Mortgage loan of deceased to be paid by heirs in Azerbaijan
Mortgage loans to be paid by the heirs
In Azerbaijan the debt of the deceased on a mortgage loan shall paid by their heirs, the Constitutional Court has decided.
In accordance with the Civil Code, the heirs who accepted the inheritance after the death of a debtor shall bear joint and several liability to creditors in the amount of the share of the inheritance they inherited from the day the inheritance was disbursed.
And in accordance with the Civil Code and the Law “On Mortgage”, if the debtor, including heirs in the event of the death of the main debtor, does not fulfill the obligation under the main obligation or does not perform in the prescribed manner, the creditor may file a claim for foreclosure on the subject of mortgage.
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Legal opinion
This caused heated discussions on the Azerbaijani segment of social networks.
Lawyer Akram Hasanov explained the decision:
“A mortgage is a type of loan you take out to buy a house and put it up as collateral. The goal here is not business and other goals. This loan was provided by the Azerbaijan Mortgage and Credit Guarantee Fund.”
According to the lawyer, some banks also issue such loans from their own funds. Currently, banks may or may not require life insurance for the borrower, and the Mortgage and Credit Guarantee Fund always requires life insurance.
“Because the term of the loan they give out is long and there is a possibility of death. In this case, if this person dies, the insurance company will pay this money, the property will not be damaged, and nothing will be asked of the heirs,” Hasanov says.
He adds that life insurance can be for other loans:
“Life insurance is not required for other types of loans provided by banks in Azerbaijan. The decision of the Constitutional Court is for these cases and it is not new.
For example, I give my house as collateral for someone else’s loan. When a person is unable to repay the loan, the bank sues, puts the house up for auction and takes the money. In the event of the borrower’s death, the same procedure applies. The Constitutional Court answers the question that arises in such cases.
The second question concerns the heirs of the deceased. The heir is not the family members of the deceased person, but those who receive his property and inheritance. The heir is liable for the debts of the deceased to the extent of the property received. If, for example, the deceased has a debt of 50,000 manats, and the cost of the house he left is 100,000 manats. The heir pays the principal of 50,000. If, on the contrary, the debt of the deceased is 100,000 and the price of his house is 50,000, then the heir pays 50,000 of the total. The rest of the debt is lost. There is nothing unusual about this.”
What does an insurance expert say?
Insurance expert Ilkin Ibragimov noted that the decision of the Constitutional Court applies not only to cases without life insurance, but also to loans, the amount of which is not fully insured:
“That is, the decision clarifies the question of who will give the rest of the loan. Life insurance in loans issued by the Mortgage and Credit Guarantee Fund is carried out according to the amount. However, if the life insurance is less than the amount taken, the remaining part is paid by the heir.
For example, a person took out a mortgage loan for 100,000 manats and took out life insurance for 50,000 manats. When a person dies, the insurance company gives 50,000, and the rest of the debt goes to his heir. The heir must pay this debt.”
