(2022-12-08-ны  өдрийн  орчуулгын  хяналт)                               Unofficial  translation

LAW OF MONGOLIA

July 9, 2009               Ulaanbaatar city

ON IMMOVABLE PROPERTY PLEDGE

CHAPTER ONE

GENERAL PROVISIONS

Article 1.Purpose of the Law 

1.1.The purpose of this Law is to regulate relations connected  with pledging immovable properties and proprietary rights as a security to provide execution of duties, making a contract for pledging immovable properties /hypotheque/, as  well  as securing the performance of duties.

Article 2.Legislation on immovable property pledge 

2.1.The legislation on immovable property pledge shall consist of the Constitution of Mongolia, the Civil Code, this Law and other legislative acts enacted in conformity with them. 

2.2.If an international treaty, to which Mongolia is a party, stipulates otherwise than this Law, then the provision of international treaty shall prevail. 

Article 3.Scope of application of the Law

3.1.If it is not regulated specifically by this Law, the general procedures of Civil Code shall apply to contract of pledging immovable properties and proprietary rights /hereinafter referred to as a "pledge"/. 

3.2.If a pledge relation shall be arisen on grounds specified by law, and/or if the relation is not specifically regulated by another law, the Civil Code and the procedure provided in this Law shall apply. 

Article 4.Pledge parties 

4.1.Pledgee is a citizen or legal entity who pledged immovable properties and proprietary rights of pledger in order to secure the execution of duties of pledger. 

4.2.Pledger is a citizen or legal entity who put their immovable properties and proprietary rights in pledge as a guarantee to secure execution of duties.

4.3.Pledger can be the obligor or a third party. 

4.4.If pledgee or pledger are both legal entities, obligations to be secured by the pledge must be reflected in accounting records in accordance with the procedures specified by law. 

Article 5.Pledge right emerging foundation

5.1.Pledge right can be emerged by grounds specified in law or by the contract made between pledgee and pledger. 

Article 6.Duties to be secured by pledge

6.1.Pledge contract can be made as a security to provide execution of loan and other duties. 

6.2.Loan agreements issued by persons specified in Article 12.1 of the Law on Regulating Money Lending shall not be registered.

/This paragraph was added by the law as of November 4, 2022 and shall be entry into forced from March 1, 2023/

Article 7.Claims to be secured by pledge

7.1.Unless otherwise provided in the law or contract, the following  claims in addition to  Article 165.6 of Civil Code shall be secured by the pledge:

7.1.1.Increased interest;

7.1.2.Expenses incurred in the sale of pledge items;

7.1.3.State duty, court expenses to be reimbursed.

7.2.Unless otherwise provided in the law or the contract, the amount of claims to be secured by the pledge cannot exceed the total sum of fees and expenses stated in article 7.1 of this Law and damage and interests specified in article 165.6 of Civil Code.

7.3.If the amount of pledgee's claim to be secured by the pledge specifically determined in the contract, pledger shall not be responsible for excess amount from the set amount except for the cases specified in articles 7.1, 7.2 and 8 of this Law. 

Article 8.Additional expenses of pledgee

8.1.Pledgee seizures expenses such as mandatory expenses for protecting pledge item, paid property taxes and fees as well as common service charges from such property under conditions, described in the pledge contract.

Article 9.Pledging immovable properties and proprietary rights

9.1.Pledger has a right to put his/her immovable properties and proprietary rights specified in article 84.3 of Civil Code in pledge.

9.2.If the law states the prior consent of other person should be obtained when concluding the pledge contract, the consent shall be obtained in the form specified by the law.

9.3.The obligee (lessee/tenant) may put lease right of immovable property in pledge only by obligor's (lessor/landlord) written permission.

9.4.The decision to pledge property owned by legal entity shall be made by authorized body specified in the law or charters.

9.5.The decision to pledge state owned or locally owned immovable properties shall be made by the authorized body specified in Law on State and local property. 

9.6.It shall be prohibited to be pledged following immovable properties: 

9.6.1.excluded from civil circulation; 

9.6.2.according to the law, payment cannot be made from the given asset; 

9.6.3.If it is required to be privatized or inserted into the list not to be privatized in accordance with procedures stated in law. 

Article 10.Pledge of common immovable properties and proprietary rights

10.1.The written permission from each owner of the pledged item shall be obtained for the pledge of common immovable property and proprietary rights.

10.2.A common property owner can partially pledge his/her/its share of the common property and he/she/it shall have to notify all other co-owners according to the article 108.3 of Civil Code. 

10.3.If a common property owner specified in article 10.2 of this Law shall need to sell his/her/its share of the common property by pledgee's demand, other co-owners of such property shall have superior rights to purchase the share according to the paragraphs 108.6-108.8 and Article 490 of Civil Code. 

CHAPTER TWO

CONCLUDING A PLEDGE CONTRACT

Article 11.Pledge contract contents

11.1.Pledge contract (hereinafter referred to as "Contract") shall be concluded in writing in accordance with the general procedures of the Civil Code and this Law and in addintion to article 156.2 of Civil Code, the followings shall be included in it:

11.1.1.Claims to be secured by the pledge, its amount, if the price and amount of the payment is not determined in advance, the procedures to determine these further;

11.1.2.The period of performance of the obligation to be secured by pledge, if the obligation was based on any other contract, the parties, date and conditions of this contract must be described;

11.1.3.Pledge item location and evidence to confirm a pledge item as pledger's property, and the name of authorized registry body that registered the proprietary rights, and propertyownership certificate number;

11.1.4.Confirmation to prove pledge item has been pledged to another person or not; 

11.1.5.If duty execution will be done partially, payment obligation period, frequency, amount or procedures to determine these further;

11.1.6.Procedures to fulfill pledge demand; 

11.1.7.Provision on whether pledgee's right is certified by pledgecertification or not;

11.1.8.If pledge item is a proprietary right of immovable property, the main condition and period of the contract which obtained such right;

11.1.9.Pledge item related third party proprietary right; 

11.1.10.Others. 

