Foreclosure on mortgaged property after the death of a property guarantor is carried out under the Law of Ukraine “On Mortgage” without the need for the creditor to file claims against the heirs pursuant to Articles 1281 and 1282 of the Civil Code of Ukra

The deadline for the creditor to file a claim against the heirs, as well as the procedure for fulfilling their obligations provided for in Articles 1281, 1282 of the Civil Code of Ukraine, do not apply to legal relations arising from the transfer by inheritance of property that the property guarantor has mortgaged to secure the fulfilment of obligations by a third party (other than the mortgagor).

Such relations are governed by the provisions of the Law of Ukraine "On Mortgage", and therefore the mortgage is valid for the mortgagor's heir, who acquires the status of the mortgagor and has all its rights and obligations under the mortgage agreement.

This is the conclusion of the Grand Chamber of the Supreme Court.

Under the circumstances of the case, the plaintiff's husband mortgaged an apartment to the bank to secure the fulfilment of loan obligations by another person. After his death, his wife inherited the apartment. At the same time, the bank assigned the right to claim under the mortgage agreement to a financial institution, which almost two years after accepting the inheritance foreclosed on the mortgaged apartment and subsequently sold it to an individual, who in turn mortgaged it to another financial institution.

The plaintiff claimed that the inherited apartment was unlawfully withdrawn from her ownership, considering the mortgage terminated as she had not received any property claims within six months of receiving the certificate of inheritance, and that the out-of-court foreclosure was contrary to Articles 1281 and 1282 of the Civil Code of Ukraine.

The courts of the previous instances considered the provisions of Article 1281 of the Civil Code of Ukraine applicable to the disputed legal relations, but made opposite conclusions regarding the creditor's compliance with the relevant deadlines, as well as the procedure for foreclosure on mortgaged property under Article 37 of the Law of Ukraine "On Mortgage" or Article 1282 of the Civil Code of Ukraine.

The Grand Chamber of the Supreme Court ruled that when the mortgagor is a third party in the main legal relationship, their obligations are exclusively property-related and not personal. It is the property, and not the mortgagor (who intentionally chose this form of obligation and specific property), that guarantees the fulfilment of the underlying obligation.

The above correlates with the provisions of part 3 of Article 23 of the Law of Ukraine "On Mortgage", according to which, if the ownership of the mortgaged property is transferred to the heir of an individual mortgagor, such heir is not liable to the mortgagee for the performance of the principal obligation, but in case of its breach by the debtor, he is liable to satisfy the mortgagee's claim within the value of the mortgaged property.

From the content of Articles 1281 and 1282 of the Civil Code of Ukraine, it can be concluded that they relate to legal relations in which a party to the principal obligation dies and its property is transferred to other persons - heirs, who, together with this property, acquire the testator's outstanding personal debt (monetary) obligation, limited to the value of the inherited property.

Thus, the provisions of Articles 1281 and 1282 of the Civil Code of Ukraine (both as to the time limits for filing claims and the procedure for fulfilling obligations by heirs) do not apply to legal relations related to the inheritance of property mortgaged to secure the fulfilment of a third party's obligation. Such legal relations are governed by the provisions of the Law of Ukraine "On Mortgage", which are special and applicable to these legal relations.

In this case, the courts found that the mortgage agreement contained a mortgage clause on satisfaction of the mortgagee's claims, in particular, by transferring ownership of the mortgaged property to the mortgagee in satisfaction of the principal obligation in accordance with the procedure established by Article 37 of the Law of Ukraine "On Mortgage", and that the mortgagee had addressed the plaintiff with notices of demand to eliminate the breach of the principal obligation.

Thus, the appellate court reasonably concluded that the mortgagee complied with the procedure for out-of-court foreclosure pursuant to Article 37 of the Law of Ukraine "On Mortgage" and, accordingly, that the mortgagee legally acquired ownership of the disputed property.

The link to the resolution of the Grand Chamber of the Supreme Court of 25 June 2025 in case No. 761/382/21 (proceedings No. 14-132цс24) will be added immediately after its publication in the USRCD.