What is a Unilateral Mortgage and when to sign it?

With the name unilateral mortgage we define a mortgage created by a debtor without the intervention of a creditor. That is to say, it is established without the lender accepting the mortgage. It is a voluntary mortgage and of a special nature, since the unilateral mortgage is not a mortgage loan, but exists to guarantee the fulfilment of a duty, such as a debt to the Treasury, through an asset that is owned. Keep reading to learn more about what a unilateral mortgage is and when it is advisable.

Thus, the person who wishes to mortgage a property, usually real estate (for this reason it is also called a unilateral real estate mortgage), let us call them a debtor or borrower, must grant a unilateral mortgage deed before a Notary, which the creditor (or lender) will later accept or not.

The unilateral mortgage deed must be registered in the Land Registry and this can be done without having to pay taxes.

It is necessary for the lender to accept it within two months from the request and for a marginal note of acceptance to appear in the Registry, since otherwise the borrower may cancel it unilaterally. To do so, the lender or creditor must go to the Notary and accept the deed of constitution of the unilateral mortgage.

• The unilateral mortgage must be accepted by the person in whose favour it is established.
• The acceptance must be recorded in the Register by marginal note.
• The effects are retroactive, that is, it applies from the date of its constitution.
• Until it is accepted, no taxes are paid.

The constitution of a unilateral mortgage is often granted in favour of different institutions, seeking to defer taxes or split debts. With this, debts against social security or the Treasury are guaranteed. For this reason, it is common to find them in favour of the Public Administration, whether state, regional or local (known as a unilateral mortgage in favour of the town hall).

Thus, the unilateral mortgage in favour of the tax agency is used as a payment guarantee when there is a debt with the Treasury. If the tax agency did not accept the mortgage, it would not be constituted. When a unilateral mortgage is in favour of the Treasury, its debtor is the State as creditor, which is why it is also known as a unilateral mortgage in favour of the state.

Among the benefits provided by the unilateral mortgage, we find the following:

• It offers guarantees to public administrations.
• It facilitates the mortgage process for creditors.
• It is exempt from taxes until it is established.
• It facilitates the debtor's payment of incurred debts.

Let us take an example of a unilateral mortgage. Juan (borrower) fails to comply with the agreed terms regarding a payment to the Tax Agency. His debt accumulates and he decides to mortgage his property in favour of the Tax Agency, processing a deed of constitution of a unilateral real estate mortgage. This ensures the fulfilment of the payment obligation and the default interest. When the obligation is fulfilled, that is, when the tax debt and its interest are paid, the mortgage is extinguished.

Companies can also process unilateral mortgages. Thus, it can be established to guarantee the debt in the purchase of shares or processed as a guarantee for a postponement of bankruptcy proceedings.

Unilateral mortgages before a Notary in Barcelona and Catalonia do not have special features in the Notary's office, except that they will only be signed by the person constituting the mortgage. Therefore, the appearance of the mortgage creditor will never be necessary in this type of mortgage in Barcelona and Catalonia.

As with other mortgages in Barcelona and Catalonia, it will be necessary to process the prior material transparency certificate when the mortgagor is an individual. Therefore, individuals will have to attend the notary on two occasions. In contrast, companies only have to attend the signing of the mortgage at the notary, without processing a prior mortgage certificate in Barcelona or Catalonia.

There are no special tax provisions in Catalonia regarding unilateral mortgages. Therefore, the general rule is that they are subject to AJD (Tax on Documented Legal Acts) at the general rate of the Autonomous Community of Catalonia, which is 1.5%.

In the most common cases of unilateral mortgages in favour of the Administration, it is generally considered that the taxpayer is the Public Administration and that it is exempt from paying AJD. However, you should be aware that the TSJ of Catalonia has had some particular considerations in specific cases.