A considerable number of loans granted in Albania have been secured with pledges on movable properties or with mortgages over immovable properties.
Under Albanian law a pledge or a mortgage may be created only in respect of an effective obligation or a conditional obligation. The obligation may be current or a future obligation but it has to be clearly defined.
A pledge or mortgage may secure an obligation of the owner of the property that is being used as collateral, or it may secure an obligation of a party that has no ownership of the collateral.
As regards immovable properties, the mortgage extends to any fixtures that are added to the mortgaged property. The same would apply to any improvements that are made.
Where the mortgaged or pledged property is damaged or lost, Albanian law gives a statutory right to the beneficiary of the pledge or mortgage to request either that additional security is offered or ask for pre-payment of the entire amount of the outstanding loan and accrued interest.
|Ilir Mustafaj, First Instance Court Judge||Endrit Shijaku, Wolf Theiss|
A major distinction between mortgages and pledges is the manner in which they are enforced if there is a default in fulfilling the secured obligations. In the case of pledged property, the lender has to notify the borrower through the courts of its intention to sell the pledged property if it does not fulfil the secured obligations. The same notification is also delivered to the owner of the pledged property if this is different from the borrower. If no objections have been raised to the selling of the property within five days from the notification being sent to the borrower, the lender may then sell the pledged property at auction.
Albanian law also provides for cases where the property is a commodity with a clear market rate, in which case there would be no need for an auction. All the lender has to do is ensure that such property is sold through persons authorised for such sales. Where a pledge has been established on several properties the court may limit the sales of properties only to those that would be suitable for covering the secured claims.
Mortgages, on the other hand, are enforced with bailiffs having most of the responsibilities in the sale of the pledged property and making sure that the mortgaged property is sold though transparent procedures that ensure the maximum value. One of the most important responsibilities of the bailiffs is to set the asking price (the minimum price that the property can be sold) of the properties that are to be sold at auction. If this is not reached in the first auction the bailiffs will call for a second auction with the asking price reduced by no more than 20%. If the reduced asking price is still not reached, the properties will be offered to the creditors to settle the claims against the reduced asking price.
More detailed legislation is being drafted in respect of the procedures in which auctions are notified and held, which is expected to provide for an even more transparent system.