The European Union’s four freedoms: free movement of persons, capital, services and goods, seem to provide a proper basis for increased trans-border property transactions and opening up of the mortgage markets within Europe. However, current trans-border transactions are few, whilst trans-national mortgage lending constitutes no more than 1% of total European mortgage business. The absence of any vivid European land market may result from lack of transparency and certainty.

Barriers
How to become the owner of a house in another country and how to finance it by a loan secured by mortgage? These practical questions are difficult to answer. In general, the buyer and his local banker will be unaware of land law in the foreign country. Further, information on owner and others with interests in the property is difficult to judge on its merits; what, for example, does it mean that Monsieur Le Grand is registered in France as ‘propriétaire’ (owner) of a certain plot? Are there hidden claims? Mortgage banks have difficulties in assessing the value of the information they receive and so do not risk supporting a loan for property in another Member State. How to overcome these barriers?
The European Commission (EC) Green Paper on Financial Services Policy (2005-2010) states that mortgage credit is one area where further retail integration might be beneficial to encourage the emergence of some activity in this field. A recent report to the EC from the Forum Group on Mortgage Credit identified barriers to any smooth functioning Internal (European) Market for mortgage credit and made recommendations to the Commission to tackle this. A common European property market requires firstly transparency of mortgage products, secondly transparency of information coming from national land registries, and thirdly a uniform level of certainty concerning rights and interests in real property.

Transparency
One solution to tackling the discrepancies between mortgages within the European Union (EU) is offered by the Eurohypothec Research Group with its model for a common mortgage. This is not intended to replace the roughly 25 different types of legal frameworks for mortgages and ‘hypotechs’ in Europe. The Eurohypothec is an extra tool for lenders and borrowers. It should also make it possible to secure a loan (or loans) with one mortgage on several properties in different Member States. Currently this is not possible; several national mortgages must be granted in each country to secure different loans. In some countries mortgages can secure only one loan. This makes a European mortgage market almost non-existent.
The European Mortgage Federation, representing EU mortgage bankers, asks for improvement in the transparency and security of Europe’s land registers. Online access to national land and mortgage registers should be made possible on a trans-border basis in all member states. The European Union Land Information Service (EULIS) would seem to provide the answer. EULIS project partners aim to set up a live operational service to provide online and updated European trans-border information, thus giving access to such information on property rights for use in the databases of participating land registries. This is also the limitation; because the legal value of such information is not equal across all countries. For example, some Member States have registration of title, guaranteeing the absence of unregistered rights, while others have registration of deeds, which may be incomplete and without any guarantees.

Certainty
The Eurohypothec will provide a European instrument for securing loans, so addressing the first requirement: transparency of mortgage products. EULIS addresses the second requirement: transparency of information from national land registries. But neither can resolve problems arising from a diversity of national land registry systems. From the recommendations of the Forum Group on Mortgage Credit it is clear that the mortgage market highly values transparency and certainty in property rights. In short, a bank won’t lend money under an Eurohypothec without certainty regarding the legal status of the property or properties encumbered. Such certainty directly depends upon the efficacy of the Land Register in showing who is the owner of a piece of land and how it is charged. However, not every registration system works in the same way.
Taking the effect of registration as a criterion, registration systems all over the world provide different levels of legal certainty. In general, a register (even within the Torrens system) can never totally guarantee actual legal status of a lot of land, as each register is based on presumptions that may be attacked in a court of law by the owner of a contradictory title. For example, because the contract of sale is void. Within Europe there is no unification of the causes that may affect the validity of a registered title. Harmonisation is difficult within the field of Land Register law, law of contracts and obligations and rights in land.

Recommendations
The Forum Group on Mortgage Credit recommended, among other things, that the European Commission should ensure the following.

• All charges affecting real estate must be registered in a Public Register in order to be binding upon and take effect against third parties, regardless of their nature.
  
• The creation, modification or extinction of a charge on real property shall become effective vis-à-vis third parties only at the point of registration in the Public Register.
  
• Registered charges on real property in relation to the same estate shall rank in the order of priority disclosed in the Public Register.
  
• Public Registers make all relevant information available to all parties or their representatives.
  
• Member States provide that the responsible Public Register certifying authority should have state indem-nity. In the event that such responsibility is delegated to a third party, such party shall be covered by appropriate professional liability insurance for an adequate sum.

• Stefan Gustafsson, 2003, EULIS: European Land Information Service, GIM International Vol. 17, No. 8, pp 45-47.
  
• Esa Tiainen, 2004, The EULIS glossary-standardising Land and Property Information Technology, GIM international Vol. 18, No. 10, pp 34-37.

Dr Hendrik Ploeger studied law at the Universities of Amsterdam and Leiden. He is assistant-professor at OTB Research Institute, Delft University of Technology (The Netherlands) and has published on several subjects of land law and land registration. He is also chairman of the FIG working group on 3D-Cadastres.

Dr Sergio Nasarre-Aznar, PhD, M.Phil. (Cantab.) is lecturer in Civil Law at University Rovira i Virgili (Tarragona, Spain) and a substitute Court of Appeal judge. He has published two books and several works on mortgage and land law, securitisation, trusts and European property harmonisation. He is a member of the Eurohypothec research group.