The Finnish system is based on the Swedish (and Germanic) legal tradition codified in the 1743 law book and subsequent amendments. The system was modernized by the entry into force of the Code of Real Estate  ¹⁾  of  12 April 1995/540 (Maakaari/Jordbalken). The old law and subsequent regulations were subjected a thorough revision but many of the new provisions had already been applied in practice for a  certain time.

A major change in the approach was the introduction of information technology which has made the traditional card registers outdated.

Where and by whom is the register kept (register authority)

The Act on the Title and Mortgage Register (1987/353) contains provisions on the establishment, opening and keeping of the title and mortgage register. The publicity of registrations is the main rule.

The District Court in whose jurisdiction the real estate is located is the competent register authority. The files are kept with the register the District Court but other Courts and authorities may issue certificates upon request.
 

How is the register organized?

As stated above the Title and Mortgage Register (Lainhuuto- ja  kiinnitysrekis-teri/Lagfarts- och inteckningsregister)  is electronic and no longer held as a card register.  The Finnish Land Survey keeps  the Land Register (Kiinteistörekisteri/Fastighetsregister) which records the formations of real estates and contains information about their physical and legal dimensions. Title and Mortgage Register is then up-dated electronically on daily basis to reflect i.a. the current  land surveying situation. Title and Mortgage Register contains information concerning the title, third person’s legal rights and mortgages and is held as data-based book-entry system. 
 

What kind of information does the register contain?

Title. The acquisition of title to real estate shall be registered. (Code of Real Estate 10:1 §). The provisions on the registration of title apply also to the registration of the acquisition of a share and a parcel of real estate, a common, a parcel and a share of a common.

Mortgages  created over real estate, shares in jointly held real estate and parcels that don’t  belong to the titleholder of the real estate are registered (Code of Real Estate 16:1 §). 

Special rights as discussed below are registered or may be registered depending on the case (Code of Real Estate 14 chapter).

A contractual right to use real estate owned by another person shall be registered as a special right. Registration may be used also for the determination of whether business property located on the real estate is affixed to the real estate.

The applications for registration, information on their consideration and the registration decisions are entered into the title and mortgage register. In addition, information on execution, precautionary measures and the bankruptcy of the titleholder of the real estate, as well as other information on rights to and encumbrances over the real estate, if they are to be notified to the register authority, are entered into the title and mortgage register.

N.B.  Most of private persons’ flats are not subject to the regime described here. Finland has a special form of limited liability company for housing purposes,  house-owning company (Asunto-osakeyhtiö/Bostadsaktiebolag). In a house-owning company every share separately or jointly with a number of other shares, entitles to possession of a specified flat in the house owned by the company. The owner of a flat is deemed to own moveable property i.e. shares and not a fraction of land.  The house-owning company owns the land and can obtain a mortgage on it whereas owner of the flat pledges shares as collateral for his loans. Virtually all blocks of flats are  legally constructed like this and thus remain outside the scope of this report. The legal provisions regulating this company form can be found in the Companies Act (29.9.1978/734) amended with the special law called Act on House-Owning Companies (17.5.1991/809).
 

Which are the effects of the entry into the register?

The law contains i.a.  provision on protection against loss of file and the protection of exchange. The principle of public credibility is one of the basic effects of the registration. An entry in the title and mortgage register shall be deemed public knowledge as from the first weekday after the date of entry. After that time no protection shall be provided by good faith, expect in certain cases. 

A lien over a real estate shall remain valid even if the person raising the lien had before that time conveyed the real estate,  if the creditor did not know nor should have known of the conveyance.  The same provision applies if title to the real estate has otherwise been transferred to another or if the right of the person raising the lien to hand over a mortgage instrument based on an earlier mortgage has been precluded.

The creditor shall not invoke his good faith if the information on the transfer of the title to the real estate has been  available in the title and mortgage register for at least one month before the raising of the lien.

If the mortgage instrument has been handed over to the creditor as  security for an eventual debt and the person handing it over had at the time the right to raise liens over the real estate, the lien shall remain valid, if the creditor did no know nor should have known of the transfer of title prior to the activation of the debt. The same provision shall apply if the creditor was in good faith when receiving the mortgage instrument. 

