Is an apartment being given as a gift with a mortgage, is it possible to draw up a deed of gift for part of it and how to save money and your own time on this - Oleg, a practicing lawyer and author of the website “Legal Ambulance”, will tell you about all this and all the non-obvious features of such a transaction. Ustinov.
Quite often, when choosing a home, we are forced to take out a mortgage, and for a long period (for example, 20-30 years). At the same time, anything can happen during this long period of time, and therefore experts recommend finding out in advance about the possibility of disposing of an apartment received on credit, which is actually pledged to the banking organization that issued funds for it.
When can I issue a deed of gift for an apartment with a mortgage?
A distinctive feature of this situation is the presence of a third interested party in the transaction. His opinion about the proposed agreement, as the opinion of the actual owner of the property, cannot be neglected. The borrower does not own the apartment solely until the entire amount allocated by the bank is returned to him.
Important! The goal of the lender (in this case, the bank) is to make sure that his money will be received back, no matter what manipulations are carried out with the apartment. By default, any change in the status of the apartment is negative for the mortgagee.
You need to be prepared for difficulties when preparing a deed of gift. By law, a transaction is possible under the following conditions:
- the contract contains a clause on the possibility of donation;
- the recipient is aware of the status of the apartment. He demonstrates the willingness and ability to act in accordance with the terms of the contract, fulfilling its requirements;
- the lender is interested in the transaction.
If a clause prohibiting donation was included in the mortgage agreement upon signing, the condition is irresistible. The only possible way out in this case is to repay the loan, removing the apartment from the status of collateral. And then deal with the gratuitous transfer of housing to the donee.
If there is no direct prohibition, or the possibility of transactions with collateral real estate is prudently mentioned, all efforts should be made to reach an agreement with the bank. The lender is able to exercise the right to refuse to issue a deed of gift if he is not sure that a change in the payer will benefit the mortgage payments.
From the point of view of the mortgagee, any transactions with unpaid real estate are unnecessary risks, which should be taken only if there are serious reasons. The payer should search for such arguments.
Important! It is unlikely that it will be possible to obtain the consent of the creditor for a deed of gift in favor of a person whose solvency is not obvious: a minor, an elderly person or a low-income person.
What the law “says” in 2021
According to the provisions described in Article 37 of the Federal Law “On Mortgage”, adopted on July 16, 1998, living space that was acquired by the owner under a mortgage loan can be transferred under a gift agreement by agreement of the person who previously provided this property as collateral. In the same law you can find lines stating that housing taken out on a mortgage before its payment is the property of the bank.
From the above it follows that until the mortgage loan is repaid, the final decision as to whether a mortgaged apartment can be donated remains with the banking organization that has the right of ownership of this property.
At the same time, paragraph 1 of the considered law “On Mortgage” contains an important rule:
The pledgee has the right to dispose of the real estate pledged to the bank with its permission.
It is worth noting that most property relations that connect the lender and the borrower and relate to the housing for which the loan was issued are subject to these regulations in 2021:
- The Civil Code of the Russian Federation, which contains all general information about the ownership of housing, as well as collateral and loan agreements.
- Federal Law No. 102 “On Mortgages”, which regulates the process of transferring collateral to a banking organization.
- A loan agreement, the content of which sets out the rights, as well as the direct obligations of the parties to this agreement (the mortgagee and the bank).
- Regulations on state registration of rights and restrictions defined in Federal Law No. 122 “On state registration of rights to real estate.”
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Legislative grounds
The legality of the rights of a credit institution to participate in deciding the fate of a mortgaged apartment is confirmed by the following regulatory documents regulating the relationship between the borrower and the creditor organization:
- Article 37 of Law No. 102-FZ streamlines the process of registering an apartment as collateral, emphasizing the mandatory consent of the lender in the transaction;
- the rights and obligations of both parties are described by Federation Law No. 122;
- methods to ensure the fulfillment of pledge obligations are listed in the Civil Code in Article 329;
- If one of the parties to the contract violates the accepted agreements, the Civil Code of the Russian Federation dictates the possibility of returning the real estate under Article 334.
In addition to the letter of the law, the agreement signed by both parties is of great importance. If its points do not contradict federal legislation, they take precedence. Being aware of the details of mortgage legislation will make it easier to have a constructive dialogue with the mortgagee.
Requirements for the contract
The deed of gift for an apartment taken on a mortgage requires the following information:
- Details of the person who decided to donate the housing, the recipient, as well as the mortgagee.
- Information about the legal document.
- Characteristics and technical description of the property.
- Be sure to write that the housing is given free of charge and irrevocably.
- An indication of the rights and obligations that are attributed to the parties.
- Information about the transfer of ownership. It must certainly be said that the person receiving the living space as a gift is informed that the property is pledged to the bank.
- Signatures of all participants in the process.
