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by Esa Vuorenpäa,
LAW OF LAND REGISTRATION AND MORTGAGES
material contained in these notes is a simplified guide to some of the major
topics in Finnish land registration and mortgage law. It is not intended as
a substitute for legal advice on individual transactions, and does not
necessarily stand on its own. Whilst the contents are believed to be
correct, the author cannot accept any responsibility for errors or omissions.
I-/- TITLE AND
The Finnish system is based on the Swedish
(and Germanic) legal tradition codified in the 1743 law book and subsequent
amendments. The system was modernized by the entry into force of the Code
of Real Estate 1) of 12 April
1995/540 (Maakaari/Jordbalken). The old law and subsequent regulations were
subjected a thorough revision but many of the new provisions had already
been applied in practice for a certain time.
A major change in the approach was the
introduction of information technology which has made the traditional card
Where and by whom
is the register kept (register authority)
The Act on the Title and Mortgage Register
(1987/353) contains provisions on the establishment, opening and keeping of
the title and mortgage register. The publicity of registrations is the main
The District Court in whose jurisdiction
the real estate is located is the competent register authority. The files
are kept with the register the District Court but other Courts and
authorities may issue certificates upon request.
How is the
As stated above the Title and Mortgage
Register (Lainhuuto- ja kiinnitysrekis-teri/Lagfarts- och
inteckningsregister) is electronic and no longer held as a card register.
The Finnish Land Survey keeps the Land Register (Kiinteistörekisteri/Fastighetsregister)
which records the formations of real estates and contains information about
their physical and legal dimensions. Title and Mortgage Register is then
up-dated electronically on daily basis to reflect i.a. the current land
surveying situation. Title and Mortgage Register contains information
concerning the title, third person’s legal rights and mortgages and is held
as data-based book-entry system.
What kind of
information does the register contain?
The acquisition of title to real estate shall be registered. (Code of
Real Estate 10:1 §). The provisions on the registration of title apply also
to the registration of the acquisition of a share and a parcel of real
estate, a common, a parcel and a share of a common.
created over real estate, shares in jointly held real estate and parcels
that don’t belong to the titleholder of the real estate are registered
(Code of Real Estate 16:1 §).
as discussed below are registered or may be registered depending on the case
(Code of Real Estate 14 chapter).
A contractual right to use real estate
owned by another person shall be registered as a special right. Registration
may be used also for the determination of whether business property located
on the real estate is affixed to the real estate.
The applications for registration,
information on their consideration and the registration decisions are
entered into the title and mortgage register. In addition, information on
execution, precautionary measures and the bankruptcy of the titleholder of
the real estate, as well as other information on rights to and encumbrances
over the real estate, if they are to be notified to the register authority,
are entered into the title and mortgage register.
Most of private persons’ flats are not subject to the regime described here.
Finland has a special form of limited liability company for housing purposes,
house-owning company (Asunto-osakeyhtiö/Bostadsaktiebolag). In a
house-owning company every share separately or jointly with a number of
other shares, entitles to possession of a specified flat in the house owned
by the company. The owner of a flat is deemed to own moveable property i.e.
shares and not a fraction of land. The house-owning company owns the land
and can obtain a mortgage on it whereas owner of the flat pledges shares as
collateral for his loans. Virtually all blocks of flats are legally
constructed like this and thus remain outside the scope of this report. The
legal provisions regulating this company form can be found in the Companies
Act (29.9.1978/734) amended with the special law called Act on House-Owning
Which are the
effects of the entry into the register?
The law contains i.a. provision on
protection against loss of file and the protection of exchange. The
principle of public credibility is one of the basic effects of the
registration. An entry in the title and mortgage register shall be deemed
public knowledge as from the first weekday after the date of entry. After
that time no protection shall be provided by good faith, expect in certain
A lien over a real estate shall remain
valid even if the person raising the lien had before that time conveyed the
real estate, if the creditor did not know nor should have known of the
conveyance. The same provision applies if title to the real estate has
otherwise been transferred to another or if the right of the person raising
the lien to hand over a mortgage instrument based on an earlier mortgage has
The creditor shall not invoke his good
faith if the information on the transfer of the title to the real estate has
been available in the title and mortgage register for at least one month
before the raising of the lien.
If the mortgage instrument has been handed
over to the creditor as security for an eventual debt and the person
handing it over had at the time the right to raise liens over the real
estate, the lien shall remain valid, if the creditor did no know nor should
have known of the transfer of title prior to the activation of the debt. The
same provision shall apply if the creditor was in good faith when receiving
the mortgage instrument.
