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Procedures of Shanghai Municipality on Real Estate Mortgage

Procedures of Shanghai Municipality on Real Estate Mortgage
 
(Promulgated by Decree No. 76 of the Shanghai Municipal People' s Government on December 6, 1999)
    
    
     Chapter I General Provisions
    
     Article 1 Purpose and Basis
     In order to strengthen the administration of real estate mortgage in this Municipality, protect the lawful rights and interests of the parties concerned and maintain the order of the real estate market, these Procedures are formulated in accordance with the Law of the People' s Republic of China on the Administration of Real Estate in Urban Areas, the Law of the People' s Republic of China on Surety and relevant laws and regulations, and in light of the actual conditions of this Municipality.
     Article 2 Scope of Application
     These Procedures are applicable to real estate mortgage in the administrative areas of this Municipality.
     Article 3 Definition
     Following are definitions of certain terms used in these Procedures:
     1. Real estate mortgage refers to an act in which the debtor or a third party provides land-use rights, houses or future interests in houses (hereinafter referred to as real estate collectively) as a surety for debts without transfer of possession, and the failure to pay the debts by the debtor shall entitle the creditor to disposal of the mortgaged property and to priority in obtaining compensation from the proceeds from the disposal.
     2. Future interests in houses refers to the right to obtain a completed houses at a future time in accordance with the terms of a general contract of a construction project, a general contract to construct a project, or a contract of purchase/sales in advance a commodity house. The future interests in a house include the future interests in a house construction project and the future interests in a commodity house construction project purchased in advance.
     Article 4 Basic Principles
     Real estate mortgage shall follow the principles of equality, voluntary contracting, fairness and good faith.
     Real estate mortgage created in accordance with the law shall be protected by the law.
    
