Definition Antichresis vs. Mortgage Contracts

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Ka Pilo

Can someone explain to me in laymans terms the difference between antichresis and mortgage?

thanks.
 

Marc

Fully vaccinated are you?
Leader
Re: Antichresis vs Mortgage contracts

It's a word no longer in general use.

Wikipedia reference-linkAntichresis

In civil law antichresis is a contract whereby a person borrowing money of another, hands over his property to the creditor, allowing the use and occupation thereof, for the interest on the money lent.

Historically, this contract was used by the Romans, among whom usury was prohibited. It was afterwards called mortgage, to distinguish it from a simple engagement, where the fruits of the ground were not alienated, which was called visgage.

The creditor also has the right to transfer debtor's profits from the immovable property at his/her wish. If the creditor is a debtor himself, he is able to sell the rights of antichresis to another creditor.

Pawn and antichresis distinguished. A thing is said to be pawned when a movable thing is given as security; and the antichresis, when the security given consists in immovables.
 
K

Ka Pilo

Re: Antichresis vs Mortgage contracts

My understanding about mortgage is that if you mortgaged the property it is still in your possession, and therefore, you still manage it. The property is only a collateral of your debt. I'm not sure if antichresis is the same as this.
 
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pldey42

Re: Antichresis vs Mortgage contracts

I think the Wikipedia entry is, in Wikipedia's unique way, probably correct but unhelpful.

According to this report from Georgia State University,

***DEAD LINK REMOVED***

it appears that in some countries antichresis is a form of lease on property:

The word “antichresis” is from the Greek “anti” (against) and “chresis” (use) denoting the action of giving a credit “against” the “use” of a property.

1 The antichresis is a mechanism through which an owner gives the rights of use of her property to a tenant in exchange for a fixed amount of money payable at the signature of the contract.

2 The antichresis establishes a tenant usufruct, the right to use the property for a limited term, usually for one required year and one optional year agreed by both parties, after which the owner returns the lump sum of money and the tenant returns the property.


It seems to be used as a way for property owners to limit risks of tenants not paying rent. I doubt that such contracts are legal in the UK which has strong tenant protection laws; certainly, I've never heard of them being used here.

Hope this helps,
Pat
 
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Wes Bucey

Prophet of Profit
Re: Antichresis vs Mortgage contracts

Given the description provided by Marc from WIKI (which jibes with my vague memory):
Mortgage (note the actual spelling) DOES mean the borrower stays in possession until the note is paid off or until the borrower defaults and the property is lost to the creditor (foreclosure)

Antichresis might be likened to borrowing money on farmland where the farmland is turned over to the lender to farm until the debt is repaid. The proceeds of farming are considered the interest on the loan.

Compare antichresis to a single payment lease of the same farmland where the income from farming is sufficient to pay interest and principal on a comparable loan and the property is returned to the owner at the end of the lease term. This is also comparable to a method used widely today in a sale/leaseback transaction where the original owner transfers title to real estate (or capital equipment like production machinery) and leases it back for a period of time, usually with a provision to be able to buy back the property at the end of the lease term for a nominal sum (like $1.00) - the feature being the original owner is able to get more money than if he just borrowed with a mortgage. The additional incentive for the money provider is the tax deduction (often accelerated depreciation) on the property, which is depreciated down to zero at the end of the lease term, hence the provision to return title for a nominal sum to avoid incurring capital gains tax or having the tax deduction disallowed.
 
K

Ka Pilo

Re: Antichresis vs Mortgage contracts

Given the description provided by Marc from WIKI (which jibes with my vague memory):
Mortgage (note the actual spelling) DOES mean the borrower stays in possession until the note is paid off or until the borrower defaults and the property is lost to the creditor (foreclosure)
So lender will not return the property until the debt is fully paid. In short, they used your property yet you still need to pay for said debt.
Antichresis might be likened to borrowing money on farmland where the farmland is turned over to the lender to farm until the debt is repaid. The proceeds of farming are considered the interest on the loan.

Compare antichresis to a single payment lease of the same farmland where the income from farming is sufficient to pay interest and principal on a comparable loan and the property is returned to the owner at the end of the lease term.
I think this is preferrable.
 

Wes Bucey

Prophet of Profit
Re: Antichresis vs Mortgage contracts

So lender will not return the property until the debt is fully paid. In short, they used your property yet you still need to pay for said debt.
I sense you misunderstand. With a mortgage, the borrower is always in possession of the real estate and its income unless or until he default (does not make repayment of the loan), in which case, he still has to be forced off by a court decision.
 
