Editing Hypothec (section)

==Overview==
This real right in security operates by way of hypothecation. It may arise only through being entered into the [[Land registration|land and hypothec register]] or the [[Ship registration|ship registry]], as a result of:
* a [[mortgage loan|hypothecary loan]] contract, required in the form of a [[notarial act]] - in case of a [[contract]]ual hypothec 
* an [[Administrative proceeding|administrative]] or court decision - in case of a compulsory hypothec

Hypothec gives a [[creditor]] a preferential [[rights|right]] to have [[claim (legal)|claim]]s paid out of the hypothecated property as last recourse when the debtor is in [[Default (finance)|default]]. In the hypothec, the property does not pass to the creditor, but they acquire a preferential right to have their debt paid out of the hypothecated property; that is, they can sell it and pay themself out of the proceeds, or in default of a purchaser they can become the owner themself.<ref name="EB1911">{{EB1911|inline=y|wstitle=Hypothec|volume=14|page=208}}</ref>