Mortgage as a means of securing claims arising from loan/credit agreements issued in the name of a natural person
Author : Natia Rekhviashvili 24/12/2025
Article ABSTRACT
The article is dedicated to an in-depth study of the mortgage as an institute of property law. It examines key principles of property law and its regulatory framework. More specifically, it provides a focused and fundamental analysis of the mortgage as a means of securing the claim arising from a loan/credit agreement issued in the name of a natural person.
A flawed practice in modern Georgia is the use of a purchase agreement with a right of redemption instead of a mortgage agreement. On 21 July 2018, an amendment to the Civil Code of Georgia established a restriction on the use of security for loans issued to natural persons, except in cases specifically provided by law.
As a result of this restriction, a practice has emerged in which the parties conclude a purchase agreement with a right of redemption instead of a mortgage agreement. This type of contract poses greater risks for the property owner, as there is a higher risk that they may lose their property.
The article aims to examine this issue in depth and to distinguish between a mortgage and a purchase agreement concluded with a right of redemption. This will be accomplished through scientific analysis, for which the article employs the comparative-legal method of norm interpretation. Using this method, Georgian legislation is compared with the legislation of foreign countries. The teleological method was also employed, which made it possible to determine the legislator’s actual intent when introducing amendments to the Code. In addition, the logical method of norm interpretation was used to identify the real reasons that led to the legislative changes to the Civil Code of Georgia.
The article reviews significant works in property law and offers an in-depth analysis of the issue under study, presenting the problems and possible solutions. As a result, scholars and researchers interested in the subject will be able to recognize the existing problem. The article will also highlight the shortcomings in the legislation that facilitate the conclusion of sham transactions. In addition, the article will present several examples from foreign countries, which provide the opportunity to conduct a comparative analysis.
In conclusion, it should be stated that the legislative restriction on concluding a mortgage agreement to secure a natural person’s loan should be lifted, and citizens should once again be allowed to enter into such transactions.
The main recommendation of the article is the following: Paragraph 4 of Article 286 of the Civil Code of Georgia should be removed entirely, which would consequently require the removal of the related subparagraphs — specifically, paragraphs 5 and 6 of the same article. As a result, the restriction on concluding a mortgage agreement in favor of a natural person’s loan would no longer exist.
Key words: Mortgage, loan, loan security, Civil Code, notary, international practice
Article DOI: https://doi.org/10.55367/IMGZ1096