Registration becomes pending (lis pendens) when the application has been presented or delivered to the competent register authority. The application shall be accepted, even if unaccompanied by a stamp duty receipt and an entry on the pending registration shall be made in the title and mortgage register.
 

How to enter information into the Title and Mortgage Register

Entries into the register require an application in writing and signed by the applicant or the person drawing up the application. The necessary documents shall be attached to the application. The applicant may present his application orally under certain circumstances.
The application for registration shall indicate:
 

The Stamp Duty Act (1943/662) contains provisions on the documents subject to stamp duty at the time of application for registration.
 

Correction of material and technical errors

If the decision of the register authority is based on evidently erroneous or incomplete information or evidently mistaken application of the law, the register authority may erase its erroneous decision and decide the matter anew.

If there is an evident misprint or miscalculation, error caused by a technical fault or another comparable error or defect in the title and mortgage register, the register authority shall make the necessary corrections to the entries.

When a registration matter has not been decided in accordance with the application or the demand of another party, written appeal instructions shall be attached to the instrument.

The deadline for appeal shall be 30 days from the decision of the matter. The appealing party shall deliver his appeal documents to the relevant register authority on the day of the deadline at the latest, under threat of forfeiting his right of action.
 

Mortgage is the most important form of raising credit against realty.

The Code of Real Estate recognizes three different categories of special rights, namely:
 

The two first groups of special rights may be registered and get legal protection. The law makes it clear that the list of rights that are to be registered(1) and may be registered (2) is exhaustive (numerus clausus). 
 
 

Do the rights have to be entered into the Register?

The registration of a mortgages has a constitutive effect in that registration is indispensable for the creation of  a contractual mortgage upon real property (Code of Real Estate 16:1 §). In practice the registration of mortgages is the most important form of registering limited rights on real property.

The Finnish system does not in principle recognize any obligation to register special rights. there is , however, one exception: leas on land. In certain cases such rights are comparable to the ownership of a real estate and thus the Code of Real Estate includes an obligation. The holder of a lease or another usufruct on the real estate of another  has an obligation to apply for the registration of his right, if the usufruct is transferable to a third party without hearing the titleholder or if there are buildings or other constructions belonging to the usufructuary on the real estate or it has been agreed that they may be built. The registration shall be applied for when the usufruct has been established or when the usufructuary has received the usufruct by conveyance or other acquisition. 

Other special rights that cannot be registered get certain protection by getting known. Parties aware of such rights cannot get protection by good faith. 
 
 

The reason behind the rights?

Mortgage in real estate is self explanatory. If a lien commitment has been made the  creditor shall have the right to demand the titleholder to hand over the mortgage instrument. The principal right of the creditor is anyway the right to receive payment of a debt backed by a lien at its latest when the assets of the real estate are distributed. The amount of the debt is decisive not the face value of the mortgage certificate.

Special rights that are registered are:
 

Yet, a special right can not be registered if it is permanent, if it is for the benefit of a given real estate or area or if it has been established by an official real estate formation measure or otherwise by a decision of the authorities. These are easements and as such attributable to the piece of real estate and registered in the Land Register. Easements are as a rule permanent and in force against third parties and they are normally created by the assistance of the authorities.

An agreement between the joint titleholders of a real estate on the possession of the real estate may be registered

A right belonging to someone else than the titleholder and relating to a building, construction, machine or facility used in business and contributing to the purpose of the real estate may be registered, if:
 

A right subject to a reservation or repossession clause shall be registered to be in force for at most five years from the conclusion of the agreement.
 

Is there a hierarchy between the registrations?

The Finnish law recognizes a hierarchy between different entries into the register.
 

Which is the criteria in determining the precedence?

The legal effects of the registration of a special right begin on the day when the registration application has become pending. A registration earlier applied for shall take precedence in relation to a registration or mortgage later applied for. A special right shall take precedence to a lien, based on a mortgage, applied for on the same day.

The seniority of mortgages may, however, be altered upon the application of the titleholder, if the lienholders and holders of special rights whose right decreases due to the alteration consent to the same. An alteration of seniority may be effected also upon the application of a lienholder, with the consent of the titleholder and the other rightholders.
 
 

Are the registered rights transferable?