     Chapter II Creation of Mortgage
    
     Article 5 Mortgageable Real Estate
     The following types of real estate may be mortgaged:
     1. Lawfully acquired assigned use rights to land on which no houses or other surface affixtures have been built;
     2. Houses whose ownership has been lawfully acquired and the land-use rights within the limits of their occupation;
     3. Lawfully acquired future interests in a house(s); and
     4. Other real estate that may be mortgaged in accordance with the law.
     Article 6 Immortgageable Real Estate
     The following types of real estate shall not be mortgaged:
     1. Administratively allocated use rights to land on which no houses or other surface affixtures have yet been built;
     2. Use rights to collectively owned rural land on which no houses or other surface affixtures have yet been built;
     3. Educational facilities, medical and sanitation facilities, and other facilities for public good in the possession of schools, kindergartens, hospitals and other institutions and social organizations whose purpose is to serve public good;
     4. Use rights to houses or land that have been listed in accordance with the law as among urban houses to be demolished and relocated, or as within the areas of collectively owned land to be requisitioned;
     5. Real estate entrusted to the government for management;
     6. Houses or use rights to land whose ownership titles have not been properly registered and received;
     7. Real estate whose ownership is unclear or is controversial;
     8. Real estate that has been sequestrated and kept under surveillance in accordance with the law or otherwise restricted in transfer;
     9. State-owned residential houses that have already been leased; and
     10. Other real estate that shall not be mortgaged according to law.
     Article 7 Debts That May Be Guaranteed by Mortgage
     Debts that may be secured by mortgage include the principal and interest of debts, penalties for breach of contract, damages, and the costs needed for realizing a mortgage. In case terms of mortgage are stipulated in the mortgage agreement, such stipulations shall prevail.
     Article 8 Duration of Surety by Mortgage
     The mortgage shall last as long as the debts secured by it, and shall terminate when the debts are discharged.
     Article 9 Determination of the Value of the Mortgaged Property
     When creating a mortgage, the mortgagor and mortgagee shall negotiate the value of the mortgaged property. In case the negotiation fails, the parties may, after consultation, authorize a real estate assessment agency to determine the value of the mortgaged property, unless the laws and regulations stipulate otherwise.
     Article 10 Value of the Mortgaged Property and the Debt Secured
     The debt secured by the mortgaged property shall not exceed the value of the real estate mortgaged. Specifically, the debt secured by mortgage of assigned land-use rights shall not exceed the amount for the transfer of the use rights to the state-owned land; and the debt secured by mortgage of the future rights in a house construction project shall not exceed the cost of building agreed on in the general contract of the construction project or the general contract to construct the project.
     After a mortgage is created, the remaining part of the value of the real estate in excess of the debt secured may be mortgaged again, but the debt secured by the second mortgage shall not exceed the remaining part of its value.
     Article 11 Notice of the Second Mortgage
     The mortgagor who creates a second mortgage on a piece of mortgaged real estate shall inform in writing the second mortgage has already been created on the real estate.
     Article 12 Mortgage of a Piece of Real Estate That Has Already Been Leased
     The mortgagor who creates a mortgage on a piece of real estate has already been leased, shall inform in writing the original lessee that the original lease agreement remains valid.
     Article 13 Mortgage of a Piece of Real Estate on Whose Use a Time Limit Has
     Been Set
     When a piece of real estate with a limited number of years' use rights is mortgaged as surety of a debt, the time for repayment of the debt shall not exceed the limited time of use of the land.
     Article 14 Mortgage of a Piece of Real Estate Owned by More than One Person
     When a piece of real estate of co-ownership is mortgaged, only that share belonging to the mortgagor may be mortgaged.
     When a piece of real estate of joint tenancy is mortgaged, assent of all the co-owners shall first be obtained and the mortgagor is all the co-owners.
     Article 15 A Mortgage Created with Two or More Pieces of Realty
     When a mortgage is created with two or more pieces of realty, the two or more pieces of realty are regarded as the one and the same surety. As long as the mortgage exists, the obligations shared by them can not be separated. If the mortgagor and mortgagee have contracted otherwise, the terms agreed upon shall prevail.
     Article 16 A Mortgage Created with Assigned Land-use Rights
     When a mortgage is created on assigned land-use rights, the principal debt it secures shall be limited to the loans for developing the assigned piece of land, and shall not violate the regulations of the State and this Municipality on the transfer and transfer of land-use rights, nor violate the stipulation reached in the land-use rights transfer contract.
     Article 17 Relation Between Houses and Land-use Rights in a Mortgage
     Houses and the use rights of the land occupied by them shall be mortgaged together simultaneously. When part of the houses are mortgaged, that part of the houses and the apportioned land-use rights shall be mortgaged together simultaneously.
     Article 18 A Mortgage Created on Commodity Houses
