Legal Alerts/17 Mar 2017

Legal Alert – Mortgage Notes To Be Issued in Electronic Form Only – Deadline Approaching

As of 1 June 2017 new real property mortgage notes will be issued in electronic form only. In addition, as of 1 January 2020 you cannot use any previously issued written mortgage note to establish an effective mortgage right over a real property. Accordingly, the use of a mortgage note requires conversion into an electronic form. The discussed changes are based on the amendments of the Finnish Code of Real Estate approved last year.

Background and essential changes

Since November 2013, it has been possible to apply for a real property mortgage in the form of a traditional written mortgage note or an electronic mortgage note. Further, one of the options has been to apply for conversion of a written mortgage note into an electronic one. However, considering the large number of written mortgage notes still being used, the legislator wishes to speed up the process of adopting electronic mortgage notes. The mortgagors and mortgagees need to adapt to the changes in two different phases:

  • Phase 1. As of 1 June 2017, real property mortgage notes will be issued in electronic form only. A mortgage right is perfected when the mortgage (and a remark that no written mortgage note is issued or the mortgage note is issued in electronic form) and the secured creditor as its recipient are recorded in the Finnish Title and Mortgage Register. However, the perfection is deemed to have occurred already when the application for entry into the register becomes pending.
  • Phase 2. As of 1 January 2020, an effective mortgage right needs to be established by using an electronic mortgage note. Accordingly, a previously issued written mortgage note cannot be used for the same.

Measures relating to electronic mortgage notes

Mortgage application

You can apply for a mortgage through two different options:

  • deliver a form to the National Land Survey of Finland (“NLSF”), or
  • use the electronic Property Transaction Service. Sign-up in the Property Transaction Service requires a so-called strong electronic identification. You can verify you identity, for example, through an online bank identifier (natural persons) or a Katso identifier (legal persons).

You may also authorise certain persons to continuously apply for mortgages on your behalf.

Release of mortgage right

In connection with release of a mortgage right, the parties should ensure that the transfer of the electronic mortgage note(s) is registered in the Finnish Title and Mortgage Register. To register this transfer you can submit your application by delivering a form to the NLSF or through the Property Transaction Service. Registered mortgagees need to provide their consent for the transfer through one of these options. In case of an electronic sale and purchase of a real property, the mortgagees may give their consent as an attachment to the purchase agreement. Such consent may be conditional. Further, the registered mortgagee may undertake to transfer the mortgage note (to the new secured creditor) in a way that the matter involving the registration of the new mortgagee becomes pending without any separate application to that effect. However, for the time being such undertaking may be either unconditional or conditional upon consummation of the electronic sale and purchase only.

Mass conversion

Finnish credit institutions may take advantage of the so-called mass conversion where the credit institution does not need to attach the original mortgage note(s) to the conversion application, provided that the mortgage note(s) in question is otherwise sufficiently identified in the application, and the credit institution notifies the register that it will nullify it. For the time being, you can submit your conversion application by delivering a form to the NLSF only. However, the aim is that in the future you can apply through the Property Transaction Service as well.

Since the extensive conversion of mortgage notes may cause backlog in the NLSF, the holders of written mortgage notes should consider filing of a conversion application already in the course of this or next calendar year (i.e., well before the deadline of year-end 2019).

Borenius’ lawyers are available to assist in addressing any questions you may have regarding this client alert. Please feel free to contact any of the Borenius attorneys listed in this alert or those with whom you usually work.

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Additional information

Niina Nuottimäki



Tuomas Tikkanen