11.2.If law allows and parties agreed on the contract, pledge demand can be executed outside the court control. 

11.3.In the contract specified in article 11.2 of this Law, it shall state in detail the method to sell  the pledge item outside the court control.

Article 12.Registration of contract

12.1.The Contract shall be registered in accordance with the legislation on State Registration. 

12.2.If the Contract violates legislation on State Registration and provision of the article 11 of this Law, it shall be prohibited to be registered in the State registry. 

12.3.The Contract that violates the procedures for state registry shall be invalid.

Article 13.Notification of third party's right about pledged item to a pledgee 

13.1.A pledger shall notify to a pledgee in a written form regarding leases and  other limited rights of third party in relation with the pledge item. If it shall be not notified, pledgee has a right to make amendments on the pledge contract or claimto achieve performance of the obligation before its deadline. 

CHAPTER THREE

PLEDGE CERTIFICATE

Article 14.Pledge certificate

14.1.Pledge certificate shall be a physical security and permit that certifies the following rights of legal owner: 

14.1.1.right to receive and claim to cash payment obligation, secured by an immovable property pledge without any other evidence; 

14.1.2.Immovable property pledge right that secures the performance of principal obligation. 

14.2.Pledge certificate shall be made in the cases specified by law. 

Article 15.Pledge certificate contents

15.1.Pledge certificate shall include the following: 

15.1.1.Title "pledge certificate";

15.1.2.If a pledger is an individual, pledger's first name, surname, civil registration number, permanent address or, if the pledger is a legal entity, its proper name, state registration number and location;

/This sub-paragraph was amended by the law as of June 3, 2022./

15.1.3.Primary pledgee's first name, surname, and permanent address;

15.1.4.If a pledgee is a third party, principal obligator's first name, surname, permanent address or, if the obligator is a legal entity, its proper name, state registration number and permanent address); 

15.1.5.Accrued ground, date, and location of the Pledge right; 

15.1.6.The amount of pledge obligation and interest, and methods to determine the amount of interest and payment; 

15.1.7.Provisions on whether the obligation to be secured by pledge may be fulfilled before the due date; 

15.1.8.Name of pledge item, description of its attributions and location and state registration number of propriety right; 

15.1.9.If a proprietary right related to immovable property has been pledged, information of such immovable property specified in article 15.1.8 of this Law and period of validity of the proprietary right; 

15.1.10.the provisions on whether there is any pledge related to the third party property right; 

15.1.11.the provisions of statement of pledger's permission that allows legal owner to pass the pledge certificate to others; 

15.1.12.Procedures to secure duty execution from pledge item; 

15.1.13.Date of Pledge certificate made; 

15.1.14.Pledger's signature and if the pledger is a third party, then signature of an obliger, who is secured by pledge;

15.2.A certificate that does not include any of the information specified in article 15.1 of this Law shall be invalid.

15.3.Any other information other than those specified in article 15.1 of this Law, may be included in the certificate by mutual agreement between the parties.

Article 16.Pledge certificate formulation

16.1.A pledger formulates one copy of pledge certificate according to the form approved by the State registration authority and submit to the State registration authority along with the contract.

16.2.The state registration authority shall record the date and place of concluding of the pledge contract into the pledge certificate, and sign and seal each page, take a copy of it into a personal file, and deliver the original to the pledgee within 5 working days. 

/This paragraph was annulled by the law as of June 21, 2018/

16.3.If a citizen pledged or leased his/her privately owned land and its proprietary right, it shall be prohibited to formulate and register a pledge certificate on these items. 

16.4.Any document, transaction that violates the procedure specified in article 16.3 of this Law shall be invalid.

Article 17.Amendments to pledge certificate 

17.1.If obliger, pledger and legal possessor of the pledge may mutually agree and make following amendments to the pledge certificate: 

17.1.1.Attach the changes made to content in writing to the original and to note on pledge certificate that attachment is an inseparable part of the pledge certificate; 

17.1.2.To formulate a new pledge certificate which contain the amendments in accordance with the article 15 and 16 of this Law and to annul the previous one. 

17.2.The State registration authority shall register the relevant changes in the State Register within 3 working days from the date of receipt of the request to register the changes made to the pledge certificate according to Article 17.1.1 of this Law, and no service fees, charges or fees shall be charged for such registration.

/This paragraph was annulled by the law as of June 21, 2018/

17.3.The State registration authority shall confiscate and archive the pledge annulled in accordance with article 17.1.2 of this Law. 

/This paragraph was annulled by the law as of June 21, 2018/

Article 18.Implementation of pledge certificate right and executing obligation to be secured by the pledge

18.1.A legal holder of the pledge certificate, when expressing the rights evidenced by the pledge certificate shall present be pledge certificate to an obliger, who is responsible for pledge certificate obligation, upon his/her request and prove the right of pledge certificate to own it.

18.2.A pledgee shall be obliged to transfer the pledge certificate to an obliger after the obliger completely fulfills the obligations secured by the pledge certificate. 

18.3.The pledger shall include a note about partial performance of the obligation in the pledge certificate or prove it by relevant financial documents.

18.4.If the requirements specified in article 18.3 of this Law shall be not met, it shall be considered that the obligation has not been fulfilled except in the cases specified in Article 38.6 of this Law. 