     Real estate developers shall not create a mortgage on commodity houses already sold in advance.
     When a mortgage is created by real estate developers with completed commodity houses, the mortgaged houses shall not be sold before termination of the mortgage.
     Article 19 Newly-added Houses After a Mortgage Contract Is Signed
     Houses newly added on the land after a mortgage contract is signed do not belong to the surety.
     Article 20 A Mortgage Created on Houses Limited in Property Rights
     In creating a mortgage on houses limited in property rights, regulations of the State and this Municipality on the rights of houses limited in property rights shall be complied with.
     Houses limited in property rights referred to in the preceding Paragraph are houses whose owner is entitled to full rights of possession and use, but limited rights of disposal and gains.
     Article 21 Maximum-amount Mortgage Created on Real Estate
     The creditor and debtor may create a maximum-amount mortgage on real estate. When creating a maximum amount mortgage, the mortgagor and mortgagee shall agree on the period of time during which a series of debts occur and the maximum amount of debt secured.
     After expiration of the period of time during which debts occur, the creditor and debtor shall go for the registration of determination of maximum amount mortgage. In case the period of time during which the actual debts occurred is shorter than that agreed on, the period of time during which the actual debts occurred may be taken as criterion; in case the period of time during which the actual debts occurred exceeds that agreed on, the agreed period of time shall be taken as criterion. In case the actual debts accrued on expiration of the agreed period of time are lower than the maximum amount agreed on, the actual debts accrued shall be entered as the amount of principal debts secured; in case the actual debts accrued exceed the maximum amount agreed on, the agreed maximum amount of debts shall be entered as the amount of principal debts secured.
     The principal obligatory contracts secured by maximum-amount mortgage shall be limited to loan contracts and contracts signed concerning a certain commodity of which a series of transactions occur successively during a given period of time.
     Maximum-amount mortgage referred to in this article is the act in which the mortgage and the mortgagor agree that a piece of real estate is mortgaged within the limits of a maximum amount of debts as surety for a series of debts that occur successively during a given period of time.
     Article 22 A Mortgage Created on Future Interests in a House Construction
     Project
     The principal debts secured by a mortgage created by real estate developers and other construction units on future interests in house construction projects shall be limited to the loans for completing the construction project, with the exception of those who have paid up all the construction costs of the project.
     In creating a mortgage on future interests in a construction project, the following conditions shall be met simultaneously:
     1.More than 25% of the total investment in developing the house construction project has been completed;
     2.The contract of the construction project is a general contract of the construction project, or a general contract to construct the project that shall produce houses with independent functions of use; and
     3.The commodity houses within the scope of the construction project have not yet been sold in advance.
     No maximum-amount mortgage shall be created on future interests in house construction projects.
     In creating a mortgage with future interests in house construction projects, the regulations of the State and this Municipality on the administration of construction project contracts shall be complied with.
     Article 23 A Mortgage Created on Future Interests in Commodity Houses Purchased in Advance
     When a person who purchase a commodity house in advance creates a mortgage on future interests in the commodity house he has purchased in advance, the principal debt secured shall be limited to the loans for purchasing this commodity house, with the exception of those who have made full payment for the commodity house.
     No maximum-amount mortgage shall be created on future interests in houses purchased in advance.
     In creating a mortgage on future interests in houses purchased in advance, the provisions of the State and this Municipality on the administration of sales in advance of commodity houses shall be observed.
     Article 24 Supervision and Control of Loans
     The mortgagee of a house construction project shall, according to the stipulations of the contract, supervise and control the use of the loan, so that it shall be used specifically for the construction of the project.
     Use of proceeds from sales of houses in advance and sales of houses by the real estate developer shall be supervised and controlled by a special organization entrusted with this job. And priority shall be given to the repayment of loans for the construction of the house project. In case a mortgage exists on the house construction project and the assigned use rights to the land it occupies, the mortgage of the corresponding portion shall be cancelled.
     The specific procedures for supervising and controlling the use of proceeds from sales in advance and sales of commodity houses shall be formulated separately by the Municipal Government.
     The loans mentioned in Paragraph 2 of this article refer to loans obtained by mortgage of the assigned land-use rights, loans obtained by mortgage on future rights in the house construction project, and other loans for construction of the construction project.
    
