Lapse of Surety Bond.
The lawyer has extensive experience in litigation matters regarding the lapse of surety bond. The surety
bond itself is a means by which the creditor guarantees the obligation taken by the debtor, through the
surety. The practice of creditors (Banks) in Albania has shown that the surety bond contract is contained
in the same contract as the loan agreement, so two legal actions are performed in the same deed. This fact
is not done by chance by the creditors, but with the sole purpose that in case of non-payment of the debt,
after the execution order for the bank loan contract is issued by the Court (which is an executive title), the
creditor can execute this title, both against the debtor as well as against the surety at the same time. This
action, commonly practiced by bailiffs and creditors, is not in support of the law, as surety bond is in itself
a separate agreement between creditor and surety and the law has clearly defined what is the legal path to
be followed by creditors for the execution of the obligation to the surety and specifically, the only way is
the merits lawsuit in court.
The law has clearly defined what we execute with the execution order issued for the loan contract, and specifically:
“The execution order against the debtor can also be executed against the third person, who, in order to secure the obligation, has encumbered one of his belongings according to the law, when the creditor requests the execution on this belonging”.
According to the content of this provision, we find that the execution order issued by the court at the request of the creditor, to the debtor, for the executive title of loan contract, has effect on a third person, who, has encumbered a belonging to secure the obligation. In the analysis of the phrase “he has encumbered one of his belongings according to the law “, we say that: – the belonging is encumbered either through a pledge (for movable property), or through a mortgage (for immovable property). This means that: – the execution order extends the effects to the principal debtor, the mortgagor and the mortgagee. This article excludes the extension of the effects of the execution order, issued on the basis of the executive title of the loan contract, to the surety, against whom a merits trial must be conducted to request the fulfillment of the obligation by them. And, at the end of the merits trial, upon issuance of the execution order for the final court decision, which charges the surety with the fulfillment of the obligation, the creditor can request the compulsory execution of this decision by the bailiff.
Article 600 of the Civil Code provides: “The surety bond shall lapse if the creditor fails to take legal action against the surety within six months of the date of expiry of the time period for performing the obligation.”.
The legislator, from the very wording of the provision and its content (Article 600 of the CC), has provided a preclusive deadline, the passage of which entails the lapse of the surety bond. So, after the issuance of the execution order, the creditor (bank), based on its right to demand full and immediate payment of the entire obligation, had to file a lawsuit against the surety within 6 months, if it would request the fulfillment of obligation by the surety.
It should be understood that: – the facilities offered to banks, within the meaning and according to Article 510 of the Code of Civil Procedure, refer only to acts for granting bank loans which are acts of legal actions performed between the banking entity and the borrower. In this sense, the facilities for the bank are offered entirely to the main borrowers, who are the ones who have benefited from the loans granted, while the surety is a different entity from the borrower and as such is subject to legal regulations on the surety , including safeguards for it. For this reason, it is worth noting that the creditor’s facilities towards the borrowers do not extend to the surety.
If any citizen is a surety in a bank loan agreement and is faced with the fact that his / her property was seized by the bailiff due to this bail, he / she has the right to request in court the lapse of surety bond, referred to in Article 600 of the Civil Code.
We have several decisions of the Courts of Appeal, Tirana and Gjirokastra (which were represented by the lawyer) that in unison have accepted claims-lawsuits with the object: Lapse of surety bond.
The law has clearly defined what we execute with the execution order issued for the loan contract, and specifically:
“The execution order against the debtor can also be executed against the third person, who, in order to secure the obligation, has encumbered one of his belongings according to the law, when the creditor requests the execution on this belonging”.
According to the content of this provision, we find that the execution order issued by the court at the request of the creditor, to the debtor, for the executive title of loan contract, has effect on a third person, who, has encumbered a belonging to secure the obligation. In the analysis of the phrase “he has encumbered one of his belongings according to the law “, we say that: – the belonging is encumbered either through a pledge (for movable property), or through a mortgage (for immovable property). This means that: – the execution order extends the effects to the principal debtor, the mortgagor and the mortgagee. This article excludes the extension of the effects of the execution order, issued on the basis of the executive title of the loan contract, to the surety, against whom a merits trial must be conducted to request the fulfillment of the obligation by them. And, at the end of the merits trial, upon issuance of the execution order for the final court decision, which charges the surety with the fulfillment of the obligation, the creditor can request the compulsory execution of this decision by the bailiff.
Article 600 of the Civil Code provides: “The surety bond shall lapse if the creditor fails to take legal action against the surety within six months of the date of expiry of the time period for performing the obligation.”.
The legislator, from the very wording of the provision and its content (Article 600 of the CC), has provided a preclusive deadline, the passage of which entails the lapse of the surety bond. So, after the issuance of the execution order, the creditor (bank), based on its right to demand full and immediate payment of the entire obligation, had to file a lawsuit against the surety within 6 months, if it would request the fulfillment of obligation by the surety.
It should be understood that: – the facilities offered to banks, within the meaning and according to Article 510 of the Code of Civil Procedure, refer only to acts for granting bank loans which are acts of legal actions performed between the banking entity and the borrower. In this sense, the facilities for the bank are offered entirely to the main borrowers, who are the ones who have benefited from the loans granted, while the surety is a different entity from the borrower and as such is subject to legal regulations on the surety , including safeguards for it. For this reason, it is worth noting that the creditor’s facilities towards the borrowers do not extend to the surety.
If any citizen is a surety in a bank loan agreement and is faced with the fact that his / her property was seized by the bailiff due to this bail, he / she has the right to request in court the lapse of surety bond, referred to in Article 600 of the Civil Code.
We have several decisions of the Courts of Appeal, Tirana and Gjirokastra (which were represented by the lawyer) that in unison have accepted claims-lawsuits with the object: Lapse of surety bond.