New Regulation Of Land And Mortgage Registers And Mortgages In Poland

An amendment to the Land and Mortgage Registers and Mortgages Act of 1982 entered into force in February 2011. The modifications are very broad and will significantly simplify the practice of banks and other lending institutions with respect to the establishment of securities on real estate.

One type of mortgage

The previous division of mortgages into regular mortgages securing claims of a specified amount and capped mortgages securing claims, including future claims of an unspecified amount up to a specified limit has been abandoned. Instead there is now only one type of mortgage, which resembles the previous capped mortgage. Under the new regulations a mortgage secures a pecuniary claim, including a future claim, up to a specified limit. Within this cap a new mortgage secures payment of interest, cost of proceedings/enforcement and any other secondary or incidental claims, if they are mentioned in the documents used to register the mortgages.

Many claims, one mortgage

In the previous system one mortgage could only secure one claim. As a result, in order to secure claims arising out of transactions of extended structures involving many entities on the lending and borrowing sides, it was necessary to establish many mortgages. This substantially increased costs, as well as the time it took to obtain the security of payment. The amendment provides for two cases in which a new mortgage may secure more than one claim. Firstly, one mortgage may secure several claims arising out of different legal relationships if one creditor is entitled to them. Secondly one mortgage may secure several claims of many creditors if only one project is financed. In such a case a creditor should appoint a mortgage administrator (either the creditor or a third party) who will enter into an agreement to establish a mortgage and will execute the rights and perform the duties of the mortgage creditor in its own name but on account of all creditors, whose claims are secured by the administered mortgage.

Split mortgages allowed

The former provisions did not allow for a mortgage to be "split". In practice, when some part of a claim secured with a mortgage was assigned, existing mortgages in favour of the assignor were usually reduced and new mortgages were established in favour of the assignees. The amendment sets forth that a mortgage creditor can split a mortgage upon notifying the owner of the real estate encumbered with the mortgage effective from the date of...