     Chapter III Mortgage Contract
    
     Article 25 Form of Mortgage Contract
     In creating a real estate mortgage, a written mortgage contract shall be signed.
     A mortgage contract may be signed in the form of a mortgage clause in a loan contract, or it may be signed separately.
     Article 26 Main Contents of a Mortgage Contract
     A mortgage contract shall include the following Items:
     1.Names or titles and addresses of the mortgagor and mortgagee;
     2.The type and amount of principal debts secured;
     3.Time for repayment of the debt by the debtor;
     4.The location, use, configuration, area, metes and bounds and value of the mortgaged property;
     5.The ownership of the house and the use rights of the land, the mode by which the land-use rights are acquired and the serial number of the title deed of the real estate;
     6.The scope of the debts secured by the mortgage; and
     7.Other matters stipulated by the mortgagor and the mortgagee.
     In the case of mortgage created on the future interests in a house construction project, the mortgage contract shall include the following items in addition to those listed in Paragraph 1 of this article:
     1.Serial number of Construction Project Planning Permit ;
     2. The amount of money for the transfer of the state-owned land-use rights;
     3. The construction costs agreed on in the general contract of the construction project or the general contract to construct the project;
     4. The amount of money already invested in the construction project, but the costs for obtaining the land-use rights not included; and
     5. Date of completion of the construction project.
     If a maximum-amount mortgage is created on a piece of real estate, the mortgage contract shall include the following items in addition to those listed in Paragraph 1 of this article:
     1.The period of time during which a series of debts occur; and
     2.The maximum debt secured.
     In case a mortgage contract does not contain all the items specified in this article, it may be remedied by adding the missing Items.
     Article 27 Items That Shall Not Be Included in a Mortgage Contract
     In concluding a mortgage contract, the mortgagee and the mortgagor shall not stipulate that the ownership of the mortgaged property shall be transferred to the debtor when the time for repayment of the debt by the debtor expires but the mortgagee has been not paid off.
     Article 28 Language of the Mortgage Contract
     The mortgage contract shall be written in Chinese but may be simultaneously written in other languages.
     Article 29 Notarization of Mortgage of Foreign-related Real Estate
     Mortgage of real estate shall be notarized by a notary public in this Municipality if the mortgagor or the mortgagee is a natural person, legal person or an organization from Hong Kong Special Administrative Region, Macao Special Administrative Region, Taiwan Region or a foreign country.
     Article 30 Void Contract
     The following mortgage contracts are void:
     1. Mortgage contracts signed in violation of Article 6, Paragraph 1 of Article 18, Paragraph 3 of Article 22, or Paragraph 2 of Article 23;
     2. Mortgage contracts whose primary contracts are invalid, except in cases where the mortgage contract stipulates otherwise; or
     3. Other mortgage contracts signed in violation of the law.
     Article 31 Alteration of Mortgage Contract
     The mortgagor and the mortgagee may alter the mortgage contract through consultation. In such cases, an altered written contract shall be signed.
     In case there are more than one mortgage on the same property, the mortgagee who wants to alter the mortgage contract shall obtain assent from all subsequent mortgagees.
     Article 32 Discharge of a Mortgage Contract
     The mortgagor and the mortgagee may discharge the mortgage contract through consultation. In such cases, a written contract to discharge the mortgage shall be signed.
     Article 33 Termination of a Mortgage Contract
     A mortgage contract shall terminate under any one of the following circumstances:
     1. The debt secured by the mortgage has been repaid;
     2. The mortgage contract has been discharged;
     3. The creditor has released the debtor from the debt; or
     4. Other circumstances in which the law stipulates or the parties to the mortgage contract to terminate the mortgage contract.
    