After registering the transaction, the donee receives a certificate of receipt of the right to housing with an encumbrance.
Find out from our article how much it will cost to formalize a transaction of donating living space between close relatives.
Getting consent
A mandatory precondition for drawing up an agreement is to obtain a bank decision approving the alienation of the mortgaged property from the borrower. And such consent is almost impossible to obtain without voicing compelling reasons why the act of donation is necessary and useful, including to the bank.
Such a reason may be the proven state of ill health of the donor, his obvious financial insolvency in comparison with the situation of the donee.
The decision made by the banking organization will comply with the requirements of Article 38 of Law No. 102 and be based on the agreement drawn up when registering the mortgage. The potential possibility of donating real estate leaves room for further maneuvers; a direct prohibition closes the topic of donation until the loan amount is paid in full.
Let's consider the option of a hypothetical bank consent. His first action as a mortgagee will be a scrupulous check of the payer’s reliability and his credit history. Increasing the number of payments understands the creditor's confidence, working in your favor.
Important! The bank is unlikely to consider mortgage real estate transactions if the remaining payments are more than a third of the original amount.
Owner's rights
The purchased property becomes the property of the buyer after he:
- Concluded a purchase and sale agreement with the seller.
- Transferred the agreed amount of funds to the second party.
- Registered property rights in Rosreestr.
When applying for a mortgage, some adjustments are made to this procedure. The contract is concluded between three parties - the seller, the buyer and the lender. The bank gives the money and therefore places an encumbrance on the living space so that the borrower cannot dispose of the property alone.
After registration of housing, the mortgage borrower has the right:
- Move into the premises yourself and move in close relatives and members of your family.
- Register there and register your relatives there.
- Make cosmetic repairs.
- Arrange the premises at your personal discretion.
Restrictions on the rights of the owner apply to the following procedures:
- Property For Sale.
- Registration of deed of gift.
- Registration in the apartment of persons who have no family relationship with the owner.
- Carrying out redevelopment.
- Long-term rental of premises.
Any of these actions must be agreed with the creditor and can only be carried out with his approval.
Step-by-step instruction
Initial actions
- Make a decision about the identity of the donee, taking into account the future requirements of the creditor.
- Clarify the presence of a clause allowing transactions with mortgage real estate in the agreement concluded when applying for a loan. The presence of such a provision allows you to contact a banking organization.
Where to contact?
The most complete answer about the possibility of transferring an apartment free of charge, including instructions on further actions and significant points, will be received from the company that issued the mortgage on this property. The office must geographically belong to the same region and city as the purchased housing.
Next, you need to clarify the data of the employee who is assigned to study the payer’s case, assess the solvency and trustworthiness of the donee appearing in the desired act. Make an appointment with him.
What documents will be needed?
To study a request, a banking organization should prepare:
- statement about the possibility of free transfer of housing with a mortgage;
- a duplicate of the applicant's passport;
- duplicate loan agreement;
- registration certificate of the apartment with exact characteristics;
- a pre-drafted gift agreement;
- additional documents (upon request of the bank employee).
Next you need:
- Determine whether the information provided meets the requirements. Provide additional evidence of trustworthiness at the request of a bank employee.
- Obtain written consent from the banking organization to conduct the gift transaction.
- Prepare and draw up an agreement on the gratuitous transfer of real estate yourself or contact a notary office for this.
State registration of the contract
If the lender's consent is obtained, written permission is included in the standard set of documents submitted to Rosreestr:
- passports of the parties involved in the transfer of real estate;
- application for registration;
- title documents of the home owner;
- technical passport of the living space that is the subject of the donation;
- consent of the spouse certified by a notary (if necessary);
- extract from the house (apartment) register.
Peculiarities
The most important point in this situation is the presence of a third party participant in the person of the creditor, whose opinion cannot be ignored. As a result of the donation, the recipient becomes the owner of the property. The obligations under the encumbrance also pass to him. This point should be reflected in the drawn up contract along with a clause on the essence of the encumbrance: its type and the nature of the claims to housing.
Important! Incorrect execution of the gift agreement may lead to the recognition of the transaction as void. Therefore, although contacting a notary is not mandatory, with such a complex medical history, it is worth playing it safe and entrusting the preparation of documentation to a professional.
This will cause unnecessary expenses, but will serve as a guarantee against design errors and save time on document corrections.
Re-register the mortgaged property into the ownership of the person accepting the gift
List of required documents
When the bank has given its consent, the time comes to draw up a deed of gift for the apartment taken under the mortgage lending program. For state registration of an agreement, the following package of documents is required:
- Passports of citizens of the Russian Federation belonging to the donor and recipient.
- Application for registration.
- A document confirming the right to real estate.
- A technical passport for the living space that is given by one person to another.
- The approval of the second spouse, which must be certified by a notary. This is necessary if the home was purchased during marriage.
- An extract from the apartment register about the persons registered in this living space.
