Registered condition subsequent: civil law and mortgage law aspects

Abstract

By means of a registered condition subsequent, the seller accepting a deferred purchase price is entitled to a powerful remedy against default whereby it may unwind the sale and reacquire the relevant asset, with retroactive effects (ex tunc)¸ by delivering a judicial or notarial termination notice to the purchaser. Should the object of the sale be real estate, upon the registration of the registered condition subsequent at the land registry, the seller shall be entitled to reacquire the asset from the purchaser or from any third parties, despite the registered condition subsequent does not qualify as an in rem security interest. As an ancillary convention to a real estate sale, the contract parties are free to choose the law applicable to the sale and to the registered condition subsequent, as per article 10.5 of the Civil code. The parties may freely exclude the application of the Catalonian civil code, even if the asset is located in Catalonia, the provisions under article 621-54 of the Catalonian Civil code not being mandatorily applicable. When the registered condition subsequent is combined with a penalty in the amount of all or part of the purchase price from time to time paid by the purchaser, to be triggered as in case of late, full or partial default by the purchaser, the registered condition subsequent will enable the seller to reacquire the asset, without redelivering to the purchaser (or any other registered title-holders) any portion of the purchase price already settled (or just redelivering the portion of the already paid purchase price exceeding the agreed-upon penalty), even if the purchaser (or any other registered title-holders) fail(s) to accept the asset transfer-back, without first obtaining judicial endorsement of the asset transfer back.