     Chapter IV Mortgage Registration
    
     Article 34 Effect of Mortgage Registration
     In creating a real estate mortgage, one shall have the mortgage registered in accordance with the law. The mortgage contract shall become effective on the date of registration.
     When a mortgage contract is altered, the mortgage registration shall be altered in accordance with the law. The altered mortgage contract shall become effective on the date of alteration registration.
     Article 35 Organizations in Charge of Mortgage Registration
     The mortgagor and the mortgagee shall, according to the competence of real estate registration organizations, go to the appropriate municipal or the district/county real estate registration organizations to complete the mortgage registration.
     Article 36 Applicants of the Mortgage Registration and the Documents to Be
     Submitted
     The mortgagor and the mortgagee shall jointly apply for mortgage registration. In applying for mortgage registration, they shall submit their identification cards, the primary contract, the mortgage contract and the following documents:
     1. The purchase (sales) of the commodity house in advance contract, if the mortgage is created on the future interests in commodity houses purchased in advance;
     2. Real estate title deeds, the general contract of the construction project, or the general contract to construct the project, if the mortgage is created on the future interests in house construction projects;
     3. Real estate title deeds and the land-use rights transfer contract, if the mortgage is created on the assigned use rights of land on which no houses or other affixtures have yet been erected; or
     4. Real estate title deeds if the mortgage is created with other types of real estate.
     Article 37 Applicants for Mortgage Alteration Registration and the Documents
     to Be Submitted
     When the mortgage contract is altered, the mortgagor and the mortgagee shall jointly apply to the original organization that had handled the mortgage registration for alteration registration. When applying for mortgage alteration registration, they shall submit identification cards, certificate of mortgage and the mortgage alteration contract.
     Article 38 Applicants for Mortgage Cancellation Registration and the Documents to Be Submitted
     When a mortgage contract terminates the mortgagor and the mortgagee shall jointly apply to the original organization that had handled the mortgage registration for mortgage cancellation registration. When applying for mortgage cancellation registration, they shall submit identification cards, certificate of mortgage, and the following documents:
     1. The creditor' s written testimonial, if the debt secured by the mortgage has been repaid or discharge in accordance with the provisions of items 1 and 3 of Article 33 of these Procedures;
     2. The mortgage cancellation contract, if the mortgage is cancelled in accordance with item 2 of Article 33 of these Procedures; or
     3. Relevant materials, if other circumstances occur whereby the law stipulates, or the parties agree, that the mortgage terminate in accordance with item 4 of Article 33 of these Procedures.
     In completing mortgage cancellation registration, if the mortgagor applies but the mortgagee does not, the registration organization may accept the mortgagor' s application and enjoin the mortgagee to complete the cancellation registration within a specified time limit. In case the mortgagee fails to complete the cancellation registration within the specified time limit, the registration organization may ratify the mortgagor' s cancellation registration in accordance with law.
     Article 39 Issuance, Alteration and Cancellation of Mortgage Certificate
     Real estate registration organizations shall, within the stipulated time upon receiving application for mortgage registration, make a decision in accordance with the law on whether or not to grant registration. If registration is granted, a certificate of the mortgage shall be issued; if registration is denied, a written notice shall be given to the applicant.
     Real estate registration organizations shall, within the stipulated time upon receiving application for mortgage alteration registration, make a decision in accordance with the law on whether or not to grant the alteration registration. If the alteration registration is granted, the mortgage certificate shall be altered; if the alteration registration is denied, a written notice shall be given to the applicant.
     Real estate registration organizations shall, within the stipulated time upon receiving application for cancellation of mortgage registration, make a decision in accordance with the law on whether or not to grant the cancellation registration. If the cancellation registration is granted, the mortgage certificate shall be revoked; if cancellation registration is denied, a written notice shall be given to the applicant.
     Article 40 The Keeping of Real Estate Titles and Mortgage Certificates
     The title deed of the mortgaged real estate shall be kept by the mortgagor.
     The mortgage certificate issued by real estate registration organizations shall be kept by the mortgagee.
     Article 41 Registration Fees
     When completing mortgage registration or mortgage alteration registration, the mortgagor and the mortgagee shall pay registration fees to the real estate registration organization in accordance with relevant regulations.
     Article 42 Inspection of Registration Files
     Files of mortgage registration, mortgage alteration registration and mortgage cancellation registration shall be open to the public for inspection. Specific procedures for inspection shall follow relevant regulations of the Municipal People' s Government.
    
