07.03.2026
Legal Risks of Mortgage Loans and Strategies to Prevent Eviction
In Georgia, a mortgage loan secured by real estate is one of the most common financial obligations. Although a mortgage is the primary means of purchasing a home or starting a business, due to economic hardships, job loss, or other unforeseen circumstances, borrowers often face a harsh reality: they can no longer pay the loan.
When default occurs, most borrowers panic. Phone calls from the bank or microfinance organization, threats of property confiscation, and the fear of eviction often push people toward making the wrong decisions.
This article is designed to show you the real picture: what actually happens when you default on a loan? What are the legal stages before the auction? Is it possible to stay (stop) the auction, and what legal remedies do you have against banks or private lenders under Georgian legislation?
What is a Mortgage and What Rights Does the Creditor Have?
According to the Civil Code of Georgia, a mortgage is a form of real security. This means that when you take out a loan and secure it with real estate (apartment, house, plot of land), the creditor (bank, microfinance organization, or private individual) acquires the right to satisfy their claim through the realization (sale) of this property if you fail to fulfill your obligation.
However, the bank does not have the right to unilaterally evict you from your home the very next day. Georgian legislation strictly regulates the forced execution (foreclosure) process, which involves several crucial stages.
What Happens Before the Auction? Procedural Stages
Many borrowers believe they will lose their property immediately after a few months of non-payment. In reality, forced realization is a lengthy process. Let's examine each stage:
1. Internal Monitoring and Accrual of Penalties
As soon as you miss a scheduled payment, the default period begins. At this point, the creditor starts accruing a penalty (liquidated damages/default interest). Under Georgian legislation, restrictions have been in place since 2018: the penalty cannot exceed 0.27% of the remaining principal amount per day, and the total accrued penalty and other financial expenses must not exceed 1.5 times the remaining principal amount of the loan.
2. Official Warning
Before the creditor resorts to compulsory measures, they are obliged to warn you in writing about the necessity of fulfilling the obligation and grant you a reasonable term (usually 14 to 30 days) to remedy the breach.
3. Notary's Writ of Execution or Litigation
This is the most critical stage. In order to sell your property, the creditor requires a legal document. There are two paths:
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Litigation (Court): The creditor files a lawsuit in court. This is relatively advantageous for you in terms of gaining time, as the dispute may last for months or years.
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Notarial Execution: 99% of modern mortgage agreements contain a clause regarding "execution via notarial procedure." If this is stated in the contract, the creditor bypasses the court, goes directly to a notary, and obtains a writ of execution. This significantly accelerates the process.
4. National Bureau of Enforcement and Attachment
The notary's or court's writ of execution is sent to the National Bureau of Enforcement (or a private enforcement officer). The bailiff initiates the enforcement proceedings:
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An attachment (lien) is placed on the real estate (alienating, gifting, or further mortgaging it is prohibited).
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The market value of the property is assessed by an expert.
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A forced public auction is scheduled.
Is It Possible to Stay the Auction and Eviction?
This is one of the most frequently asked questions. The short answer is: yes, it is possible, but it requires timely legal intervention and the correct strategy.
The borrower's legal remedies against the creditor include:
1. Filing a Lawsuit and Requesting Interim Relief
If the creditor initiated proceedings via the notarial procedure, one of the most effective methods is to file a lawsuit in court requesting the invalidation of the contract, unfair terms, or the annulment of excessively accrued interest/penalties. Simultaneously, the attorney requests a measure to secure the claim (interim relief) — which means staying the ongoing enforcement proceedings (auction) until the court dispute is resolved. This provides you with vitally important time (often 1-2 years).
2. Reduction of the Penalty (Liquidated Damages)
Often, private lenders or microfinance organizations calculate penalties incorrectly, in violation of the law. According to the Civil Code, the court has the authority to reduce a disproportionately high penalty. A professional lawyer can significantly reduce the debt amount, which postpones the threat of the auction.
3. Appealing the Actions of the Enforcement Officer
If the National Bureau of Enforcement or a private bailiff violates procedural norms (for example: incorrectly assessing the property, failing to serve the warning in accordance with the law), you can appeal their actions in court, which automatically stays the auction process until the defect is corrected.
Loan Restructuring: An Alternative Solution
You must remember one important detail: banks and financial organizations do not enjoy selling your real estate. For them, it represents additional bureaucracy and a waste of time. They prefer to receive the money.
Therefore, loan restructuring is the best form of negotiation.
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What is restructuring? It is an extension of the loan term, a reduction of the monthly installment, and often, the partial or full write-off of accrued penalties.