18.5.If an obliger agreed to perform partially his/her payment duties in set schedule; he/she shall perform his/her obligation properly in consistent with the schedule. 

18.6.An obliger shall have a right to reject to perform the obligation to the person who is demanding to perform obligations secured by pledge certificate in following cases:

18.6.1.if the court has been initiating and reviewing a case upon the claim related to an invalidation of the transaction being transferred a pledge certificate or elimination of consequences arising from the invalidation of such transaction based on that grounds;

18.6.2.if it is considered to invalidate a pledge certificate due to breach the issuance procedure on new pledge certificate, and an obliger named on pledge certificate has become irresponsible for fulfilling the pledge certificate obligation.

18.7.Upon receipt of a pledge that has been revoked in accordance with this Law, the State registration authority shall print a "revoked" stamp on the face of the pledge certificate, and attach it to the relevant personal file and archive it. 

/This paragraph was annulled by the law as of June 21, 2018/

18.8.An obliger shall have no right to reject to perform the obligation on grounds other than those specified in article 18.6 of this Law and the pledge certificate. 

18.9.According to the grounds and procedures specified in this Law, a person who has newly acquired the pledge certificate shall be obliged to immediately notify the person who has rights and obligations under the pledge.  

18.10.An obliger who performed appropriately his/her duty and submitted pledge certificate with related evidence to the State registration authority and unless otherwise provided by the law or the contract, or unless its legal holder approves otherwise, it is considered that the obligation secured by pledge has been fulfilled.

Article 19.Reissue of pledge certificate

19.1.If a pledge certificate is lost or damaged, a pledgee shall be reissued it on following grounds:

19.1.1.submitted a request to reissue pledge certificate to pledger under the contract by legal holder; 

19.1.2.the court reviewed the civil cases filed by the claim for the reissuance of lost or damaged documents in accordance with special procedure specified in the Civil Procedure Code and made an appropriate decision.

19.2.Pledger formulates pledge certificate again and submit to the State registration authority with the note that indicates "Reissued".

19.3.The state registration authority shall register the re-issued pledge in accordance with Article 19.2 of this Law and deliver it to the legal holder.   

/This paragraph was annulled by the law of June 21, 2018/

19.4.A new pledge certificate must entirely be consistent with lost certificate. A person who formulated this copy shall be responsible for any loss and detriments, caused by not meeting fully this requirement.

CHAPTER FOUR

PROTECTION AND USAGE OF PLEDGE ITEM

Article 20.Usage of pledge item 

20.1.A pledger shall have a right to use pledge item for its intended purpose. 

20.2.Any terms and conditions of pledge contract to restrict pledger's such right specified in the article 20.1 of this Law shall be illegal.

20.3.Unless otherwise provided in the pledge contract, a pledger shall be obliged to properly use pledge item without decreasing the property value by more than its regular depreciation and deteriorating quality of the property.

20.4.A pledger has a right to be gained income and benefit from the pledge item in accordance with the article 157.5.1 of the Civil Code. A pledgee shall not have any right to be gained these income and benefits unless otherwise provided in the pledge contract. 

Article 21.Maintenance and repair of pledge item

21.1.Unless otherwise provided in the pledge contract, a pledger shall protect the pledge item until the termination of the contract, and carry out maintenance and major repairs in accordance with the period and procedure determined by laws and legal acts or if no period is specified, within a reasonable period, and it shall be responsible for the incurred costs thereto.  

21.2.Unless otherwise provided in the pledge contract, it shall be prohibited to change the structure, purpose, and design of the pledge item. 

Article 22.Insurance of pledge item

22.1.Unless otherwise provided in the law, the parties shall decide on whether pledge item shall be insured or not. 

22.2.If an insurance event occurred, an insurer shall take a measurement specified in Articles 170.3 and 170.4 of the Civil Code, and a pledgee shall have a privileged right to to be compensated its claim from the compensation for insurance in the priority basis.

Article 23.Protection of pledge right

23.1.A pledger shall be obliged to notify immediately to a pledgee, if court/arbitration case is initiated regarding the ownership and other rights of the pledge item and the pledger is involved as a defendant. 

23.2.In cases specified in article 23.1 of this Law, a pledger shall be protected his/her rights in accordance with article 9.4 of the Civil Code.

23.3.If a pledger refuses or does not protect his/her rights regarding to the pledge item in accordance with article 23.2 of this Law, the pledgee has the right to file a claim on behalf of pledger without a power of attorney and to demand compensation for expenses incurred in connection therewith.

23.4.If an pledge item is in illegal possession of a third party, a pledgee has a right to claim it from the illegal possession of the third party in order to transfer the pledge item into possession of the pledger in accordance with paragraphs 90.2, 106.1 and article 95 of the Civil Code.

Article 24.Evaluation of pledge item's quality and condition

24.1.A pledgee shall have a right to check through evidence or in person the quality and maintenance conditions of a pledge item during working hours based on prior notification to the pledger. Such pledgee's right can also be applied for a property that was temporarily transferred from a pledger to a third party's possession.

24.2.A pledgee shall exercise his/her rights specified in article 24.1 of this Law without hindering a pledge item possessor's proprietary right.

Article 25.Accrual right to a pledgee due to a lack of pledge item protection

25.1.A pledgee has a right to demand to pledger to execute duty in writing within the specified period, if the pledger misused the pledge item, non-performance of or breached contract duties specified in paragraph 170.2 of Civil Code and paragraph 20.2 and Article 21 of this Law. 

25.2.If a pledger fails to meet the requirements specified in article 25.1 of this Law, a pledgee has a right to demand the early performance of the duties secured by the pledge.