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pldey42

Perhaps an example based on Wes's farmland idea might help.

Mortgage:

I want a farm and borrow the money to buy it with from a lender. I pay the lender a monthly amount which covers the loan, and interest. The lender owns the farm, but I use it and live off its profits. The farm is "collateral". If I fail to pay the monthly amounts, the lender can go to court and take the farm away from me to pay off the debt.

Antichresis:

I want a farm. I give one year's rent to the owner of the farm I want. I use the farm and live off its profits for a year. At the end of the year we do it again or I vacate the farm.

Antichresis: (leaseback)

I own a farm. I want to invest capital in it. I can either borrow the capital from the bank or do leaseback, a form of antichresis:

I sell the farm to a "lender" (for an amount equal to the capital I want to invest) with an agreement that they will sell it back to me after one year (or five years, or whatever) for a small amount, and let me use it if I pay them a monthly rent. I use the farm and live off the profits, and have my capital investment. The idea is to juggle the figures so that (provided the capital investment is profitable) I end up making more money than I would have had I just borrowed the capital from the bank.

The preferable one depends upon the situation and how the local tax laws work.

As Marc said, antichresis is not a term we use much in the west. If we knew why you're asking we'd perhaps be able to give better answers by giving examples that are relevant to you.

Hope this helps,
Pat
 

Wes Bucey

Prophet of Profit
Perhaps an example based on Wes's farmland idea might help.

Mortgage:

I want a farm and borrow the money to buy it with from a lender. I pay the lender a monthly amount which covers the loan, and interest. The lender owns the farm, but I use it and live off its profits. The farm is "collateral". If I fail to pay the monthly amounts, the lender can go to court and take the farm away from me to pay off the debt.

Antichresis:

I want a farm. I give one year's rent to the owner of the farm I want. I use the farm and live off its profits for a year. At the end of the year we do it again or I vacate the farm.

Antichresis: (leaseback)

I own a farm. I want to invest capital in it. I can either borrow the capital from the bank or do leaseback, a form of antichresis:

I sell the farm to a "lender" (for an amount equal to the capital I want to invest) with an agreement that they will sell it back to me after one year (or five years, or whatever) for a small amount, and let me use it if I pay them a monthly rent. I use the farm and live off the profits, and have my capital investment. The idea is to juggle the figures so that (provided the capital investment is profitable) I end up making more money than I would have had I just borrowed the capital from the bank.

The preferable one depends upon the situation and how the local tax laws work.

As Marc said, antichresis is not a term we use much in the west. If we knew why you're asking we'd perhaps be able to give better answers by giving examples that are relevant to you.

Hope this helps,
Pat
Not quite:
In mortgage, lender does NOT own farm unless there is a default and even then, he has to go to a court to get the title. (There are some exceptions to the court part - borrower may surrender deed to avoid foreclosure and "ding" on his credit rating without court action.)

In Antichresis, the land owner has to repay the principal part of the loan, the interest was the income the lender made while in possession of the land.

:topic:
Back in the 70's, my firm arranged a type of Antichresis transaction between two devout Muslims who had a strong belief in a Koran proscription against charging interest. We created a trust which held title to some property. With elaborate documents, we arranged for (some of) the rental income from the property to go direct to the putative lender in lieu of interest (from the lender's point of view, it was an "investment" in an income-producing property.) The remaining net income after expenses went into a reserve fund. When the reserve fund reached the amount of the original loan, it was paid to the lender and the trust was dissolved and title returned to the borrower.

I am aware of similar deals by us and others (without the religious aspect) where property (real estate, stocks, bonds, etc.) is "sold" for one price and a guarantee by the seller issued to repurchase the property at a later date for a guaranteed profit. We did this sort of thing routinely with commercial banks and corporations in a thriving "repo" market. During the period the security is held, the new owner is entitled to interest and dividends paid by the security, except when the transaction is "ex dividend."
 
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pldey42

Thanks for the clarifications, Wes.

"Back in the 70's, my firm arranged a type of Antichresis transaction between two devout Muslims who had a strong belief in a Koran proscription against charging interest. "

I think this is one reason why antichresis is used instead of a mortgage. When you arranged such transactions, did you use the term "antichresis"?

Pat
 
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