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Mediation with the creditor: When your attorney gets involved in the negotiations and the creditor sees that you are legally prepared to drag out the auction through court disputes, the bank is much more likely to make concessions and offer an acceptable schedule.
Regular Sale VS Forced Auction
If you have no financial resources left to pay the debt, do not wait for the forced auction. At the first auction, the property is listed at 50-70% of its market value. If it is not sold, the price drops further at the second auction. With the help of an attorney, it is possible to stay the enforcement for a short period so that you can sell the property yourself at market price, pay off the debt, and save the remaining funds.
How Does the Actual Eviction Take Place?
If the auction is still held and someone else purchases your apartment/house (or the creditor acquires it themselves), the eviction stage begins. It is important to know that the new owner does not have the right to evict you by their own force or with police assistance. According to the amendments made to the law in 2015, the so-called "police eviction" was abolished. Today, eviction is possible only on the basis of a court decision, which is then executed by the National Bureau of Enforcement. This process, from the start of the dispute to the actual eviction, can drag on for 1 to 2 years, giving you time to find alternative housing.
Case Studies: How We Saved the Property
To better understand how legal remedies work in practice, we will share two typical examples from our legal practice (while protecting client confidentiality).
Case 1: Illegal Penalties by a Microfinance Organization and a Stayed Auction
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Problem: The client took a mortgage loan of 15,000 GEL from a microfinance organization. Due to the financial crisis, he could no longer pay. After 8 months, the creditor applied to the National Bureau of Enforcement via notarial procedure. The client was charged a huge penalty, and the debt grew from 15,000 GEL to 32,000 GEL. The apartment was already up for auction.
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Our legal action: We immediately filed a lawsuit in court and requested the invalidation of the clauses in the contract that provided for interest and penalties higher than the limit set by law. Simultaneously, we asked the judge to apply an interim relief measure.
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Result: The court granted the request for interim relief, and the auction was stayed. During the case hearing, the microfinance organization agreed to a settlement: the accrued penalty of 17,000 GEL was fully written off, and we agreed on a new, acceptable 5-year payment schedule for the principal amount. The property was saved.
Case 2: The Enforcement Bureau's Mistake and Gaining Time
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Problem: The client's house was put up for forced auction at the bank's request. The client wanted to sell the property himself at market price, but the Enforcement Bureau's expert assessed the apartment 40% below the market price and scheduled the auction for the very next day.
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Our legal action: We appealed the action of the National Bureau of Enforcement because the procedure for delivering the appraisal report to the debtor was violated.
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Result: The court found the bailiff's action illegal and obliged the bureau to restart the procedures. This gained the client 6 months, during which he managed to sell the apartment at its real price to a third party and fully paid off the bank debt.
Frequently Asked Questions (FAQ) on Eviction and Auctions
1. After how many months of non-payment can the bank put my apartment up for auction? The law does not establish a specific number of months; it depends on your contract. As a rule, the forced execution process usually begins after 3 to 6 months of default.
2. Can the bank or a private lender evict me directly from the house using police force? No, they cannot. In Georgia, the so-called "police eviction" has been abolished. Any eviction can only take place based on a court decision.
3. What happens if my apartment is not sold at the first auction? A repeat auction is scheduled, where the starting price is usually significantly reduced. If the property is still not sold, it can be "transferred in kind" to the creditor (the bank) itself.
4. If my apartment is sold at auction, but the proceeds do not fully cover the bank debt, do I still remain a debtor? Yes. If the apartment was sold for $50,000, and your debt was $60,000, you are still considered a debtor for the remaining $10,000.
5. My contract states that I agree to "notarial execution." Does this mean I no longer have the right to file a lawsuit? This is a myth. Despite the notarial execution clause, you always have the right to apply to the court, appeal the terms of the contract, and request a stay of the proceedings.
Why Do You Need a Lawyer's Involvement Immediately?
The biggest mistake borrowers make is ignoring the problem. Deleting SMS notifications and avoiding calls from the bank does not make the debt disappear; on the contrary, it worsens the situation.
Only an experienced lawyer can:
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Examine your mortgage agreement and find the legal flaws within it.
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Stay the ongoing forced execution and auction.
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Conduct effective negotiations with the bank to write off penalties and restructure the loan.
If you have received a warning from the creditor, or the case has already been transferred to the National Bureau of Enforcement, time is working against you.
Would you like us to review your specific case and develop an individual legal strategy to save your real estate? Contact us today and receive professional legal advice before it is too late.