25.3.If a pledger did not meet above mentioned requirements within contractual deadline or did not meet them within one month in case no special deadline was specified, a pledgee has a right to claim to be executed performance of the obligation from the value of pledge item.

Article 26.Consequence of pledge item destruction and damages 

26.1.Unless otherwise provided in the pledge contract, a pledger shall be responsible for any risks, caused by accidental and force major damages and destruction of pledge item.

26.2.If a condition of pledge obligation was seriously deteriorated due to damage or destruction of pledge item, which was insured in consistent with relevant law and contract, a pledgee has a right to seizure the pledge obligation of insurance indemnification. 

26.3.If a pledger and pledgee made a written contract to restore or replace damaged and distructed properties and the pledger has not fulfilled the terms of such contract properly, the pledgee shall not have a right specified in Article 26.2 of this Law. 

CHAPTER FIVE

TRANSFER OF PLEDGE ITEM TO OTHER'S OWNERSHIP, POSSESSION AND USAGE

Article 27.Transfer of a pledge item to other's ownership

27.1.The pledger shall obtain the pledgee's consent when transferring the pledged immovable property to the ownership of others. 

/This article was modiied by the law as of January 19, 2016/ 

/This paragraph was annulled by the Resolution No.1 of the Constitutional Court dated as of December 6, 2017/ 

Article 28.Keeping the pledge claim when transferring an pledge item to other's ownership 

28.1.A person who acquired pledge item as a result of transfer to ownership in accordance with the procedure specified in article 27 of this Law, shall exercise the rights and obligations of the  previous pledger.

28.2.A person who acquired pledge item as a result of inheritance, right transfer or legal entity re-establishment to the ownership pursuant to law and contract shall be responsible for pledger's duty under the contract within the amount of the value of the rights and assets transferred to him/her. 

28.3.If a pledge item is transferred to ownership of number of bodies in accordance with article 28.2 of this Law, each receiver of the pledge item shall be liable in proportion to amount of property transferred to him/her. If the property could not be shared or it was transferred co-ownership of the receivers of pledger's right, it is considered that all these pledger's right receivers shall become co-pledgers.

28.4.It is considered that the pledge is valid regardless of whether the established procedure for transfer of pledge item is breached or not.  

Article 29.Consequences of breaching the transfer procedure of a pledge item

29.1.If the requirements specified in articles 27.1 and 27.2 of this Law were violated when transferring the pledge item, a pledgee has a right to set one of the following requirements: 

29.1.1.To cancel the transaction returning a pledge item and eliminating damage caused a pledge item with in accordance with articles 56.5 and 56.6 of the Civil Code;

29.1.2.To ensure the obligations to be secured by the pledge item before the due date regardless of who owns the pledge item. 

29.2.If an individual, who acquired pledge item, knew or was possible to know that the procedure specified in article 27 of this Law was breached through the acquisition, the individual shall jointly responsible for the performance of the obligations arising from failure to properly fulfill the obligations provided by the pledge to the extent of the value of the property.

29.3.If a pledgor is a third party and the pledge item had transferred to someone else's ownership in breaching legal procedure, the pledger shall mutually be responsible for it with a new owner and previous pledger of the property.

Article 30.Transfer pledge item to others possession and usage

30.1.Pledgor has a right to rent, lease or transfer the pledge item to the third party for temporary use free of charge with consent of the pledgee within the period of performance of the principal obligation.

/The phrase "…with consent of the pledgee…" of this article was annulled by the 11th resolution of the Constitutional Court dated as of December 9, 2015/ 

30.2.If pledge item is sold by pledgee's demand in accordance with the law and contract, the leasing and other rights of the pledger specified in article 30.1 of this Law shall be terminated.

30.3.The pledgor shall obtain the consent of the pledgee when using the pledge item exceeding the period of performance of the pledge or for other purposes by the others.

/This paragraph was annulled by the 11th resolution of the Constitutional Court dated as of December 9, 2015/

30.4.Without the consent of the pledgee, the transaction granting rights to a third party exceeding the period specified in Article 30.1 of this law is invalid. 

/This paragraph was annulled by the 11th resolution of the Constitutional Court dated as of December 9, 2015/

30.5.Unless otherwise provided in the contract, the pledge item for usage by others shall not be the ground to release pledger from his obligations under the contract.

Article 31.Consequences of compulsory seizure of pledged properties to State and local ownership

31.1.If a pledgor's ownership right is terminated because of a transfer to public domain or requisition for state and local needs in consistent with grounds and procedures stated in law, the state and its authorized bodies shall pay compensation and the price. The pledgee has the right to satisfy his demands with the compensation and price provided in this way. 

31.2.If a pledgee considers that his/her interests are not completely protected by right specified in article 31.1 of this Law, the pledgee shall have a right to require to fulfill the pledge obligation before its deadline or to seizure the property.

31.3.If a pledge item was forfeited to public property as a result of the court decision due to a crime or other illegal actions of the pledgor which violates of law, the pledge shall be remain valid and in this case, procedures specified in article 28 of this Law shall be applied. 

31.4.If it is considered that the procedures specified in article 31.3 of this Law has been caused harm to pledgee's rights and interests, a pledgee shall have a right to file a claim in the court to seizure the forfeited property or to demand earlier fulfillment of the pledge obligation than its deadline.

Article 32.Consequences of seizure pledge item from an illegal possession 

32.1.If a pledger illegally acquired the pledge item, and the legal owner of pledge item seizures his/her property from a pledger's illegal possession in consistent with legal procedures, the pledge right of this property shall be terminated.

