Section 1 Mortgage and Mortgaged Property
Article 33
Mortgage as used in this Law means that the debtor¹ or a third party secures the creditor²'s rights with property listed in Article 34 of this Law without transference of its possession. If the debtor defaults, the creditor shall be entitled to convert the property into money to offset³ the debts or have priority in satisfying his claim from the proceeds of auction⁴ or sale of the property in accordance with the provisions of this Law. The debtor or the third party specified⁵ in the preceding paragraph is the mortgagor, the creditor is the mortgagee, and the property provided as security is the mortgaged property.

 

Article 34
The following property may be mortgaged: (1) houses and other things firmly fixed⁶ on the land which are owned by the mortgagor; (2) machines, means of transport and other property owned by the mortgagor; (3) the land-use right to the State-owned land, State-owned houses and other things firmly fixed on the land which the mortgagor is entitled to dispose of according to law; (4) State-owned machines, means of transport and other property which the mortgagor is entitled to dispose of according to law; (5) the land-use right to barren hills, barren gullies, barren hillocks, waste flood land and other unreclaimed land contracted by the mortgagor according to law and consent for the mortgage of such right is obtained from the party granting the contract; and (6) other property that may be mortgaged according to law. A mortgagor may at the same time mortgage all the property listed in the preceding paragraph.

Article 35
The amount of a claim secured by a mortgagor shall not exceed the value of his mortgaged property. If the value of the mortgaged property exceeds that of the claim secured, the surplus may be mortgaged again, but not in excess of the surplus.

Article 36
Where houses on State-owned land acquired in accordance with law are mortgaged, the land-use right to the State-owned land occupied by the houses shall be mortgaged at the same time. Where the land-use right to State-owned land acquired by means of granting is mortgaged, the houses on the State-owned land shall be mortgaged at the same time. The land-use right to the land used by a township (town) or village enterprise may not be mortgaged separately. Where factories and other buildings of township (town) or village enterprises are mortgaged, the land-use right to the land occupied by such buildings shall be mortgaged at the same time.

Article 37
The following property may not be mortgaged: (1) ownership of the land; (2) the land-use right to the land owned by the collectives such as cultivated land, house sites, private plots and private hills, with the exception of those provided in sub-paragraph (5) of Article 34 and sub-paragraph (3) of Article 36 of this Law; (3) educational facilities, medical and health facilities of schools, kindergartens, hospitals and other institutions or public organizations established in the interest of the public and other facilities in the service of public welfare; (4) property in relation to which the ownership or the right of use is unknown or disputed; (5) property sealed up, distrained or placed under surveillance in accordance with law; or (6) other property which may not be mortgaged as prescribed by law.

Section 2 Mortgage Contract and Registration⁷ of Mortgaged Property
Article 38
A mortgagor and a mortgagee shall conclude a mortgage contract in writing.

Article 39
A mortgage contract shall include the following particulars: (1) the kind and amount of the principal claim secured; (2) the term in which the debtor performs his obligation; (3) the name, quantity, quality, condition, location, ownership or ownership of the right to the use of the mortgaged property; (4) the scope of the guaranty of mortgage; and (5) other matters the parties deem necessary to include in the contract. If a mortgage contract does not include all the particulars specified in the preceding paragraph, the omissions⁸ may be added by amendment⁹.

Article 40
In concluding a mortgage contract, the mortgagor and the mortgagee may not stipulate¹⁰ that the ownership of the mortgaged property shall be transferred to the creditor in case the mortgagee's claim is not satisfied after maturity¹¹ of the debt.

Article 41
Where a party mortgages property provided for in Article 42 of this Law, he shall register the mortgaged property, and the mortgage contract shall become effective as of the date of registration.

Article 42
The departments responsible for the registration of mortgaged property are as follows: (1) the land administration departments which verify and issue certificates evidencing the land-use right if the land-use right to the land to which nothing is firmly attached is mortgaged; (2) the departments designated by local people's governments at or above the county level, if urban real estates or factories and other buildings of township (town) or village enterprises are mortgaged; (3) the forestry¹² administration departments at or above the county level, if forest trees are mortgaged; (4) the registration departments for means of transport, if aircraft, ships and vehicles are mortgaged; or (5) the administrative¹³ departments of industry and commerce in the place where the property is located, if the equipment and other movables of enterprises are mortgaged.

Article 43
Where a party mortgages other property, he may, of his own will, register the mortgaged property, and the mortgage contract shall become effective as of the date of execution. If a party does not register the mortgaged property, he may not defend against the claims of third party. If a party intends to register the mortgaged property, the notary¹⁴ department in the place where the mortgagor resides shall be the registration department.

Article 44
To register the mortgaged property, a party shall submit to the registration department the following documents or their duplicates: (1) the principal contract and the mortgage contract; and (2) the certificates evidencing the ownership of or the use right to the mortgaged property.

Article 45
Consulting, transcribing¹⁵ or duplicating the materials registered with the registration departments shall be permitted.

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