1E9Ct5D

5.1.2. Formalities and registration of the mortgageThe formalities of the mortgage contract follow the same rules as those for a purchaseand sale contract. Therefore, it must be granted in a public (notarized) instrument if thereal property is valued at more than the equivalent of 365 days worth of the general minimumwage. Moreover, in order for the mortgage to be enforceable against third parties,it must be recorded in the Public Registry of Property with jurisdiction in the location ofthe mortgaged property.Furthermore, as we will see in the following sections, there are some types of specialmortgages that will require the observance of different formalities or recordation in otherregistries, depending on the persons entering into the contracts or on the property beingmortgaged.200C H A P T E R X I5.1.3. ForeclosureAs was previously mentioned, in the event of default on the obligation secured by themortgage, the lender will have the right to be paid with the value of the mortgaged propertyin accordance with the priority in payment established by law. Therefore, saidlender will have the right to sell the mortgaged item and apply the necessary part of thesale price obtained to the payment of the debt.The mortgage foreclosure can be carried out judicially or extra-judicially. Likewise, theparties can contractually agree in the contract that the mortgaged property will be forfeitedto the lender at the price that will be determined at the time the lender demandspayment of the debt, as opposed to when the mortgage is taken out, with the understandingthat such agreement cannot adversely affect the rights of third parties.It is important to emphasize that in the event of default, the lender does not itself havethe right to foreclose nor does the lender acquire the mortgaged property upon suchdefault; rather the lender must pursue the civil or mercantile legal actions appropriatefor foreclosing on the debtor’s property.5.1.4. Priority in payment of mortgagesAlthough mortgagees, just as pledgees, have a preferential right to be paid with the proceedsfrom the sale of the encumbered property, it is worth mentioning that under applicableMexican law, some loans must be paid before others. Thus, for example, employeesdo not need to join a bankruptcy proceeding to make a claim for salaries or wagesaccrued from the previous year or for severance indemnifications. Also, fiscal debts arisingfrom taxes will be paid preferentially with the proceeds of the property from whichthe debt derives.Special mortgages also have different priorities in payment, which will be discussed inthe following sections.