/This paragraph was amended according to the law as of June 21, 2018/

32.2.In the case specified in article 32.1 of this Law, pledgee has a right to demand from the pledger the fulfillment of the obligation to be secured by the pledge after the court resolution is valid.

/This paragraph was amended according to the law as of June 21, 2018./

CHAPTER SIX

DOUBLE PLEDGES FOR A SINGLE IMMOVABLE PROPERTY

Article 33.Double pledges for a single immovable property

33.1.Unless prohibited by a valid prior contract, a pledger shall have a right to re-pledge immovable property to others.

/The phrase "…unless prohibited by a valid prior contract…" of this paragraph was annulled by the 11th resolution of the Constitutional Court of December 9, 2015/

33.2.In cases specified in article 33.1 of this Law, it shall be secured demands of pledgees based on a sequence registered in the state registration.

33.3.If the terms and conditions of the subsequent pledged contract are included in the previous pledge contract, the terms and conditions must be included when concluding the subsequent contract. 

33.4.Regardless of whether the subsequent pledgee has been known in advance about the contract concluded in violation of Article 33.3 of this Law, the court shall consider the subsequent pledge contract is invalid at the claim by the previous pledgee.

33.5.If both pledger and pledgee on the primary (previous) pledge contract are the same bodies, the procedure specified of this article shall not be applied. 

Article 34.Informing pledgee about the previous (primary) and next (secondary) pledges and changing the previous (primary) contract of pledge 

34.1.A pledger shall be obliged to inform about all valid pledge while entering a contract with next pledgee. 

34.2.A pledger has failed to fulfill the obligations specified in article 34.1 of this Law and the secondary (next) pledgee has a right to dissolve his/her contract and claim a compensation for indemnification excluding in cases of the pledger has proved that the secondary (next) pledgee was aware of the validity of the primary (previous) pledge of the immovable property.

34.3.A pledger, who enter the secondary (next) contract of pledge, shall be obliged to immediately inform pledgee of the primary (previous) pledge contract about the double pledge of the pledge item. 

34.4.After conclusion of a secondary (next) contract, the changes shall be made to meet the new requirements of the primary (previous) pledgee or to increase the amount of claims to be satisfied under the contract by only the consent of secondary (next) contract pledgee, unless otherwise provided in the primary (previous) contract.

Article 35.State registration of double pledge 

35.1.The state registration of double pledge shall be made in accordance with the procedures specified in the Law on State registration of property rights.

/This paragraph was amended according to the law as of June 21, 2018/

35.2.The parties shall state about state registration of primary (previous) pledge of specific immovable property in the secondary (next) contract of pledge.

35.3.All secondary (next) pledges of specific property shall be noted in the registration of primary (previous) pledge. 

Article 36.Meet the pledgees' claim for the primary (previous) and secondary (next) pledges 

36.1.A pledgee's claim shall be satisfied from the pledge item value in the order registered in the state registry. 

36.2.If previous pledgee did not enjoy his/her privilege, the right of first priority to satisfy his/her claim from the pledge item, shall be transferred to the next pledgee. 

36.3.A pledgee shall be obliged to notify to other pledgees in written before requiring the property to satisfy the obligation.

36.4.If one of the pledgees makes a demand for fulfillment of the obligation from the pledge item, the other pledgees may simultaneously demand the fulfillment of the pledge item, even if the deadline for demanding the obligation to be fulfilled by previous and next pledges has not yet reached.

36.5.Unless otherwise provided in the law or contract or if the other pledgees agree, claim of each pledge shall be met according to sequence of time schedule of performance of the obligation.

CHAPTER SEVEN

PLEDGING AND TRANSFERRING THE CERTIFICATE OF PLEDGE AND DEMAND RIGHT

Article 37.Transfer demand right

37.1.The procedures specified in the article 123 of the Civil Code shall be followed when pledgee transfers his/her demand right.

Article 38.Transferring the certificate of pledge

38.1.A pledgee shall have a right to transfer to others through selling or putting the pledge certificate. 

38.2.The rights secured by the pledge shall be transferred in written on the pledge certificate and when the pledge is transferred, claim right shall be transferred simultaneously.

38.3.While transferring a right stated in certificate of pledge, if the individual who acquires new rights in the pledge is a citizen, his/her surname and given name shall be entered or if the individual is the legal entity, the special proper name and reasons/grounds of transferring the right shall be entered in written note.

38.4.A pledgee stated in certificate of pledge shall signs in this note specified in Article 38.3 of this Law and if notes in pledge certificate is not primary/original, then a holder of the pledge certificate shall sign and notarize it.

38.5.While transferring a right secured by the certificate of pledge to other person,  all of rights secured by the certificate of pledge shall be considered transferred together.

38.6.If a pledger partially fulfill the obligations on the main contract before transferring a certificate of pledge, it shall be considered that contractual obligations is fulfilled by such amount. 

38.7.If a right to possess a certificate of pledge was based on a contract of transferring the owner's right and a previous owner's last note on the certificate, a new owner of this certificate of pledge shall become legitimate.

38.8.If the third party has completely fulfilled a pledge obligation of obliger in accordance with article 210.4 of the Civil Code, he/she shall be eligible to claim a right in the certificate of pledge to be transferred to himself/herself. If this claim is failed to be satisfied, the third party can file a claim in the court.

38.9.An individual who transfers the pledge certificate shall be obliged to inform pledger and obliger in writing about this and the name and permanent address of new legal possessor of the pledge, as well as next payment date. 

Article 39.Registration of Pledge certificate transfer

39.1.If the law and the contract provide, a new legal possessor who has transferred the pledge right in accordance with the procedure specified in article 38.1 of this Law shall register about it to State registry. 

