Attachment Mortgage

Concept and legal classification of the arrest mortgage

The arrest mortgage is a security instrument under German civil law that enables the creditor to have a security mortgage entered on a debtor’s property by order of an attachment decree. It serves to secure monetary claims when an attachment (protective enforcement) has been ordered by the court before an enforceable title for the claim exists. The arrest mortgage is an important instrument for preliminary and interim security in real property law.

Statutory foundations

The legal basis for the arrest mortgage is found in particular in Section 932 of the German Code of Civil Procedure (ZPO) as well as in the provisions of Sections 1113 ff. of the German Civil Code (BGB) regarding mortgages. Section 885 BGB is also decisive for registration, as is Section 932 para. 1 ZPO, which directly regulates the creation of the arrest mortgage.

Requirements for the arrest mortgage

Obtaining an attachment order

A key prerequisite for the registration of an arrest mortgage is the prior obtaining of an attachment order from the competent court pursuant to Sections 916 ff. ZPO. The attachment order can be issued to secure a monetary claim if there is concern that enforcement without such order would be thwarted or significantly impeded.

Grounds for attachment and attachment claim

The right to obtain an attachment order requires grounds for attachment. This is regularly given if facts are credibly demonstrated that justify the concern that without attachment, subsequent enforcement would be endangered (Section 917 ZPO). Claims for purposes of the arrest mortgage are exclusively monetary claims or claims directed towards the provision of security.

Requirement of application and procedure

After the attachment order has been issued, the creditor must apply to the land registry for the registration of an arrest mortgage. The attachment order must be enclosed with the application (Section 932 para. 2 ZPO). The arrest mortgage is recorded in the land register, with rank determined by the time of application.

Legal nature and effect of the arrest mortgage

Security mortgage sui generis

The arrest mortgage is a security mortgage of its own kind (sui generis) and differs from other types of mortgages in particular in that it is not based on an established claim, but merely on an alleged and provisionally secured claim.

Effect vis-à-vis third parties

Upon registration in the land register, a real right in favor of the creditor is created, which has the effect of a security mortgage. The arrest mortgage gives the creditor priority when later enforcing his claims by way of compulsory enforcement. After registration, the property is encumbered with a mortgage for the amount of the arrest claim. The ranking of the mortgage depends on the receipt of the registration application by the land registry.

Legal consequences for the debtor

Upon registration of the arrest mortgage, the debtor loses free availability over the property to the extent that the creditor, upon successful later judgment of his claim, can initiate compulsory enforcement. Until judgment, the arrest mortgage remains merely a security measure and is dependent upon compulsory realization.

Course and transformation of the arrest mortgage

Final security after judgment

If the creditor obtains a final enforceable title in the main proceedings, the arrest mortgage is converted into a security mortgage pursuant to Section 1187 BGB. Thereafter, it can be used like any other security mortgage for compulsory enforcement against the property, for example, by initiating a forced auction.

Removal of the arrest mortgage

If the grounds for attachment subsequently lapse, the attachment is lifted, or the attachment claim is not established by judgment, the debtor may demand the deletion of the arrest mortgage from the land register in accordance with Section 1168 BGB in conjunction with Section 932 ZPO. The period during which the arrest mortgage existed may give rise to recourse claims by the debtor if the creditor is proven to have caused damage through unauthorized entry.

Distinction from other security rights

Arrest mortgage and priority notice

The arrest mortgage differs from a priority notice (Section 883 BGB) in that the latter merely provides legal security for a contractual claim to registration but does not establish any real right of realization as a mortgage does.

Arrest mortgage and preliminary injunction

While a preliminary injunction under Sections 935 ff. ZPO is aimed at securing claims not directed at payment of money, the arrest mortgage exclusively concerns monetary claims and acts directly upon the debtor’s property.

Legal remedies and possibilities for legal protection

Objection to the attachment order

The debtor may lodge a complaint against an issued attachment order pursuant to Section 924 ZPO. According to Section 926 ZPO, the debtor may also demand that proceedings on the merits be carried out in order to have the validity of the attachment claim judicially determined.

Deletion procedure

If the security purpose ceases or the attachment order is lifted, the debtor can request deletion of the arrest mortgage from the land registry. If an enforcement title for the arrest claim has been issued, this option ceases, as the mortgage is then converted into a standard security mortgage.

Practical significance

In practice, the arrest mortgage is an effective security instrument for creditors to preferentially secure claims against debtors who have real property assets. Its great importance is particularly apparent in cases of threatened asset transfers or feared insolvency of the debtor.

Literature and further references

German Civil Code (BGB) Code of Civil Procedure (ZPO) Palandt, German Civil Code – Commentary Munich Commentary on the BGB

Frequently asked questions

How does the court procedure for obtaining an arrest mortgage proceed?

