(openPR) On 20 February 2011, a substantial amendment in the law on the registry of deeds and mortgages came into force in Poland. The changes in the regulations on mortgages shall lead to an improvement in the functionality of collaterals in rem. The significant amendment is the unification of mortgages and the waiver of the hitherto existing two kinds of mortgages, the regular mortgage and the maximum amount mortgage. The first served as collateral for a receivable with a specifiable amount; while the maximum amount mortgage is being applied as collateral for receivables of which the amount is not specifiable (e.g. interest receivables). De facto, this caused that an erroneous term of the kind of mortgage for the securitization of a receivable led to the invalidity of the granting of the mortgage. Now there is going to be only one mortgage, independent on the receivable which has to be secured.
Hitherto a mortgage could only serve as collateral for one sole receivable. Now a mortgage stipulated by contract can collateralize several receivables out of different legal relationships. Admissible is also a splitting of a mortgage based on a unilateral application of the creditor. This is in favor of the creditor, in the event that he assigns one of the receivables collateralized by mortgage, but does not want to lose the mortgage collateral on other receivables.
The law amendment leads to the hitherto under a Polish law unknown institutions of a mortgage administrator.
In order to collateralize several receivables of different creditors, but which serve the financing of the same undertaking, the creditors can appoint a mortgage administrator. The administrator can be one of the creditors or a third party. Such construction allows, for example in a building project, the collateralization by mortgage of the prospective wages for several constructers. The mortgage administrator concludes a fiduciary contract and performs the rights and obligations of the secured parties in his name but on behalf of the creditors, whose receivables are collateralized. Therefore he acts as a kind of custodian. The administrator (not the creditors) appears as secured party; however the administrator acts in his capacity but solely for the interest of the creditors. In the fiduciary contract the extent of the collateralization of each receivable is specified as well as the undertaking, for which financing is sought.
A significant amendment, which softens the hitherto applied basic principle of the dependence of the collateral on a principle deed, is the opportunity to substitute the collateralized receivable by another receivable of the same creditor. Such a substitution requires the approval of the proprietor, who is not concurrently the debtor (e.g. party to a loan contract), only if the substitution constitutes an increase of the satisfaction out of the mortgaged property (i.e. an interference of the rights of the party furnishing security). However, an approval of a person, having a right to be paid out of a mortgage, in the same or a lower rank, is not necessary in such case. By such means, one can utilize a first ranking mortgage as collateral for another receivable, if the previous receivable expires in due course and would have to be canceled in the land register.
The amendment of the regulations on mortgages was expected for a long time and should raise interest in this institution in the course of business. Moreover, it should lead to an improved collateralization of investments associated with property.
