and discount. In practice, the specific way to realize the mortgage right is first decided by the parties through consultation. The agreement can be concluded when the mortgage contract is concluded, after the mortgage contract is concluded or even when the mortgage is realized. If the two parties fail to reach an agreement, the mortgagee may bring a lawsuit to the people's court, and the people's court will decide how to realize the mortgage. The following three ways are analyzed in detail: auction auction can make the price change of collateral open and fair, which not only ensures the realization of creditor's rights to the maximum extent, but also protects the interests of mortgagor, so auction is regarded as the most basic way to realize mortgage in legislation in various countries. Auction is divided into arbitrary auction and compulsory auction. The former is that the parties voluntarily entrust the auction, and the latter is that the mortgagee applies to the court for auction. With regard to the procedure and effectiveness of auction, the relevant provisions of the auction law and the civil procedure law should be specifically applied. Selling is a relatively simple way to exchange the price of the auction target, that is, the parties or the court directly sells the collateral at a fair and reasonable price, and the proceeds give priority to repaying the secured creditor's rights. However, it should be noted that in judicial practice, auction is generally the principle, and sale only exists in the form of exception. Discount refers to the debtor's failure to perform the debt at the expiration of the performance period, and the ownership of the mortgaged property is transferred from the mortgagor to the mortgagee through an agreement between the mortgagee and the mortgagor, or when the agreement fails, and the judgment is made by the people's court after trial, so as to realize the mortgage. In short, the ownership of the collateral is obtained by discounting the collateral in the form of agreement. Although this method is simple in procedure, it is not transparent enough, so there are many restrictions in legislation, the most important of which is the county's ban on "liquidity contracts". The so-called liquidity contract, also known as mortgage contract, mortgage contract or advance mortgage payment, refers to the clause that the guarantor of the property agrees that the collateral belongs to the creditor before the debt performance period expires and the creditor's rights are not paid off. The fundamental reason for prohibiting "liquidity contract" is that when the value of collateral is higher than the amount of creditor's rights or appreciates in the future, the excess will not be returned to the guarantor, and the interests of the guarantor or other creditors will be harmed; However, if the collateral depreciates later and neither party makes up for it, the interests of the secured party will be damaged.
It can be seen that all the above situations are unfair. In particular, debtors are often in a weak position economically, while creditors are usually in an advantageous position. Creditors may take advantage of the debtor's urgent need for loans, forcing it to use collateral with higher value to guarantee smaller claims, and hope to obtain the ownership of collateral for profiteering when the debtor cannot repay the debt at maturity. Therefore. Based on the principle of fairness and justice in civil law, in order to protect the interests of vulnerable debtors and balance the rights and interests of all parties, most modern civil laws prohibit liquidity contracts. China's property law explicitly prohibits this.
In addition to the above methods, in theory and practice, the mortgagee and the mortgagor are generally allowed to negotiate to realize the mortgage in other ways. Among them, the most meaningful way is to refer to the system of Anglo-American law, collect fruits from the mortgaged property possessed by the mortgagee, or manage the mortgaged property by trust to realize the mortgage right. If the finance department negotiates with the mortgagor to lease the mortgaged property or the bank uses the mortgaged property, the rent will be used to repay the loan. In the financing of foreign-related projects in China, the collateral is mostly large power stations, expressway, bridges and so on. It is difficult to change the price by auction, so it is usually recognized that foreign creditors have the right to take over the collateral and pay off their debts with the proceeds.