The court procedure to obtain an arrest mortgage generally starts with the creditor’s application for the issuance of an attachment order pursuant to Section 916 ZPO. The creditor must set out and credibly demonstrate to the court both a claim for attachment (a claim against the debtor) and reason for attachment (danger of thwarting or significantly hindering enforcement). If the attachment application is granted, the competent court issues what is known as an attachment order, which is served on the debtor. The creditor must then enforce the attachment within the period of one month prescribed in Section 929 para. 2 ZPO by applying for registration of the arrest mortgage in the land register. The arrest mortgage is usually entered as a security mortgage, i.e., in Section III of the land register. The procedure is generally conducted as a summary proceeding to prevent possible loss of rights by the creditor, and in certain cases may take place without a prior oral hearing. The debtor may subsequently apply for the lifting or amendment of the attachment if the conditions for this have changed or never existed.

What documents and evidence are necessary to apply for an arrest mortgage?

To apply for an arrest mortgage, a written application to the competent local court is first required, in whose district the affected property is located (Section 802 ZPO in conjunction with Section 929 ZPO). All documents necessary to substantiate the claim for attachment and the reasons for attachment, such as contracts, invoices, reminders, correspondence, or affidavits, must be enclosed. There must also be a description and precise designation of the property to be encumbered by extract from the land register or other official documents. The court’s attachment order itself, as well as suitable enforcement documents, are required to initiate registration in the land register. It should be noted that the requirements for substantiation in attachment proceedings are lower than in full proof; documents and affidavits are usually sufficient. If applicable, evidence of urgency (reason for attachment) and proof of costs should also be kept ready.

What are the legal effects of registering an arrest mortgage in the land register?

With registration of the arrest mortgage, a security mortgage is created in favor of the creditor on the affected property (Section 932 ZPO, Section 1184 BGB). This security mortgage serves exclusively to secure the claim designated in the attachment order as well as interest and costs. From the time of registration, the creditor acquires a real security right that, in the order of rank in the land register, grants him preferential satisfaction against other creditors and third parties—including in insolvency proceedings (Section 879 BGB). The arrest mortgage, like a security mortgage, is effective only to the extent the secured claim exists. Once the claim is fully satisfied, it is to be deleted. Upon final judgment, the arrest mortgage can be converted into a forced security mortgage (Section 932 para. 3 ZPO). However, the arrest mortgage can also be challenged, for example, by lifting the attachment or extinguishing the claim.

How can the debtor defend against the registration of an arrest mortgage?

The debtor can initially defend himself against the issuance of the attachment order itself by way of objection or immediate complaint pursuant to Section 924, Section 793 ZPO. If the creditor has already had an arrest mortgage registered, the debtor can apply for the interim lifting or modification of the attachment if the grounds for attachment have ceased to exist or never existed (Section 927, Section 942 ZPO). In addition, it is possible to avert enforcement from the arrest mortgage by depositing the owed amount or providing adequate security (e.g. bank guarantee). Registration and existence of the mortgage can also be challenged in land registry proceedings by way of a corresponding complaint (Section 71 GBO), if there are formal errors. The debtor can also demand deletion of the arrest mortgage if the claim is not duly established in time or the grounds for attachment have lapsed.

What costs are incurred in registering an arrest mortgage?

Court fees are incurred for the attachment order, the amount of which depends on the value in dispute and is regulated by the GNotKG (Act on Court Fees in Family Matters and in Matters of Voluntary Jurisdiction). The land registry charges separate fees for the registration of the arrest mortgage under the GNotKG, which are primarily based on the value of the claim to be secured. In addition, there are other costs (e.g. fees for land register extracts, postage) and, if required, notary fees. In the case of legal representation, legal fees are charged in accordance with the RVG (Lawyers’ Remuneration Act). These total costs are initially borne by the creditor; in case of success, they can, however, be claimed as procedural costs against the debtor and—if established—secured with the arrest mortgage (Section 788 ZPO).

What is the significance of the arrest mortgage in the debtor’s insolvency proceedings?

In the event of the debtor’s insolvency, the arrest mortgage is generally considered a secured right of separate satisfaction within the meaning of Section 49 InsO. This means that the creditor can obtain preferential satisfaction from the property up to the amount of his secured claim, before the proceeds fall into the insolvency estate. The prerequisite is that the arrest mortgage was registered prior to the opening of insolvency proceedings and on the basis of a still existing attachment title. If, however, the attachment is enforced (registered) after the opening of insolvency proceedings, it is ineffective in accordance with Section 88 InsO (“hardening clause”). It is therefore advisable, in the event of impending insolvency, to register the arrest mortgage as quickly as possible. In any case, it must be taken into account that the insolvency administrator may attack the arrest mortgage under certain conditions, for example within the scope of insolvency avoidance (Sections 129 ff. InsO).