Mortgage Encumbers Transferred Real Estate

There are three institutional modes of the transfer of mortgaged property: Encumbrance, Subrogation and Dualism. Traditionally, the Civil Law of the Continental Law System adopts the mode of Encumbrance, by taking the encumbrance effects of mortgage as the center together with the discharge system of mortgage. In Chinese academia, there has been much dispute over the choice of the institutional modes of mortgaged property transfer. Yet too much emphasis has been laid on the advantages and disadvantages of each mode that the theoretical foundation of the selected mode has not been clarified. By studying the encumbrance effects, this thesis tends to deepen both the theoretical understanding of the mode of encumbrance and the discussion about the selection of the institutional modes of mortgaged property transfer. Except for Introduction and Conclusion, there are five chapters in this thesis.Chapter One focuses on the precondition of the encumbrance effects of mortgage. In China, the jurisdictions and theories of restricted mortgages property transfer are based on both fundamental principles and value considerations. The fundamental principles of restricted mortgaged property transfer are the traditional theories of restricted property supported by both the Separation of Rights and the Domination of Values. The value consideration is the balancing of the interests of mortgagee, mortgagor and transferee. This thesis defends the free transfer of mortgaged property, proves the feasibility of substituting the theory of restricted property with the theory of encumbrance, and redefines the relationships between property and mortgage, thus providing theoretical foundation for the free transfer of mortgaged property. Moreover, the value consideration of restricted transfer does not hold either. It provides too much affirmative protection for mortgagee, violates the idea of making the best use, and impedes the circulation and transactions of property.Chapter Two clarifies the definition and contents of the encumbrance effects of mortgage. This thesis points out that the encumbrance effects are born with the setting of mortgage and is highlighted when mortgaged property is being transferred. The encumbrance effects only refer to the attribute of mortgage on mortgaged property, i.e. mortgage encumbers mortgaged property. The rights related to the implementation of mortgage can not be included in this concept.Chapter Three explores the theoretical basis of the encumbrance effects, abandoning the widely-accepted approach, thus discovering the truth of "registration generating the encumbrance effects". This chapter gives a historical review of the encumbrance effects of mortgage, pointing out that it originates from the Roman law, with "actio Serviana" being the first precedent. It is not registration system that generates the encumbrance effects. On the contrary, registration limits the effects. To structure the theoretical basis of the encumbrance effects of mortgage, encumbrance theory should be adopted in place of the restricted property. In this way, free transfer of mortgage, the meaning and theoretical basis of the encumbrance effects of mortgage are well presented in this chapter.Chapter Four elaborates the methods of blocking and limiting the encumbrance effects of mortgage, including mortgage eliminating system and the registration system which can objectively limits the encumbrance effects of mortgage. The former aims to eliminate mortgage completely, such as purge and system of discharge on behalf of others, the latter limits the scope of mortgage which can initiate the encumbrance effects.Chapter Five analyzes China’s design of the mortgage transfer system, explaining whether or not the existing law has admitted or should admit the encumbrance effects of mortgage from aspects of interpretative theory and legislative theory. This chapter points out the irrationality of some scholars’argument that the current law stipulates the encumbrance effects, since such argument lacks persuasiveness. However, admitting the encumbrance effects of mortgage has theoretical basis, practical necessity and feasibility. From the perspective of legislative theory, China’s mortgage transfer system should stipulate the encumbrance effects of mortgage.