Registration becomes pending (lis pendens)
when the application has been presented or delivered to the competent
register authority. The application shall be accepted, even if unaccompanied
by a stamp duty receipt and an entry on the pending registration shall be
made in the title and mortgage register.
How to enter
information into the Title and Mortgage Register
Entries into the register require an
application in writing and signed by the applicant or the person drawing up
the application. The necessary documents shall be attached to the
application. The applicant may present his application orally under certain
The application for registration shall
||the real estate or other registrable
object to which the application pertains;
||the claim or request of the applicant
and, where necessary, a justification for the same;
||the name and domicile of the
applicant, a personal identity number, trade register number or other
corresponding identifier; and
||the telephone number of the applicant,
his legal representative or attorney, as well as the address for service.
The Stamp Duty Act (1943/662) contains
provisions on the documents subject to stamp duty at the time of application
material and technical errors
If the decision of the register authority
is based on evidently erroneous or incomplete information or evidently
mistaken application of the law, the register authority may erase its
erroneous decision and decide the matter anew.
If there is an evident misprint or
miscalculation, error caused by a technical fault or another comparable
error or defect in the title and mortgage register, the register authority
shall make the necessary corrections to the entries.
When a registration matter has not been
decided in accordance with the application or the demand of another party,
written appeal instructions shall be attached to the instrument.
The deadline for appeal shall be 30 days
from the decision of the matter. The appealing party shall deliver his
appeal documents to the relevant register authority on the day of the
deadline at the latest, under threat of forfeiting his right of action.
II-/- SPECIAL RIGHTS AND
Mortgage is the most important form of
raising credit against realty.
The Code of Real Estate recognizes three
different categories of special rights, namely:
||registrable special rights
||other registrable rights
||other special rights
The two first groups of special rights may
be registered and get legal protection. The law makes it clear that the list
of rights that are to be registered(1) and may be registered (2) is
exhaustive (numerus clausus).
Do the rights
have to be entered into the Register?
The registration of a mortgages has a
constitutive effect in that registration is indispensable for the creation
of a contractual mortgage upon real property (Code of Real Estate 16:1 §).
In practice the registration of mortgages is the most important form of
registering limited rights on real property.
The Finnish system does not in principle
recognize any obligation to register special rights. there is , however, one
exception: leas on land. In certain cases such rights are comparable to the
ownership of a real estate and thus the Code of Real Estate includes an
obligation. The holder of a lease or another usufruct on the real estate of
another has an obligation to apply for the registration of his right, if
the usufruct is transferable to a third party without hearing the
titleholder or if there are buildings or other constructions belonging to
the usufructuary on the real estate or it has been agreed that they may be
built. The registration shall be applied for when the usufruct has been
established or when the usufructuary has received the usufruct by conveyance
or other acquisition.
Other special rights that cannot be
registered get certain protection by getting known. Parties aware of such
rights cannot get protection by good faith.
The reason behind
Mortgage in real estate is self
explanatory. If a lien commitment has been made the creditor shall have the
right to demand the titleholder to hand over the mortgage instrument. The
principal right of the creditor is anyway the right to receive payment of a
debt backed by a lien at its latest when the assets of the real estate are
distributed. The amount of the debt is decisive not the face value of the
Special rights that are registered are:
||a lease or other usufruct;
||a right to a pension off the real
||a right to take timber; and
||a right to extract land or mineral
resources or another comparable right of extraction.
Yet, a special right can not be registered
if it is permanent, if it is for the benefit of a given real estate or area
or if it has been established by an official real estate formation measure
or otherwise by a decision of the authorities. These are easements
and as such attributable to the piece of real estate and registered in the
Land Register. Easements are as a rule permanent and in force against third
parties and they are normally created by the assistance of the authorities.
An agreement between the joint
titleholders of a real estate on the possession of the real estate may be
A right belonging to someone else than the
titleholder and relating to a building, construction, machine or facility
used in business and contributing to the purpose of the real estate may be
||the object has been built or brought
on the real estate subject to a reservation or repossession clause or on
the basis of a lease contract or another comparable agreement; or
||the object has been transferred to
the usufructuary of the real estate as a part of the usufruct.
A right subject to a reservation or
repossession clause shall be registered to be in force for at most five
years from the conclusion of the agreement.
Is there a
hierarchy between the registrations?
The Finnish law recognizes a hierarchy
between different entries into the register.
Which is the
criteria in determining the precedence?
