The expert spoke about the impact of the reconstruction of mortgaged real estate on the mortgage

Reconstruction of mortgaged real estate and an increase in its value do not turn a mortgage into an indefinite encumbrance. Dmitry Shchegelsky, President of the National Chamber of Real Estate (St. Petersburg) and CEO of the Academy of Sciences Benois, told Izvestia about this on May 27.

Convenient debts: why the popularity of non-targeted loans secured by property has grown

The volume of disbursements has reached its maximum since 2023

The mortgage, he said, is dependent and provides a specific obligation — a loan. Therefore, after full repayment of the debt, the encumbrance stops automatically, even if the object has been rebuilt many times and increased in price.

"The rule on the preservation of collateral during reconstruction (art. 345 of the Civil Code of the Russian Federation) only prevents the pledgor from "dumping" the encumbrance by changing things. It does not create a new indefinite encumbrance and does not bind the mortgage to an infinite term. The term of the mortgage is still determined by the repayment period of the loan," the expert noted.

At the same time, the increase in the cost of the facility does not generate new debt and does not prevent the removal of encumbrances, he said. On the contrary, it only strengthens the creditor's security.

When the loan is paid, the mortgagee is obliged to send the documents for repayment of the mortgage record to the EGRN, and the encumbrance will be lifted, the source added. Thus, reconstruction does not make the mortgage permanent — it only ensures that the creditor does not lose collateral in the process of property improvement by the debtor. Hypothetically, a mortgage can become "lifelong" only in the case of permanent debt restructuring due to the borrower's low solvency, Shchegelsky concluded.

Read more in the Izvestia article:

Perestroika of the century: how not to lose collateral after reconstruction