39.2.In the case specified in article 39.1 of this Law, a legal possessor shall submit a Pledge certificate and its registration form to the State Registration authority. 

39.3.The State Registration Authority shall, within one working day after receiving the original of the pledge certificate and the application, amend the pledge certificate and the state registry, make a note, and hand over the pledge certificate to its legal possessor. 

/This paragraph was annulled by the law as of June 21, 2018/

39.4.Legal possessor shall be not required to pay any fee for the register of pledge certificate on his/her own name. 

Article 40.Pledging a certificate of pledge 

40.1.A pledge certificate can be pledged by a legal possessor to others as a warrantee of the legal possessor's obligation performance. 

40.2.A note shall be made on the pledge certificate in case of pledging the certificate. 

40.3.If certificate of pledge is pledged without transferred to possession of  pledgee, any transactions using this certificate of pledge shall apply procedures specified in article 158 of the Civil Code. 

40.4.If certificate of pledge is transferred to a pledgee, the contractual parties shall include the following terms and conditions in the contract of pledge:

40.4.1.Enforce the pledge item according to procedures in article 158 of the Civil Code;

40.4.2.Transfer a right in certificate of pledge under the conditions and procedures specified in article 38 of this Law;

40.4.3.Terms on making special note about that the pledgee may sell the pledge  certificate in order to be fulfilled pledge obligation.

CHAPTER EIGHT

FULFILLING PLEDGE OBLIGATION FROM THE PLEDGE ITEM

Article 41.Claiming obligation performance 

41.1.If the obliger and pledgor fail to fulfill their obligations or fail to fulfill them properly, the pledgee has a right to claim for the obligation performance.

41.2.A pledgee has a right to demand selling the pledge item to satisfy the obligation performance, if pledger did not meet the requirement of article 41.1 of this Law.

41.3.If pledge item is double-pledged, the pledgee shall be obliged to inform other pledgees, pledgers, if pledger is a third party, inform obliger, if pledged item is a rental property, inform the rental right possessor while exercising the right specified in article 41.2 of this Law.

Article 42.Notifying pledger

42.1.A pledgee shall be obliged to inform to pledger and obliger in writing that he/she will claim for obligation performance in accordance with article 41.1 of this Law.

42.2.If a pledger and an obliger do not respond within defined time period that specified on the notice, pledgee shall register this to State Registration authority and notify to pledger and the third party who has registered his/her rights in relation to the pledge item in writing that the obligation performance will be secured from the pledge item. 

42.3.If pledger does not respond to notice specified in article 42.2 of this Law within 30 days or does not fulfill his/her obligations, a pledgee shall start the sale of the pledge item. 

42.4.Notice form and its delivery procedure specified in article 42.2 of this Law shall be approved by the State registration authority. 

Article 43.Selling procedure of pledge item 

43.1.Pledged property can be sold by a judicial decision or non-judicial (contractual) procedure. 

Article 44.Selling pledge item through non-judicial procedure

44.1.Non-judicial procedure of selling pledge item shall be regulated by law and agreement made between the parties.

44.2.When selling pledge item by non-judicial procedure, it shall be used either with direct selling method specified in article 45 of this Law or auction method specified in article 46 of this Law. 

44.3.In the case of secondary/subsequent pledge, if the primary pledgee agrees, it can be sold through a non-judicial procedure. 

44.4.It is prohibited to sell following pledge items through a non-judicial procedure:

44.4.1.Land; 

44.4.2.Immovable property such as historical, artistic, cultural valuables that registered or must be registered to the State register.

Article 45.Direct selling of pledge item 

45.1.If pledgee and pledger agree in accordance with article 11.2 of this Law, the pledge item can be sold directly. 

Article 46.Selling pledge item through non-judicial auction

46.1.Selling pledged item through non-judicial auction shall be organized by an legal entity which specialized in the sale of immovable property chosen by pledgee and pledger mutually agreed or if not so agreed upon, chosen by pledgee based on contract.

46.2.The initial bidding fee of the auction shall be determined in accordance with the article 177.1 of Civil Code. 

46.3.The auction shall be organized open to the public pursuant to article 197 of the Civil Code.

46.4.The notes specified in article 197.20 of the Civil Code, as well as the contract specified in article 197.23 of the Civil Code shall become a basis for registering a new owner in the state registration. 

46.5.The auction shall be considered not to have taken place in the following cases:

46.5.1.No competition in the auction;

46.5.2.The winner has not transferred the payment offered by himself/herself into corresponding account within period specified in the contract. 

46.6.If there is a case specified in Article 46.5 of this Law, a public announcement about the auction not being held within two business days shall be published in the newspaper where the initial announcement was published.

46.7.A pledgee has a right to acquire pledge item at its initial bidding fee of the auction entering into a contract and negotiation with a pledger within 10 business days after the announcement that the auction has not taken place. 

46.8.If the agreement specified in article 46.7 of this Law is not reached, auction shall be held again within a period of not more than one month after the initial auction was held. 

46.9.If the auction is held on the grounds specified in article 46.5.1 of this Law, the fee specified in article 46.2 of this Law shall be decreased by up to 20 percent. 

46.10.If the auction is held on the grounds specified in article 46.5.2 of this Law, the initial value of the pledge item shall be determined by the article 46.2 of this Law.

46.11.The procedures specified in article 46.3 of this Law shall be adhered to reorganize the auction. 

46.12.If an auction specified in articles 46.9 and 46.10 of this Law, is not successfully conducted, a pledgee has a right to acquire the pledge item at a price not more than 40 percent of the value specified in article 46.2 of this Law. 