The legal effects of the registration of a
special right begin on the day when the registration application has become
pending. A registration earlier applied for shall take precedence in
relation to a registration or mortgage later applied for. A special right
shall take precedence to a lien, based on a mortgage, applied for on the
The seniority of mortgages may, however,
be altered upon the application of the titleholder, if the lienholders and
holders of special rights whose right decreases due to the alteration
consent to the same. An alteration of seniority may be effected also upon
the application of a lienholder, with the consent of the titleholder and the
registered rights transferable?
It goes without saying that a mortgage is
transferable. The transferability is the main rule. Yet, some special rights
are not transferable due to their personal nature; e.g. a right to a pension
is a registered right but it cannot be transferred.
If a special right has been registered,
its alteration, transfer and lapse may be registered applying, where
appropriate, the provisions on the registration of special rights. The legal
effects of registration apply to an alteration of a special right by
agreement or other transaction only if it has been registered.
Are there any
consumer protection aspects related ?
Registration of title, mortgage on special
rights do not cause protection problems as such.
Real estate sales which are vital to the
registration of title if carried out by real estate agents may indirectly
include aspects of consumer protection.
Mortgage documents are drafted and made in
most cases by the financial institution granting a loan and not by a notary.
Banks have been widely criticized of miss information when requesting
collateral and having liens raised over real estate. Every financial
institution is well advised to inform the customer in detail. A financial
institution should be very restrictive in accepting mortgage and other
collateral as security for all the commitments of a person in consumer
III-/- HOW TO WIN THE PROBLEMS
RELATED TO CROSSBORDER SECURITIES?
Can the mortgage
and the secured debt be subject to different legal systems?
The answer is yes: the mortgage is related
to the real estate and is governed by the law of the location of the real
estate, forum re sitae, whereas the promissory note showing the real claim
may be governed by another law. This is logical as a mortgage may only be
created over real estate, a share in jointly held real estate and a parcel
not belonging to the titleholder of the real estate.
When the mortgage has been created, the
applicant is issued a mortgage instrument as a certificate of the
mortgage. The mortgage instrument is a certificate and although tradition of
the mortgage instrument is required in some cases, the mortgage instrument
is not an independent bearer document.
The law on the applicable law on
international contracts § 5 states that if a contract does not include a
provision on the choice of law the applicable law shall be the jurisdiction
with the closest connection bearing in mind the circumstances of the
relationship. The law is based on the treaty of Rome and can also be
interpreted so that either the domicile of the bank or the location of the
real estate could determine the applicable law. There are no precedents on
this issue. In particular in consumer credits the location of the real
estate pledged could be decisive.
The law on the applicable law on
international contracts § 8 states that when rights are transferred the
applicable law remains unchanged between the original debtor and the
If the mortgage instrument has been handed
over as security of an eventual debt the lien shall be raised when the debt
becomes active. Then again if the debt has been paid the mere possession of
the mortgage instrument does not create any security. This clearly
demonstrates that the mortgage instrument has a partly separate life span
independently of the secured debt and is no longer to be considered as a
From the Finnish point of view a mortgage
in real estate is an optimal security. The conflict of law aspect calls for
a contractual provision on the applicable law of the main debt and the
mortgage instrument can be reused after the payment of the debt or it can be
conveyed when the principal debt is transferred. Code of Real Estate 17:5,2
§ states that “the creditor may convey the mortgage instrument only if he at
the same time transfers the debt which is backed by the lien.” You are
reminded of the fact that Finnish flats are constructed as moveable property
where the object of pledging is shares. Otherwise the same conflict of law
observations apply with respect to transactions of moveable property.
Can the mortgage
amount be in foreign currency?
The amount of the mortgage has to be fixed
amount and expressed in the currency of Finland. The interpretation has been
thus that the mortgage amount can neither be in Euros nor in foreign
denomination. As the currency of Finland will be Euro this provision will
change without the legal wording having to be modified.
notaries’ acts be included in the registration?
The Finnish concept of notaries public is
very different from that of many other European countries and follows the
Swedish tradition. A vast majority of deeds are form free and just very few
require the intervention of a notary public. The sale of real estate
requires the confirmation of a notary.
the title The sale of real estate is concluded in writing. A
notary shall attest the sale in the presence of all the signatories of the
deed of sale. Notaries in this context are defined as certain judges, civil
servants and persons nominated by the district court. Thus a deed certified
by a foreign notary does not qualify.
Registration of a
mortgage. The application for a mortgage shall be made in
writing to a district court and does not require any certifications by a
notary. Thus the question is irrelevant from the Finnish point of view.
special rights. the main rule is that beside the sale of real
estate these deeds do not require the intervention of a notary. The
applicant shall present the contract or other document relating to the
attachment or transfer of the registrable right. As the acts concerned are
not notary deeds the question is of no importance.