- Approval from the Board of Trustees. Requested when the gift transaction concerns the rights of incapacitated or minor persons.
- Bank consent.
You can learn how to issue a deed of gift for living space from our article.
How much will you have to spend?
The donation procedure includes paid and free moments. Free are:
- the direct act of transferring an apartment as a gift from one close relative to another;
- issuing the consent of the creditor bank.
You will have to pay:
- if the donation occurs between non-close relatives or strangers. The contract stipulates which party pays a 13 percent duty on the cost of the apartment;
- state fee of 2,500 rubles in favor of Rosreestr;
- notary services, if resorted to.
How banks might behave when donating a mortgaged apartment
Having decided to donate an apartment, the question inevitably arises of how the creditor banking organization will react to the desire to transfer property “tied” to the bank. And, although a citizen’s availability of such an opportunity is prescribed at the legislative level - bank employees have the right to prohibit a transaction.
However, after considering the situation, the bank may allow the transfer of property or include a clause in the loan agreement that the borrower may not expect a positive response from the lender when transferring the encumbered property as a gift to a close relative or any other person.
Thus, it is possible to facilitate the process of alienation of mortgaged housing already at the stage of drawing up an agreement between the borrower and the bank, by expressing your desire to include the corresponding clause in the content of the loan agreement.
But, in most cases, housing is taken out on credit for oneself, and therefore, before drawing up a deed of gift for it, the organization’s employees will have to provide compelling reasons for receiving a positive response.
Expert opinion
Oleg Ustinov
Practicing lawyer, author of the website “Legal Ambulance”, one of the co-founders of the “Our Future” foundation.
Experienced lawyers recommend, first of all, that the bank draw the borrower’s attention to the need to carry out the transaction and obtain benefits for each of the parties involved. For example, a citizen who wants to donate real estate is unable to pay regularly established amounts or has health problems, which calls into question the integrity of the transaction as a whole.
Of course, the mistrust of bank employees is justified, because along with the ownership of the mortgaged property, the unpaid part of the loan also passes to the new owner, the size of which in itself is one of the important factors in making a negative or positive decision.
That is why the person who applies for housing and will act as the donee must meet the following conditions:
- Be a citizen of the Russian Federation and have permanent registration in the region where the creditor bank is located;
- carry out labor activity for at least 6 months at the last place of work, and also have at least 1 year of official total work experience;
- be fully solvent and have available funds for subsequent loan repayments.
Note that you can donate an apartment provided that there is a debt on it (sometimes this is even much easier, because an employee of the creditor organization understands that, unlike the current owner, the future owner can make regular payments). To do this, the recipient only has to pay the debts owed to the HOA and the bank along with penalties. However, if the legal successor, when concluding the gift agreement, was not informed about such debts, the transaction will be declared invalid!
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It is rational that a banking organization will not give its consent to the registration of a gift and re-registration of property rights if this transaction may increase the risks of the bank itself. For example, it will probably not be possible to donate living space to a minor or an elderly person, or to a person with health problems.
Lawyers also explain this fact by the fact that it will subsequently be difficult for the organization to sell the mortgaged housing if the borrower is unable to fulfill his loan obligations.
What happens if you draw up a deed of gift for an apartment with a mortgage without the knowledge of the creditor bank
Also, many readers of our column on donating real estate are interested in whether it is possible to issue a deed of gift for an apartment with a mortgage without the bank’s permission and what consequences may follow after violating the prohibition agreement? We answer - you will not be able to draw up a donation agreement for such living space! Why?
It's simple. To complete a property donation transaction, the parties to this transaction must officially register the transfer of ownership of real estate in the State Register, whose employees are required to accept from the donor and recipient the documents established by current legislation, some of which must be issued by representatives of the creditor bank.
If the borrower ignores the rules described above, the banking organization has the right to do the following:
- file a corresponding statement of claim in court, demanding termination of the transaction;
- sell the mortgaged apartment if the debt is not repaid to the bank in full;
- insist on early payment of all debt, as well as force the violator to pay all fines resulting from the borrower’s violation of the terms of the loan agreement.
Are there options to bypass the credit institution?
Participation in a transaction by a bank as a sovereign owner creates additional difficulties, because the decisive opinion of this party must be taken into account. Sometimes there is a desire to circumvent legal conditions by drawing up documents without the knowledge of the creditor. Such actions will have the following consequences:
- Rosreestr will not accept documents for registration.
- The bank may exercise its right to hold the violator accountable by demanding penalties.
- The donation transaction will be declared invalid.
- The credit institution may require early payment of the entire mortgage amount, taking into account interest or alienation of the housing that serves as collateral.
✅ Donation procedure
The main difference from the usual donation of a share is permission from the third party to the legal relationship (the bank). The applicant will have to contact a notary, since we are talking about the alienation of shares in the apartment. But first things first.
