Reuven borrowed $500,000 from Shimon, using his home and his bungalow as security for the loan.

Reuven has thus far paid back $400,000 of the loan and would now like to sell his bungalow. He approached Shimon and asked if he would remove the lien from the bungalow so that he could sell it, since the lien that is on Reuven’s primary home would more than cover the remaining value of the loan.

Q: Is Shimon obligated to release the lien on the bungalow?

A: Halacha states that a lender who has a lien on a borrower’s property or properties cannot be forced to release half of the lien when half of the loan is repaid (C.M. 74:4). Poskim understand that this ruling is limited to where the lender benefits financially from retaining the lien on the entire property or properties. In the event that the lender does not have any financial benefit from retaining a lien on the entire property or properties, we would indeed force the lender to release the lien based on the principle of kofin al midas sdom – we force a person to do something that will benefit another when it does not cause him any loss (Taz ibid.).

Others disagree and contend that the reason the lender may refuse to release the lien is not because he benefits financially from the lien; rather, the reason the lender may retain the entire lien even though the loan has been partially repaid is that it gives the lender leverage on the borrower and pressures the borrower to repay the entire loan. As such, the lender retains the lien entirely until every last penny of the loan is repaid (Shach ibid. 18).

A proof to the latter opinion is found in Choshen Mishpat 54:1. Shulchan Aruch there rules that if a borrower repays half of his loan, he cannot force the lender to write a new contract for the remainder of the loan. The reason is that the lender would prefer to provide the borrower with a receipt for half the loan. When the borrower is forced to retain a receipt that states that he repaid half the loan, he will be anxious to promptly repay the remainder out of fear that he could lose the receipt and possibly be forced to pay the full amount recorded in the contract. Since it is to the lender’s advantage to write a receipt as opposed to writing a new loan document, it is not considered midas s’dom (Tumim ibid. 10. See Imrei Binah Halva’ah 84, who agrees with Tumim).

Since, in this case, Shimon benefits from retaining the full lien in that it pressures Reuven to repay the remainder of the loan, Shimon cannot be forced to release the lien on the bungalow.