IV -/- INTRODUCTION TO THE
PROCEDURE OF ENFORCEMENT
Enforcement always requires legal grounds
such as a court judgement, a conciliation confirmed by a court or an
The enforcement proceedings are initiated by an application to the bailiff
who shall take preparatory measures i.a. acquires all the necessary
documents. The applicant has to pay in advance the costs related to such
publication. The notice concerning the auction shall be published
in the Official Gazette and a local newspaper. And at least four weeks
before the compulsory auction. In addition the notice shall be mailed to the
applicant, mortgage holder, debtor and the owner of the real estate.
claims. No more than two days before the compulsory auction the
creditors shall present the claims. In practice the auction is initiated by
the presentation of claims. The creditors have the opportunity to make their
claims, object other creditor’s claims etc. The bailiff reads aloud the
minutes, the abstract of the register of mortgages and other official
documents. Thereafter the bailiff draws up the schedule of creditors.
priority. The schedule of creditors shall i.a. indicate the order
of priority of the rights to be taken into account when distributing the
sales price. Execution Act 5:26,1 §.
Minimum Bid at a
Compulsory Auction. The list of creditors shall include the
minimum bid or a lowest purchase price acceptable at a compulsory auction of
a real estate. The lowest bid must be higher than the aggregate amount of
those receivables and distraint related costs which have higher priority
than the debt due to which the notice of compulsory auction has been given.
If the notice has been given for the payment of two or more creditors’
receivables, the lowest acceptable bid is determined on the basis of the
debt with the highest priority between such receivables. The list of
creditors is confirmed by the bailiff. Further the list is given to the
persons involved for their acceptance and signing. A creditor who has signed
the list cannot apply for a change in the list.
If a bid which is acceptable according to
the list of creditors is made at the auction, the real estate shall be sold,
unless the purchase price does not cover the payment of the debt due to
which the auction was initiated and the creditor of the same objects to the
sale. If a bid exceeding the limit for the lowest acceptable purchase price
is not made, the real estate shall not be sold, unless the creditors whose
receivables are not fully covered by the purchase price and the person who
initiated the auction give their consent to the sale.
When a bid has been accepted at the
auction, the buyer has to pay one sixth of the purchase price in ready money
or alternatively grant a mortgage to the real estate in order to secure the
payment. Before the closing of the auction it further has to be notified
where and when the remainder of the purchase price must be paid.
The code of Real Estate 13:3 grants
protection in cases of double conveyance.
If the same real estate has been conveyed
to two persons, the later conveyance shall take precedence, if registration
of title to it is first applied for and the conveyee, at the time of
acquisition, did not know nor should have known of the previous conveyance.
If registrations of title to several acquisitions are applied for on the
same day, the earliest conveyance shall take precedence.
An acquisition of real estate based on a
conveyance shall be permanent even if the conveyor was not the rightful
titleholder of the real estate due to a defect in his acquisition or that of
a previous titleholder, if the title of the conveyor was registered at the
time of acquisition and the conveyee, at the time, did not know nor should
have known that the conveyor was not the rightful titleholder.
A special right to or lien over real
estate shall be binding even if the person effecting one was not the
rightful titleholder of the real estate, if his title was registered at the
time of acquisition and the person holding the lien or special right, at the
time, did not know nor should have known that he was not the rightful
The conveyee or person holding a title or
special right shall not receive the protection, if:
||the deed of title or other
acquisition document of the rightful titleholder or the power of
attorney or other competence document of his representative has been
||the conveyance of the rightful
titleholder is invalid because he has been coerced into it or
||the conveyor of the real estate or
the real estate of the establisher of a lien over or special right to it
has been registered as titleholder by mistake or if the entry in the
register is not based on a decision of the register authority.
A lien over real estate shall remain valid
even if the titleholder has prior to the raising of the lien lost his right
of decision over it because of execution, precautionary measures or
bankruptcy, unless the loss of that right was entered into the title and
mortgage register at the time of the raising of the lien and the creditor
also otherwise did not know nor should have known that the titleholder no
longer had the right to raise a lien over the real estate.
If the mortgage instrument has been handed
over to the creditor as security for an eventual debt and the person handing
it over had at the time the right to raise liens over the real estate, the
lien shall remain valid, unless the loss of that right was entered into the
title and mortgage register prior to the activation of the debt and the
creditor also otherwise did not know nor should have known that the
titleholder no longer had the right to raise a lien over the real estate.