46.13.The procedures on buying and selling contract of the Civil Code shall be followed when the pledge item is sold or taken by pledgee's claim according to articles 46.3, 46.7, 46.8 and 46.12 of this Law.

46.14.The pledge right shall be terminated, if the pledge item is sold in accordance with article 46.13 of this Law or taken by a pledgee's claim or if pledgee has not enjoyed his/her right stipulated in article 46.12 of this Law. 

Article 47.Selling pledge item by judicial decision 

47.1.If the court satisfies the obliger's claim for the sale of pledge item or if there is a judge's order confirming the notary notice in accordance with Article 184.1 of the Law on Civil Procedure, the item shall be purchased by compulsory auction in accordance with the procedures specified in the Civil Code and the Law on Court Decision Enforcement.

/This paragraph was amended according to the law as of July 2, 2015 and some parts of this paragraph were repealed by the 2nd resolution of the Constitutional Court of March 16, 2016/

Article 48.Pledger and third-party rights

48.1.A pledger and as well as third party who has registered his rights related to the ownership of the pledge item in state registration, have a right to interrupt the pledge item selling procedure at any time before pledgee begins to exercise his/her rights  specified in articles 46.7 and 46.12 of this Law but before the scheduled date of direct selling or auction by satisfying the pledgee's demand. 

48.2.In accordance with the procedure specified in article 48.1 of this Law, the rights of pledger shall be transferred to the third party who interrupted the sale of pledge item by paying payment to pledgee, in proportion to his/her performance of obligation.  

48.3.A right specified in the article 48.1 of this Law can be exercised once in consecutive 12 months of period and twice during entire loan period. 

Article 49.Reimburse pledgee's expenses

49.1.An individual who got transferred right according to the article 48.2 of this Law shall be obliged to reimburse related expenses in order to fulfill the requirements to pledgee. 

Article 50.Registering a new owner of pledge item

50.1.If pledge item is transferred to obligee or sold through an auction, pledgee shall be obliged to register to the State registration authority with the evidence of transfer document, and pledgee, pledger's name and permanent address, pledge item's location, if pledge item is a land, cadaster information and a fact that selling procedure complied with this Law shall be noted in notification form.

Article 51.Termination of rights of pledgee and third party 

51.1.If a pledger made sale and purchase contract specified in the article 45.1 of this Law, or the pledge item was sold under the court procedure or through auction outside of court, or registration specified in article 50 of this Law was done, the all rights of the pledgee in regards with pledge contract and pledge item shall be terminated, and for the third party, it's all right issued and registered in regards with pledge item shall be terminated once the pledge contract is made. 

51.2.The rights of pledgee shall remain in place, if rights related to the pledge item that registered to the state registration are not fulfilled before the conclusion of the pledge contract, or pledge right has not been terminated by sale and purchase agreement.

Article 52.Distributing revenue from a pledge item sale

52.1.Income revenue of pledge item non-judicial sale shall be distributed according to article 179 of the Civil Code and judicial sale shall be distributed according to the article 49 of the Law on Court decision enforcement. 

52.2.After deducting expenses related to a pledged item sale, a pledgee's claims specified in article 7 of this Law shall be met in accordance with procedures stated in article 216 of the Civil Code and the remaining of cash revenue shall be given to a pledger. 

52.3.The distribution specified in article 52.1 of this Law shall be executed by following authorized bodies:

52.3.1.The court decision enforcement agency, if a pledge item was sold by court decision and procedure;

52.3.2.Auction organizer in cases specified in article of 46.1 of this Law. 

52.4.If the pledged item is a state or locally owned property, the related requirements will be met first from the proceeds of its sale, and the remaining parts shall be allocated to the appropriate budget.

CHAPTER NINE

FEATURES OF PLEDGING A LAND

Article 53.Pledging a land 

53.1.Land owned by a citizen of Mongolia and the right to possess land can be pledge items and they can be pledged in accordance with conditions stated in the law. 

53.2.If a land lease and other property rights have been transferred to a citizen or legal by contract, the person who acquired such right, can pledge the land under a permission of the land owner within a valid period of such right.

53.3.The cadaster of land, a copy of certificate of land ownership, use and possession shall be attached with the land pledging contract. 

53.4.In the case of non-fulfillment of contractual obligations in the land pledge agreement, the parties may mutually agree to collect the performance of the obligation from the pledge item in accordance with the procedure specified in Article 184.1 of the Law on Civil Procedure.

/This paragraph was amended according to the law as of July 2, 2015 and some parts of this paragraph were repealed by the 2nd resolution of the Constitutional Court as of March 16, 2016/

53.5.The agreement specified in Article 53.4 of this Law shall be certified by a notary. 

/This paragraph was amended according to the law as of July 2, 2015 and some parts of this paragraph were repealed by the 2nd resolution of the Constitutional Court as of March 16, 2016/

53.6.A pledgee is prohibited from offering the conditions specified in the article 53.4 of this Law as a standard condition of contract.

/This paragraph was added according to the law as of July 2, 2015/

Article 54.Lands that owned by proper loan 

54.1.Unless otherwise provided in the law or the contract, lands acquired with proper loan of authorized legal entity who providing bank and loan service, the right of creditor ownership shall be commenced by registering at state registration and in this case, the authorized legal entity providing to conduct bank or loan service shall be a pledgee.

Article 55.Pledging a lot, where buildings under a pledger's ownership locate

55.1.Unless otherwise provided in pledge contract, a pledge right for lands has no concern of buildings that locate or have been constructed in the land (lot), owned by a pledger and third party.

55.2.In case of claiming to seizure a pledged land, if a pledger is an owner or proprietor of a building (or ongoing construction) which locates in remaining a non-pledged land, the pledger has a right to use the part of the necessary for the intended use of his/her land under a limited condition in accordance with article 151 of the Civil Code. 

55.3.The condition for the limited use of land specified in article 55.2 of this Law shall be determined by a contract between pledger and owner of the buildings and facilities. Any dispute arisen shall be decided by court. 

55.4.The pledger of the land is on the pledged land and has the right to dispose of the buildings and structures in his ownership without the consent of the pledgee, without the pledge right being created according to Article 55.1 of this law, but the pledgee has the priority to purchase the underlying land of the building under the same conditions as other buyers.  

55.5.In the event that agricultural land is pledged together with inseparable components such as a building and structures owned by pledger located on such land,the pledge shall be considered valid. 

Article 56.Conducting a building and construction work in a pledged land (lot) by a pledger 

56.1.The pledger has the right to construct buildings on the pledged land with the consent of the pledge, unless otherwise specified in the land pledge contract, and the pledge does not apply to the buildings unless otherwise specified in the pledge contract.

/The phrase "… with consent of the pledge, unless otherwise provided in the land pledge contract…" of this paragraph was repealed by the 11th resolution of the Constitutional court dated as of December 9, 2015/

56.2.If a pledger's construction of a building on the pledged land deteriorated or is likely to deteriorate a pledgee's warranty issued by this land pledge, a pledgee has a right to change the pledge contract or claim to concern the building to his/her pledge. 

Article 57.A pledge of land (lot), where a third party's ownership building locates

57.1.If a pledged land (lot) is transferred or sold by pledgee, as for the buildings ad structure owned by the third party on the land, the pledger's all of rights and obligations related to the pledger's ownership of the land shall be transferred to a new owners of the land (lot).

Article 58.Features of sale of a pledged land (lot)

58.1.Only citizens of Mongolia shall participate in the forced auction sale of the land (lot) as pledge item.

58.2.Agricultural land as a pledge item cannot be claimed to be transferred or sold before completing necessary stages of regular and frequent works such as processing, reprocessing and selling agricultural products and the pledge contract shall be valid until the 1st of November of a year determined to perform the obligation to be secured by pledge or its appropriate part. 

58.3.The postponing the sale of pledge item shall not influence counterparties rights and obligations, which are secured by pledge. The obliger shall not be released from a obligation to pay damage, interest and forfeiture to a pledgee during the deferred period.

58.4.If an obliger fully meets the claim to be secured by obligee's pledge within the deferred period, the court shall annul its previous decision on provision of pledged item based on obliger's request.

58.5.The court shall not delay the period of the sale of pledged land, if there are the following reasons:

58.5.1.If delay in the sale would cause a serious negative effect on a pledgee's financial condition;

58.5.2.If a bankruptcy case is initiated to declare the pledgee insolvent. 

CHAPTER TEN

FEATURES ON PLEDGING AN APARTMENT BUILDING

Article 59.Pledging a premises of public apartment building

59.1.In case of pledging a premises under joint property ownership of the public apartment building, in addition to the premises, the portion assigned to the pledger according to the joint ownership right shall be considered jointly pledged.

Article 60.Pledge of houses and residential apartments, acquired by dedicated loans 

60.1.Unless otherwise provided in law and contract, the pledge right shall be created by registering the creditor's ownership right to own houses and residential apartments, which are acquired and built with designated loan of banks or other legal entities which authorized to engage in credit activities in the State register. In this case,  the legal entities authorized to conduct banking and credit activities shall be pledgees.

Article 61.Satisfying claim right 

61.1.The claims for demand obligation performance from the apartment building as a pledged item shall be resolved by judicial procedure in accordance with Chapter 8 of this Law or by non-judicial procedure agreed  mutually by parties.

61.2.If the apartment building is sold in order to secure duty execution, the apartment shall be released in accordance with the procedure stated in the law. 

61.3.A lease contract, which was made before an accrual of pledge can remain valid after it is sold if it qualifies the requirements. 

Article 62.Protection of consumer right 

62.1.A pledgee is obliged to notify below information to pledger in writing explanation before signing immovable property pledging contract with the purpose to purchase immovable property or to construct buildings, facilities and residential apartment, or  renovate them: 

62.1.1.Pledgee, his/her representative's name, address; 

62.1.2.Loan designation/purpose;

62.1.3.Repayment time period of loan, payment amount, if it is partial payment, partial payment schedule, amount, main loan and interest distribution, payment location, payment method; 

62.1.4.If loan interest is alternate, formula for determining interest difference, frequency of changes; 

62.1.5.Insurance, notary, registration fees and other expenses related to the loan, which must be paid by creditor in accordance with the law and contract; 

62.1.6.Whether the creditor to prepay fully or partially all or part of main loan and its interest, if so conditions to apply on such prepayments; 

62.1.7.In case of non-payment of the loan on time, step by step measures to fulfill duty execution from the property and the pledge item may be lost; 

62.1.8.Pledge contract conditions, restriction on the use and utilization of pledge item, obligation to preserve and protect the property and the obligation to be insured, if stated in the contract; 

62.1.9.Whether it is necessary to evaluate to the pledge item, a person who making assess/evaluate, if necessary. 

62.2.The procedure and forms for providing information specified in article 62.1 of this Law shall be approved by the Mongol bank (Central Bank) and Financial regulatory commission. If the procedure is violated, it shall be considered that the information has not been provided. 

THE CHAIRMAN OF THE STATE GREAT KHURAL OF MONGOLIA DEMBEREL.D