Perestroika of the century: how not to lose collateral after reconstruction
Reconstruction of mortgaged real estate does not stop mortgage encumbrances — even if the object has changed beyond recognition, the pledge is automatically preserved by law, the Supreme Court of the Russian Federation explained. Until the debt is fully repaid, the facility is secured by the bank, so any major changes require approval. Ignoring this rule can lead to fines, problems with sale or refinancing, and in extreme cases, loss of housing, experts warn. How not to lose collateral for real estate after its reconstruction — in the material of Izvestia.
Reconstruction without the consent of the bank: what is the risk of the borrower in a changing market
In 2025, 968.2 thousand mortgage loans were issued, which is 25.7% less than a year earlier, and citizens are increasingly considering alternative scenarios for improving housing conditions, including the purchase of dilapidated housing with subsequent reconstruction, according to data from the Bank of Russia and a study by the Analytics center. Business. Law", carried out with the support of the CCI of the Russian Federation. According to the position (definition 310-ES25-14720, available to Izvestia) Of the Supreme Court of the Russian Federation, reconstruction, processing or other modification of the collateral does not terminate the encumbrance. The new object automatically remains as collateral regardless of the consent of the parties. However, this does not mean that the borrower can carry out the work without notifying the lender.
According to the Department for Public Relations and Mass Media of the Supreme Court, one company took out a loan from a bank, and the other provided a gas station as collateral to guarantee a refund. Over time, the rights to this debt and collateral were transferred from one creditor to another, and after changes in the banking system, the claims went to the state structure. The new creditor demanded to repay the debt through the court and foreclose on the mortgaged property.
The courts of first instance collected the debt, but refused on the second point: they considered that after the reconstruction the building became a different object, therefore the old pledge ceased, especially since there was no record of encumbrance in the register. However, the Supreme Court did not agree with this, recalling the rule of the Civil Code: if the mortgaged property has been reconstructed or changed, the new object automatically remains pledged regardless of the consent of the parties.
As a result, the Supreme Court overturned previous court decisions and indicated that foreclosure could be levied on the reconstructed facility, since the pledge remained valid. At the same time, none of the participants in the case disputed that it was the same object, and did not question its value. The main conclusion of the Judicial Board for Economic Disputes of the Supreme Court of the Russian Federation is that a serious restructuring of mortgaged real estate does not remove mortgage encumbrances.
"Unauthorized reconstruction is considered a significant violation of the loan agreement," explained Susana Kirakosyan, adviser to the BVMP Law Office, Deputy Chairman of the Committee of the Chamber of Commerce and Industry of the Russian Federation on entrepreneurship in the housing and communal services sector. — In such a situation, the bank has the right to demand early repayment of the entire loan amount. If the borrower is unable to repay the debt in a lump sum, the lender may foreclose on the modified property, which means selling the property at auction.
Until the debt is fully repaid, the apartment is secured by the bank, so any major changes require approval. Ignoring this rule can lead to fines, problems with the sale or refinancing, and in extreme cases, loss of housing, according to the Russian Guild of Realtors, citing the norms of the federal law "On Mortgages" and judicial practice.
Will the mortgage become a lifelong burden?
One of the key questions for borrowers is whether the mortgage will turn into an indefinite encumbrance after the reconstruction and appreciation of the facility. Experts and developers are unanimous: no, mortgages do not become "eternal."
— The mortgage is dependent — it provides a specific obligation, — said Dmitry Shchegelsky, President of the National Chamber of Real Estate, CEO of the Academy of Sciences Benois (St. Petersburg). — As soon as the debt is repaid, the encumbrance stops automatically, even if the facility has been rebuilt many times.
At the same time, the rule on preserving collateral during reconstruction only prevents the pledgor from "dumping" the encumbrance by changing the thing, it does not create a new indefinite restriction (these are the norms under Articles 352 and 345 of the Civil Code of the Russian Federation).
— An increase in the value of an object does not generate new debt and does not prevent the removal of encumbrances. On the contrary, this only strengthens the creditor's security, but does not deprive the mortgagor of the right to terminate the mortgage after fulfilling the obligation. When the loan is paid, the mortgagee is obliged to send documents to repay the mortgage record, and the encumbrance will be lifted," the expert emphasized.
The amount of debt after reconstruction for the borrower remains the same, the payment obligations are fixed, as explained in the Udacha Group of Companies. The property is secured until the loan is fully repaid, regardless of the final cost.
Mortgage and inheritance: what happens after the death of the owner
The situation when the owner of mortgage real estate dies after the reconstruction of the facility is regulated by the general norms of civil legislation. According to Article 1175 of the Civil Code, the loan obligations are transferred to the heirs along with the property, but only within the limits of the value of the inherited object.
By law, the heir accepts the apartment and loan obligations, but is not responsible for debts beyond the cost of housing. The mortgage does not terminate automatically — all its conditions continue to apply. This means that the reconstruction does not change the order of inheritance: the encumbrance remains, and the heirs have the right either to continue payments or to give up the property (this is what the norms of the Civil Code of the Russian Federation and the explanations of the Supreme Court of the Russian Federation say). In the second case, the bank has grounds to withdraw the pledged property, even if its value or form has changed. This rule also applies to facilities that have undergone any reconstruction.
Protection of children's rights: shares in the reconstructed collateral
Since, according to the explanations of the Supreme Court of the Russian Federation, reconstruction does not remove the burden, the shares of children in the reconstructed facility also remain as collateral. At the same time, as noted in the Public Council under the Ministry of Construction of Russia, the bank is not interested in withdrawing housing if the borrower pays regularly. The main thing is that the reconstruction does not lead to a decrease in the cost of collateral.
If the price falls, the lender has the right to demand additional collateral, which may also affect children's shares (this is established by the norms of the law "On Mortgages" and the Family Code).
When redevelopment is legalized, it is necessary to obtain the written consent of the mortgagee bank, the Russian Guild of Realtors adds. This requirement applies to all cases, including facilities with shared ownership of minors. Ignoring the procedure may complicate subsequent housing transactions.
Small towns and dilapidated housing
The practice of buying dilapidated houses with a mortgage for the purpose of their subsequent reconstruction is common in small towns, according to the RGR. And the decision of the Supreme Court of the Russian Federation does not prohibit such an approach, but establishes clear rules for its implementation: reconstruction is possible, but the burden remains.
The CCI of the Russian Federation also points out that the preservation of collateral does not mean a ban on reconstruction. At the same time, the borrower is obliged to coordinate the work with the bank. Otherwise, the lender may demand early repayment, and this is a serious risk for families hoping for a gradual improvement in housing.
Thus, the decision of the Supreme Court does not create new barriers, but requires more discipline from borrowers: for the reconstruction of dilapidated housing, it is necessary to comply with all the terms of the contract and coordinate the process with the lender.
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