The use of mortgages in Bosnia and Herzegovina is widespread and is generally considered to be very effective security. Under a mortgage agreement, the debtor mortgages real estate to secure his (or another person`s original debts). The actual guarantee [p.B. a real estate mortgage, a pledge of ownership (payment) or a non-owner guarantee] granted to guarantee the debt of another is not a guarantee, as it does not include a personal commitment fund to honour the commitment of another. Article 2314 of the French Civil Code, which allows, under certain conditions, to grant relief of the guarantee, is therefore not applicable to it. 58 Pfandrecht, 1967, paragraph 3, point a): “A collateral is established by agreement between the debtor and the creditor.” Therefore, the beneficiary of the actual guarantee granted to cover another`s debts does not have the opportunity to discuss or apologize , nor the obligation to inform the 1984 deed, nor the requirement of proportionality between the amount of the business and the assets and revenues of the guarantee. Conversely, the expiry of the period applicable to the principal debtor automatically benefits the beneficiary of the actual security, while it does not benefit the personal bond. The obligations arising from a bonding contract arise only from the guarantee. The original debtor has no influence on the conclusion or validity of this contract and consent is not required.
Safe agreements must be concluded in writing, but no verification or certification is required. The validity of the guarantee agreement depends on the validity and existence of the main agreement between the creditor and the original debtor. 111 Contract Law,1973, para. 40: “An obligation may be carried out by a person other than the debtor, unless the debtor is required to personally honour it depending on the nature of the undertaking or agreement between the parties.” A common guarantee is the bank guarantee which obliges the bank to pay the debt of the original debtor at the request of the creditor in the event of default of the initial debtor. Although not expressly specified by law, Bosnian legal entities, as banks, also have the right to give guarantees. It is customary for parent companies to issue guarantees for the obligations of their subsidiaries (downstream guarantee) and vice versa (upstream guarantee). When guarantees are made on behalf of a parent or sister company (cross stream guarantee), it is necessary to take into account the rules of capital preservation and rules that prohibit hidden distributions of profits. A mortgage contract must be executed as a legal deed and registered in the land registry to be perfected and valid against third parties.
The mortgage will come into effect the day it is registered in the Land Registry. The classification of the different mortgages on the same property depends on the order in which they were registered. In this case, Mr. Y had granted Company A a mortgage on a property owned by him, in order to guarantee payment of an amount that amounts to that company by Company B. The creation of a real security debt to guarantee the debt of another had raised the question of the nature of such an undertaking and, therefore, the possibility of classifying it as “real security”. If the relief of Article 2314 of the French Civil Code had benefited Mr. Y, he could have obtained the relief of the real estate mortgage granted, thus ending his bonding business. It is also possible for a party to join a debt as a co-debtor, for example by accepting joint and several liability for the debt of the original debtor.