     Chapter V Possession and Management of the Mortgaged Property
    
     Article 43 Possession and Management of the Mortgaged Property and Responsibilities for Possession and Management
     The mortgaged property shall be possessed and managed by the mortgagor.
     While under his/her possession and management, the mortgagor shall keep the mortgaged property safe and in good condition.
     The mortgagee has the right to supervise and inspect the possession and management of the mortgaged property in accordance with the terms of the mortgage contract.
     Article 44 Lease of the Mortgaged Property
     In case the mortgagor leases the mortgaged property during the existence of the mortgage, he/she shall inform in writing the lessee of the fact that the real estate has been mortgaged to.
     Article 45 Transfer of the Mortgaged Property
     With the exception as provided for in Paragraph 2 of Article 18 of these Procedures, the mortgagor may transfer the mortgaged property during the mortgage. Except in the case of real estate developers' sales in advance or sales of commodity houses, the mortgagor-transferor, when transferring the mortgaged property during the mortgage, shall give written notice of the transfer to the mortgagee, and inform the transferee of the mortgage. The transfer shall be void if the mortgagor fails to inform the mortgagee or the transfer in advance.
     The proceeds from the transfer of the mortgaged property may be used by the mortgagor to repay pre-schedule the debts secured by the mortgage after consultation with the mortgagee. The proceeds may also be deposited as mortgaged property with a third party agreed on by the mortgagor and the mortgagee after consultation with the mortgages.
     When informing the mortgagee, the mortgagor shall also give information of the price of the transfer and the suggested disposal of the proceeds from the transfer, and consult with the mortgagee on such matters.
     The mortgagee shall, within 15 days upon receiving notice, give a reply to the mortgagor in writing and may file registration with the real estate registration organization for the record. Failure to reply within the prescribed time limit shall be regarded as acquiescence. In case the mortgagee thinks the price of the transfer is obviously lower than the value of the mortgaged property, he/she may ask the mortgagor to offer a new surety. If the mortgagor does not agree to give a new surety, the mortgagee may refuse to grant permission for the transfer of the mortgaged property.
     When the mortgagor applies to the administrative organizations of real estate transaction for the change of the name of the owner in the register, or for registration of contract of transfer of commodity houses purchased in advance, he/she shall submit his/her agreement with the mortgagee on the disposal of the proceeds from the transfer or a testimonial certifying the failure of the mortgagee to make a reply within the prescribed time limit upon receiving notice of the transfer. On the basis of such agreements or testimonials, the administrative organizations of real estate transaction shall turn the matter over to real estate registration organizations for transfer and alteration registration of real estate, or transfer go through the formalities of registration for the record, transfer of commodity houses purchased in advance.
     The part of the proceeds from transfer of the mortgaged property that is in excess of the debt shall belong to the mortgagor, and any deficiencies between the proceeds and the debt shall be paid off by the mortgagor.
     Article 46 Performance of the Mortgage Contract by the Successor
     After a legal person or a non-legal-person organization as the mortgagor undergoes an alteration, his subject of succession shall continue to perform the original mortgage contract.
     When a natural person as the mortgagor dies or is adjudicated to be dead, the legitimate heir or legatee of the mortgaged property shall continue to perform the original mortgage contract, with the exception of the case that the party concerned relinquishes the inheritance or the legacy.
     Article 47 Duty of Giving Notice of the Change of the Mortgaged Property or the Mortgagor
     In any one of the following circumstances, the mortgagor or his/her successor shall give written notice to the mortgagee in a timely manner:
     1.The house mortgaged is listed in accordance with the law among those to be demolished and relocated;
     2.The mortgaged property is inherited or divided when the mortgagor who is a natural persondies or is adjudicated to be dead; or
     3.When succession occurs as a result of the change of mortgagor organization that is either a legal person or a non-legal person.
     With the exception of normal wear and tear, in case of loss or damage of the mortgaged property, the mortgagor shall take effective measures to prevent any further loss or damage and inform the mortgagee of the case.
     Article 48 Remedy for Loss or Damage of the Mortgaged Property
     When the mortgage is eliminated as a result of the loss of the mortgaged property, the debt secured by the mortgage may be applied for repayment ahead of schedule with the compensations for its loss or damage of the mortgaged property if agreement is reached through consultation between the mortgagor and the mortgagee. Or an appropriate part of the compensations may be taken and put in the keeping of an agreed third party as surety.
     If the mortgagor neglects to recover damages from the person liable for the loss or damage of the mortgaged property, the mortgagee may claim for subrogation of compensation.
     If any fault on the part of the mortgagor results in the loss or damage of the mortgaged property so that it can not or is inadequate to secure the debt, the mortgagor shall give anew or add something as surety to make up for the lost value of the original surety.
     Article 49 Restriction on the Demolition and Reconstruction of the Mortgaged Property
     Unless city construction demands that the mortgaged property be demolished and relocated, the mortgagor shall not demolish or reconstruct the house already mortgaged.
     Article 50 Demolition and Relocation of Mortgaged Houses
     In case a mortgaged house is listed among those to be demolished and relocated in accordance with the law, the following provisions shall be followed:
     1.If the compensation is an exchange of titles to properties, the mortgage shall be recreated on the house exchanged for; or
     2.If the compensation is paid with money at an appraised price, the mortgagor may negotiate with the mortgagee for repayment ahead of schedule of the debt secured by the mortgage. Or he/she may, through consultation with the mortgagee, take an appropriate part of the money and deposit it with a third party agreed upon by both parties as surety.
     After the mortgagor has reached agreement on compensation with the party who is to demolish and relocate the mortgaged property, he/she shall confer with the mortgagee on matters specified in the preceding Paragraph. The mortgagor shall not get the compensation or the house for resettlement before he submits to the party that is to demolish and relocate the mortgaged house the written agreement reached by him/her and the mortgagee on the handling of the mortgage and the debt it secures.
     In case a new mortgage is created in accordance with the provision of Paragraph 1 of this article, the mortgagor and the mortgagee shall sign a new mortgage contract. If two or more mortgages exist on the property originally mortgaged, the mortgages newly created shall follow the order of the original mortgage registration.
     Article 51 Transfer of Mortgage
     The mortgage shall not be separated from debt and shall not be transferred independently by, nor shall it be used as surety for other debts.
     Mortgage may be transferred together with the debt in the primary contract. The transferee shall be entitled to the same rights and interests as the original mortgagee. The contract of transfer shall be registered with the real estate registration organizations.
     The debt in the primary contract of a maximum-amount mortgage shall not be transferred.
    
     Chapter VI The Realization of Mortgage
    
     Article 52 Conditions for Exercising Mortgage
     When the time for repayment of the debt is due, the mortgagee may exercise the mortgage under any of the following circumstances:
     1.The debtor fails to repay the debt due;
     2.When the debtor dies, or is adjudicated to be dead, and his/her legitimate heir or legatee fails to repay the debt due;
     3.The debtor is dissolved, or is adjudicated to be bankrupt; or
     4.Other circumstances in which the mortgagee does not receive payment of the debt.
     Article 53 Mode of Exercise of Mortgage on One Mortgaged Property
     When there is one mortgage on one mortgaged property, the mortgagee who does not receive payment of the debt due may negotiate with the debtor for satisfaction of the debt with the appraised price of the mortgaged property, or with the proceeds from auction or selling of the mortgaged property.
     Article 54 Mode of Exercise of Mortgage of Two or More Mortgages on One Mortgaged Property
     If there are two or more mortgages on one piece of mortgaged property, the mortgagee who does not receive payment of the debt when the time for repayment is due shall inform other mortgagee, when exercising the mortgage. The mortgagee shall also consult with all mortgagees preceding him on the handling of the mortgage and the debt it secures. If the consultation fails to produce results, the mortgagee may negotiate with the mortgagor for disposal of the mortgaged property by auction or sale.
     The order in which the mortgagees receive repayment of debts from the proceeds of auction or selling shall be the order of mortgage registration.
     The proceeds from the auction or selling of the mortgaged property shall be disposed in the following ways:
     1.They shall be used to repay the mortgagee the matured debt secured by the mortgage; or
     2.They shall be used to repay ahead of schedule the debts the mortgagor owes to other mortgagees after consultation with them. Or the mortgagor may, through consultation with the mortgagees, take an appropriate part of them and deposit it with a third party agreed upon by both parties as mortgaged property.
     Article 55 Provisions on the Mode of Disposal of the Mortgaged Property
     In case the mortgagor and the mortgagee choose to dispose the mortgaged property by auction, the regulations of the State and this Municipality on auction shall be followed.
     In case the mortgagor and the mortgagee choose to dispose the mortgaged property by selling or by transfer to the mortgagee at the appraised price, the regulations of this Municipality on the transfer of real estate shall not be violated.
     Article 56 Preemptive Right
     When the mortgagor and the mortgagee agree to dispose the mortgaged property by transfer to the mortgagee at the appraised price, or by selling, the following natural persons, legal persons or other organizations are entitled under equal conditions to enjoy preemptive right to purchase the said property:
     1.Other co-owners of the co-owned mortgaged property ; and
     2.The lessee who had leased the real estate before the mortgage.
     Before the mortgagor and mortgagee dispose the mortgaged property by paying an appraised price, or by selling it, they shall make inquiries in the written form to see whether the parties listed in the preceding Paragraph who have preemptive rights in purchasing the mortgaged property will exercise their rights.
     Article 57 Collecting of Fruits by the Mortgagee on the Mortgaged Property
     In case the debtor fails to repay the debt due when the time for repayment is due so that the mortgaged property is sequestrated by the people's court according to law, the mortgagee is entitled to the fruits accrued on the property from the date of sequestration. If the mortgagee fails to inform the obligor responsible for paying the legal fruits of the fact that the people's court has sequestrated the mortgaged property, the effect of the mortgage shall not reach the fruits of the mortgaged property.
     The fruits mentioned in the preceding Paragraph shall first of all be used to pay the costs for collecting them.
     Article 58 Handling of the Gains from the Land in the Disposal of the Proceeds of Mortgaged Property
     If a mortgage is created on the use rights of administratively allocated land together with the affixtures on it, the mortgagee, when disposing of the mortgaged property, shall first pay an amount of money equivalent to the price for the transfer of use rights of that piece of state-owned land before he gets any priority to be paid with the surplus of the proceeds.
     Article 59 Proceeds from Auction of Newly Added Houses
     When it is necessary to auction the mortgaged property, the newly added houses on the land may be auctioned together with it. However, the mortgagee shall not enjoy any priority in getting repayment of debt from the proceeds of auction of the newly added houses.
     Article 60 Distribution of Proceeds from Disposal of the Mortgaged Property
     Proceeds from the disposal of the mortgaged property shall be distributed in the following sequence:
     1.Costs for disposing of the mortgaged property;
     2.Taxes and fees on disposal of the mortgaged property;
     3.The amount of money equivalent to the price for the transfer of use rights of the piece of state-owned land mortgaged;
     4.Money owed for the construction of the project;
     5.The principal debt and interest, penalties and damages; and
     6.Whatever remains is to be paid to the mortgagee.
     In case the proceeds from disposal of the mortgaged property are not adequate to cover the debt secured by the mortgage, the debtor shall be liable to pay the deficiency.
     Distribution of proceeds from disposal of houses with limited ownership shall not violate relevant regulations of the State and this Municipality.
     Article 61 Scope of Satisfaction of the Mortgagee in a Mortgage Created on the Assigned Use Rights of Land
     If the mortgagor, after mortgaging the assigned use rights of a piece of land, mortgages the newly added houses on the land, scope of satisfaction of the mortgagee shall be limited to the price for the transfer of use rights of the state-owned land. If the mortgagor creates a mortgage on part of the newly added houses on the land, the scope of satisfaction of the mortgagee in a mortgage created on the assigned use rights of land shall be limited to the price for the transfer of use rights of that part of the state-owned land proportionally occupied by the newly added houses.
     Article 62 Handling of Lease in Disposing of the Mortgaged Property
     If a mortgage is created on leased real estate, the original registered lease contract remains valid after disposal of the mortgaged property.
     If a mortgaged piece of real estate is leased, the original lease contract automatically terminates upon disposal of the mortgaged property, unless the transferee agrees to continue the lease.
     Article 63 The Mortgaged Property after Bankruptcy
     When a mortgagor goes bankrupt, the property mortgaged before bankruptcy does not belong to estate to be liquidated. However, if the proceeds from disposal of the mortgaged property exceed the debt it secures, the difference in excess of the debt belongs to bankruptcy property, unless the laws and regulations stipulate otherwise.
     Article 64 Exercise of Mortgage of Real Estate in Rural Areas
     If a mortgage is created on factory buildings of township/town, or village enterprises on collectively owned rural land, or other houses and the use rights of the land they occupy, disposal of the mortgaged property shall comply with relevant regulations of the State and this Municipality on the transfer of real estate on collectively owned land. The nature of collective ownership and use of the land after disposal of the mortgaged property shall not be changed without going through legal procedures.
    
     Chapter VII Legal Liability
    
     Article 65 Liabilities for Breach of Contract
     When the mortgage contract becomes effective, the mortgagor and the mortgagee shall perform their obligations. Non-performance or incomplete performance on the part of either party shall render him/her liable for breach of contract and for damages suffered by the other party as a result of such conduct.
     If the mortgage contract is rendered non-performable by faults on the part of the mortgagor or the mortgagee, the party in fault shall be liable for the damages suffered by the other party.
     Article 66 Liabilities for Rendering the Mortgage Contract Invalid
     In the case of an invalid mortgage contract, the party in fault is liable for the damages suffered therefor by the other side. If both parties are in fault, they shall take responsibility for their respective faults.
     Article 67 Liabilities for Concealing the Status of the Mortgaged Property
     In case the mortgagor conceals the fact that the mortgaged property had already been mortgaged or had been leased, resulting in losses by others, the mortgagor is liable for damages thereof.
     Article 68 Exemption of Liabilities
     In case the mortgaged property is totally or partially lost, damaged or depreciated due to force majeure, the mortgagor shall inform the mortgagee in a timely manner. After obtaining relevant proof, the mortgagor may be exempted from providing anew or add to the surety.
     Article 69 Settlement of Disputes
     Disputes arising between the mortgagor and the mortgagee on the performance of contract or the exercise of mortgage rights shall be settled through consultation. In case consultation fails, they may take legal proceedings at the people's court in accordance with the law.
    
     Chapter VIII Supplementary Provisions
    
     Article 70 Mortgage of State-owned Real Estate
     In the case of mortgage of state-owned real estate, relevant regulations on the administration of state-owned assets shall simultaneously apply.
     Article 71 Date of Implementation
     These Procedures shall become effective on January 1, 2000. Procedures of Shanghai Municipality on the Mortgage of Real Estate promulgated by the Shanghai Municipal People's Government on August 22, 1994 shall be repealed on the same date.
    

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