Chapter XVI Mortgage Right

Section 1 General Mortgage Right

Article 179 In order to ensure the payment of debts, an obligor or a third party mortgages his/its properties to the obligee without transferring the possession of such properties, and when the obligor fails to pay due debts or any circumstance as stipulated by the parties concerned for realizing the mortgage right happens, the obligee has the right to seek preferred payments from such properties.

The "obligor" or "third party" as referred to in the preceding paragraph shall be the mortgagor, the "obligee" shall be the mortgagee, while the "properties for security" shall be the mortgaged properties.

Article 180 As regards the following properties that the obligor or the third party has the right to dispose of, mortgage may be established thereon :

(1) Buildings and other objects fixed to land;

(2) The right to use construction land;

(3) The right to contracted management of such land as barren land, etc. that is acquired through bid invitation, auction and public consultation, etc.;

(4) Manufacturing facilities, raw materials, semi-manufactured goods and finished products;

(5) Buildings, vessels and aircraft under construction;

(6) Means of communications and transportation; and

(7) Other properties not prohibited from being mortgaged by any law or administrative regulation.

All the properties listed in the previous paragraph may be mortgaged together by a mortgagor.

Article 181 An enterprise, individual industrial and commercial household or agricultural production operator may, upon the written agreement between the parties concerned, mortgage the existing manufacturing facilities, raw materials, semi-manufactured goods and finished products or those to be owned in future, and when the obligor fails to pay its/his due debts or any circumstance as stipulated by the parties concerned for realizing the right to mortgage arises, the obligee has the right to seek preferred payments from the chattels existing at the time of the realization of the right to mortgage.

Article 182 For mortgaging building, the right to use construction land within the area of this building shall be mortgaged together. When mortgaging the right to use construction land, all the buildings on such land shall be mortgaged together.

Where a mortgagor fails to mortgage the properties together in accordance with the provisions in the preceding paragraph, the properties not mortgaged shall be treated as having been mortgaged together.

Article 183 As regards the right to use construction land of a township or village enterprise, mortgages may not be alone established thereon. Where the plant of a township and village enterprise is mortgaged, the right to use construction land within the area of such plant shall be mortgaged together.

Article 184 Any of the following properties may not be mortgaged:

(1) Ownership of land;

(2) The right to use such collectively-owned land as cultivated land, house sites, land and hilly land allotted for private use, etc., except for those mortgagable as prescribed by any law;

(3) Educational, medical, healthy and other public welfare facilities of such institutions and social groups with the aim of benefiting the public as schools, kindergartens, hospitals, etc.;

(4) Properties with unclear or controversial ownership or use rights;

(5) Properties legally confiscated, seized or controlled; or

(6) Other properties that cannot be mortgaged as prescribed by any law or administrative regulation.

Article 185 For establishing a mortgage right, the parties concerned shall enter into a written mortgage contract.

In general, a mortgage contract shall contain the items as follows: