Lender's special legal mortgage
The lender's special legal mortgage is a statutory real security over real property, created by the 2021 reform of security law (Ordinance No. 2021-1192), which abolished and replaced the former lender's privilege (PPD). It secures a loan granted for the acquisition of built or unbuilt real property, and ranks ahead of a conventional mortgage taken on the same day, without requiring payment of land publicity tax.
Key points
- The ordinance of 15 September 2021 (effective 1 January 2022) merged the former PPD into the category of legal mortgages under the name 'hypothèque légale spéciale du prêteur de deniers'.
- It applies only to loans financing the acquisition of real property (not renovation or other uses), and solely over the property purchased with the borrowed funds.
- Its ranking is prior to any conventional mortgage registered on the same day, giving the lender a highly advantageous priority repayment position.
- It is exempt from the land publicity tax (0.715%), making it significantly cheaper than a conventional mortgage for the same secured amount.
- Like all mortgages, it must be established by notarial deed and filed with the land publicity service; a notarial release (mainlevée) is required after repayment.
Frequently asked questions
What is the difference between the lender's special legal mortgage and a conventional mortgage?
Both are real property securities created by notarial deed, but they differ on two key points. First, ranking: the lender's special legal mortgage takes priority over a conventional mortgage registered on the same day, as it is deemed to date back to the acquisition deed. Second, cost: the special legal mortgage is exempt from the 0.715% land publicity tax, unlike the conventional mortgage which is subject to it.
Why was the former PPD replaced by the lender's special legal mortgage?
The 2021 reform aimed to simplify and modernize French security law, which was considered overly complex and fragmented. The former PPD was a sui generis security that did not fit neatly into the classic mortgage/privilege categorization and had an inconsistent legal regime. By reclassifying it as a special legal mortgage, the legislature clarified its place within the real property security framework while preserving its tax advantages and priority ranking.
How does a broker explain this security to a borrower buying a primary residence?
The broker explains that some banks — especially for borrowers not eligible for mutual surety — will register a special legal mortgage over the purchased property. This security does not require a third-party guarantor but does generate notarial fees at setup and a release fee upon resale or early repayment. Concretely, the borrower must budget for these costs, and the broker helps estimate the precise amount based on the borrowed capital.
In practice
A self-employed borrower buys an apartment for €280,000. The bank declines a Crédit Logement surety due to the borrower's irregular income and instead takes a lender's special legal mortgage over the acquired property. The notary draws up the deed, which is filed with the land publicity service on the day of signing. The borrower saves the 0.715% land publicity tax compared with a conventional mortgage — approximately €2,000 on this amount.
Official sources
- The special legal mortgage of the lender of money · Service-Public.gouv.fr
- Mortgage credit (official guide) · Service-Public.gouv.fr
- Housing and financing information · ANIL