It goes without saying that a mortgage is transferable. The transferability is the main rule. Yet, some special rights are not transferable due to their personal nature; e.g. a right to a pension is a registered right but it cannot be transferred.

If a special right has been registered, its alteration, transfer and lapse may be registered  applying, where appropriate, the provisions on the registration of special rights. The legal effects of registration apply to an alteration of a special right by agreement or other transaction only if it has been registered.
 

Are there any consumer protection aspects related ?

Registration of title, mortgage on special rights do not cause protection problems as such. 

Real estate sales which are vital to the registration of title if  carried out by real estate agents may indirectly include aspects of consumer protection. 

Mortgage documents are drafted and made in most cases by the financial institution granting a loan and not by a notary. Banks have been widely criticized of miss information when requesting collateral and having liens raised over real estate. Every financial institution  is well advised to inform the customer in detail. A financial institution should be very  restrictive in accepting mortgage and other collateral as security for all the commitments of a person in consumer credit cases. 
 

Can the mortgage and the secured debt  be subject to different legal systems?

The answer is yes: the mortgage is related to the real estate and is governed by the law of the location of the real estate, forum re sitae, whereas the promissory note showing the real claim may be governed by another law.  This is logical as a mortgage may only be created over real estate, a share in jointly held real estate and a parcel not belonging to the titleholder of the real estate.

When the mortgage has been created, the applicant is issued a mortgage instrument as a certificate of the mortgage. The mortgage instrument is a certificate and although tradition of the mortgage instrument is required in some cases, the mortgage instrument is not an independent bearer document. 

The law on the applicable law on international contracts § 5 states that if a contract does not include a provision on the choice of law the applicable law shall be the jurisdiction with the closest  connection bearing in mind the circumstances of the relationship. The law is based on the treaty of Rome and can also be interpreted so that either the domicile of the bank or the location of the real estate could determine the applicable law. There are no precedents on this issue. In particular in consumer credits the location of the real estate pledged could be decisive. 

The law on the applicable law on international contracts § 8 states that when rights are transferred the applicable law remains unchanged between the original debtor and the transferee. 

If the mortgage instrument has been handed over as security of an eventual debt the lien shall  be raised when the debt becomes active.  Then again if the debt has been paid the mere possession of the mortgage instrument does not create any security. This clearly demonstrates that the mortgage instrument has a partly separate life span independently of the secured debt and is no longer to be considered as a security bond. 

From the Finnish point of view a mortgage in real estate is an optimal security. The conflict of law aspect calls for a contractual provision on the applicable law of the main debt and the mortgage instrument can be reused after the payment of the debt or it can be conveyed when the principal debt is transferred. Code of Real Estate 17:5,2 § states that “the creditor may convey the mortgage instrument only if he at the same time transfers the debt which is backed by the lien.” You are reminded of the fact that Finnish flats are constructed as moveable property where the object of pledging is shares. Otherwise the same conflict of law observations apply with respect to transactions of moveable property.
 

Can the mortgage amount be in foreign currency?

The amount of the mortgage has to be fixed amount and expressed in the currency of Finland. The interpretation has been thus that the mortgage amount can neither be in Euros nor in foreign denomination. As the currency of Finland will be Euro this provision will change without the legal wording having to be modified.

Can foreign notaries’ acts be included in the registration?

The Finnish concept of notaries public is very different from that of many other European countries and follows the Swedish tradition. A vast majority of deeds are form free and just very few require the intervention of a notary public. The sale of real estate requires the confirmation of a notary.

Registration of the title The sale of real estate is concluded in writing. A notary shall attest the sale in the presence of all the signatories of the deed of sale. Notaries in this context are defined as certain judges, civil servants and persons nominated by the district court. Thus a deed certified by a foreign notary does not qualify.

Registration of a mortgage.  The application for a mortgage shall be made in writing to a district court and does not require any  certifications by a notary. Thus the question is irrelevant from the Finnish point of view.

Registration of special rights.  the main rule is that beside the sale of real estate these deeds do not require the intervention of a notary. The applicant shall present the contract or other document relating to the attachment or transfer of the registrable right. As the acts  concerned are not notary deeds the question is of no importance.
 

Enforcement always requires legal grounds such as a court judgement, a conciliation confirmed by a court or an  arbitration award. 

