What does the right to priority in respect of the encumbered property mean in a security interest?

The right of priority to be repaid in respect of the secured property in the security interest refers to the fact that when the debtor is unable to repay the debt, there are multiple creditors, and the claims are equally repaid due to the equality of the claims, but if there is a debt secured by collateral, the collateral has the priority right to repay the debtor, that is, the collateral can be used to repay the debt to the debtor with the mortgage right in priority.

According to Article 33 of the Security Law of the People's Republic of China, the term "mortgage" as used in this Law refers to the debtor or a third party not transferring possession of the property listed in Article 34 of this Law and using the property as security for creditor's rights. When the debtor fails to perform its obligations, the creditor shall have the right to receive preferential repayment in accordance with the provisions of this Law at the discount of the property or the price of the auction or sale of the property. The debtor or third party provided for in the preceding paragraph is the mortgagor, the creditor is the mortgagee, and the property provided for security is the collateral.

Article 34 The following property may be mortgaged:

1) Houses and other fixtures on the ground owned by the mortgagor;

2) Machinery, means of transport and other property owned by the mortgagor;

3) State-owned land use rights, houses and other fixtures on the ground that the mortgagor has the right to dispose of in accordance with law;

4) State-owned machinery, means of transport and other property that the mortgagor has the right to dispose of in accordance with law;

5) The land use right of barren hills, barren ditches, barren hills, barren beaches and other wastelands contracted by the mortgagor in accordance with law and mortgaged with the consent of the contract issuing party;

6) Other property that may be mortgaged in accordance with law.

The mortgagor may mortgage the property listed in the preceding paragraph.

Legal Analysis: A guarantee is a special guarantee undertaken to ensure that the creditor's claim is satisfied. The guarantee is established through the guarantee contract, and after the guarantee contract is established, a certain relationship of rights and obligations arises between the parties.

That is, the guarantor and the creditor agree that when the debtor fails to perform the debt, the guarantor will perform the debt or assume responsibility according to the agreement. In other words, the guarantee contract is based on the premise of the main contract between the creditor and the debtor. The main contract concluded between the creditor and the debtor is the basis for the creation of the security relationship and the object of the guarantee.

As a subordinate contract, the guarantee contract mainly stipulates the rights and obligations of the creditor and the guarantor. In the property law, the parties to the legal relationship of a security interest have a specific title, the main contract is concluded by the creditor and the debtor, and it is agreed with the creditor that when the debtor fails to perform the debt, it is the guarantor who performs the debt or assumes responsibility according to the agreement, and the owner of the thing provided as security is the debtor or guarantor. We refer to the creditor as the security interest holder. Article 170 of the Property Law stipulates that the holder of the security interest shall have the right to receive priority in respect of the secured property in accordance with the law in the event that the debtor fails to perform the due debt or realizes the security interest as agreed by the parties, unless otherwise provided by law.

That is, as long as the debtor fails to perform the due debt or the parties agree to realize the security interest, the security interest holder, i.e., the creditor, has the right to be repaid in priority for the secured property.

Legal basis: Civil Code of the People's Republic of China

Article 386:The holder of the security interest shall enjoy the right to be repaid in priority in respect of the secured property in accordance with law in the event that the debtor fails to perform the debts due or in the event that the seller agrees to realize the right to the collateral.

Article 387:Where a creditor needs security in order to ensure the realization of its creditor's rights in civil activities such as lending or trading, it may create a security interest in accordance with the provisions of this Law and other laws.

Where a third party provides security to the creditor for the debtor, the debtor may be required to provide a counter-guarantee. Counter-guarantees shall be governed by the provisions of this Law and other laws.

Legal analysis: 1. In the case of tax arrears by the grantor of the security interest, the state's tax right is superior to the security interest. 2. Under certain circumstances, the unpaid employee claims will prevail over the security interest.

3. The lessee's right of first refusal is superior to the security interest. 4. The priority right of repayment of the construction contractor is superior to the mortgage right.

Legal basis: Article 45 of the Law of the People's Republic of China on the Administration of Tax Collection and Collection of the People's Republic of China shall be collected by the tax authorities in priority over unsecured creditor's rights, except for Xianling as otherwise provided by law; If the tax owed by the taxpayer occurs before the taxpayer creates a mortgage or pledge on his property or the taxpayer's property is retained, the tax shall be enforced before the mortgage, pledge or lien. If a taxpayer owes tax and at the same time is fined or confiscated by an administrative organ, the tax preference shall precede the fine and confiscation of illegal gains.

The tax authorities shall periodically make public announcements on the non-payment of taxes by taxpayers.

1. If the parties have registered a clear scope of security interest in the registration authority, the scope of priority for payment of the proceeds from the exercise of the security interest shall be subject to the scope of registration.

2. The scope of priority for repayment of the price obtained by the creditor from the exercise of the security right shall be subject to the agreement of the parties, and if the parties have not agreed, the scope of the security interest shall include the main creditor's right and its interest, liquidated damages, damages, the cost of keeping the secured property and realizing the hidden right of the collateral.

3. According to the principle of non-prosecution and ignorance of civil litigation, the court shall prevail in the judgment and enforcement of the scope of the property right claimed by the creditor, and cannot arbitrarily extend it to the part of the creditor that the creditor has not claimed in the scope of the agreement or statutory guarantee.

4. The mortgagee has the right to be repaid in priority for the secured property within the limit of the maximum amount of the creditor's right.

5. The pledgee has the right to be repaid in priority for the secured property within the limit of the maximum amount of the pledgee.

1. What are the statutory priorities in the Civil Code?

1. There are many kinds of priority rights in the Civil Code:

1) In the case of a creditor's right in a security interest, the collateral shall have the priority right to be repaid;

2) The co-owners have the right of first refusal to purchase the common property;

3) The lienholder has the priority right to be compensated for the retained property.

2. Legal basis: Article 306 of the Civil Code of the People's Republic of China [Realization of the Right of First Refusal].

Where co-owners transfer their share of the immovable or movable property in common, they shall promptly notify the other co-owners of the conditions of the transfer. The other co-owners shall exercise the right of first refusal within a reasonable period of time.

Where two or more other co-owners claim to exercise the right of first refusal, negotiate to determine their respective purchase ratios; If the negotiation fails, the right of first refusal shall be exercised in accordance with the proportion of their respective common shares at the time of transfer. Hidden Void Hall.

Article 386:[Definition of Security Interest]The holder of the security interest shall enjoy the right to receive priority in repayment of the secured property in accordance with law in the event that the debtor fails to perform the debts due or the parties agree to realize the security interest, except as otherwise provided by law.

Article 447:[Definition of Lien]If the debtor fails to perform the debts due, the creditor may retain the debtor's movable property that is already in lawful possession and has the right to be repaid in priority for the movable property.

The creditor provided for in the preceding paragraph is the lienholder, and the movable property in possession is the property in lien.