Initiative. The enforcement proceedings are initiated by an application to the bailiff who shall take preparatory measures i.a. acquires all the necessary documents. The applicant has to pay in advance the costs related to such documents. 

Service by publication. The notice concerning the auction shall be published in the Official Gazette and a local newspaper. And at least four weeks before the compulsory auction. In addition the notice shall be mailed to the applicant, mortgage holder, debtor and the owner of the real estate. 

Presentation of claims.  No more than two days before the compulsory auction the creditors shall present the claims. In practice the auction is initiated by the presentation of claims. The creditors have the opportunity to make their claims, object other creditor’s claims etc. The bailiff reads aloud the minutes, the abstract of the register of mortgages and other official documents. Thereafter the bailiff draws up the schedule of creditors. 

Order of priority. The schedule of creditors shall i.a. indicate the order of priority of the rights to be taken into account when distributing the sales price. Execution Act 5:26,1 §. 

Minimum Bid at a Compulsory Auction.  The list of creditors shall include the minimum bid or a lowest purchase price acceptable at a compulsory auction of a real estate. The lowest bid must be higher than the aggregate amount of those receivables and distraint related costs which have higher priority than the debt due to which the notice of compulsory auction has been given. If the notice has been given for the payment of two or more creditors’ receivables, the lowest acceptable bid is determined on the basis of the debt with the highest priority between such receivables. The list of creditors is confirmed by the bailiff. Further the list is given to the persons involved for their acceptance and signing. A creditor who has signed the list cannot apply for a change in the list.

If a bid which is acceptable according to the list of creditors is made at the auction, the real estate shall be sold, unless the purchase price does not cover the payment of the debt due to which the auction was initiated and the creditor of the same objects to the sale. If a bid exceeding the limit for the lowest acceptable purchase price is not made, the real estate shall not be sold, unless the creditors whose receivables are not fully covered by the purchase price and the person who initiated the auction give their consent to the sale.

When a bid has been accepted at the auction, the buyer has to pay one sixth of the purchase price in ready money or alternatively grant a mortgage to the real estate in order to secure the payment. Before the closing of the auction it further has to be notified where and when the remainder of the purchase price must be paid.
 

Protection 

The code of Real Estate 13:3 grants protection in cases of double conveyance.

If the same real estate has been conveyed to two persons, the later conveyance shall take precedence, if registration of title to it is first applied for and the conveyee, at the time of acquisition, did not know nor should have known of the previous conveyance. If registrations of title to several acquisitions are applied for on the same day,  the earliest conveyance shall take precedence.

An acquisition of real estate based on a conveyance shall be permanent even if  the conveyor was not the rightful titleholder of the real estate due to a defect in his acquisition or that of a previous titleholder,  if the title of the conveyor was registered at the time of acquisition and the conveyee, at the time, did not know nor should have known that the conveyor was not the rightful titleholder.

A special right to or lien over real estate shall be binding even if the person effecting one was not the rightful titleholder of the real estate, if his title was registered at the time of acquisition and the person holding the lien or special right, at the time, did not know nor should have known that he was not the rightful titleholder.

The conveyee or person holding a title or special right shall not receive the protection, if:
 

	the deed of title or other acquisition document of the rightful titleholder or the power of attorney or other competence document of his representative has been forged;
	the conveyance of the rightful titleholder is invalid because he has been coerced into it or
	the conveyor of the real estate or the real estate of the establisher of a lien over or special right to it has been registered as titleholder by mistake or if the entry in the register is not based on a decision of the register authority.

A lien over real estate shall remain valid even if the titleholder has prior to the raising of  the lien lost his right of decision over it because of execution, precautionary measures or bankruptcy, unless the loss of that right was entered into the title and mortgage register at the time of the raising of the lien and the creditor also otherwise did not know nor should have known that the titleholder no longer had the right to raise a lien over the real estate.

If the mortgage instrument has been handed over to the creditor as security for an eventual debt and the person handing it over had at the time the right to raise liens over the real estate, the lien shall remain valid, unless the loss of that right was entered into the title and mortgage register prior to the activation of the debt and the creditor also otherwise did not know nor should have known that the titleholder no longer had the right to raise a lien over the real estate.