In: Root » Legal and finance » Loans and mortgages
Mortgage is the most popular way ofsecuring debt against real property in Poland. The mortgagee has two privileges - its debt comes before amounts due to personal creditors and encumbrances real property regardless ofwho the owner might be. Mortgage neither restricts owner's rights to dispose ofreal property, nor provides the creditor with any actual control over the mortgaged property. The following rights can be mortgaged: • the ownership right to real property; • co-owner's right to a real property; • perpetual usufruct; • cooperative ownership right to a real property; • mortgage-secured debt (this means that mortgage is established on the another mortgage, subintabulat). Because ofthe mortgage specificity rule, only a precisely identified property can be mortgaged and a record must be made in the mortgage book to make the mortgage effective. The facility secures a pecuniary debt and it must be expressed as a specific amount ofmoney. A mortgage is based either on a contract (a contractual mortgage) or by way ofa decision issued by a court or another competent body (an obligatory mortgage). Detailed regulations provide when the obligatory mortgage must be applied in order to secure amounts due to public authorities. The contractual mortgage is usually a means allowing secure loan repayment. The lender signs a contract with the owner ofthe real property to be mortgaged, or other entitled person ifthe mortgage applies to another right to the property. For a property to be effectively mortgaged a record (constitutive) must be made in the mortgage book. The obligatory mortgage aims to secure and execute an existing debt. The obligatory mortgage is awarded (without or against the property owner's will) to the lender by means ofa writ ofexecution, by an interim order issued by a court, or based on a public prosecutor's decision. Then a record must be made in the mortgage book to render the mortgage effective. An obligatory mortgage arising from a debt owned to public authorities is mainly applied under the tax law of 29 August 1997. The mortgage can be awarded to the Treasury or a local government and applies to all real property held by the indebted taxpayer. The reason for the mortgage is the taxpayer's specific liabilities and amounts ofincome tax in arrears. The facility can also be awarded to the Social Insurance Institution under the social insurance law. The encumbered real property is seized by a bailiffacting on behalfofthe court in whose jurisdiction the property is located. To assess the property's value, the bailiff appoints either one or several surveyors; ready-made valuations are also usable, as long as they are valid. The property is sold at a public auction that the bailiff must announce at least 2 weeks before the event takes place. The starting price at the first auction is three-quarters ofthe valuation figure and two-thirds at the second auction. After the auction has been closed, the supervising judge approves the property purchase, if a buyer has been successful. Once the judge's decision becomes effective and the buyer performs the auction conditions, the court awards the ownership title, allowing a record to be made in the mortgage book. A simplified property execution procedure is also possible, ifthe property in question is unbuilt land or land on which development work has not been completed. Once the decision awarding the ownership right has become effective, all rights and effects of revealed rights and personal claims to the property become essentially null and void. Ifthe property could not be sold at the second auction and no entitled party could take it over, then the property execution procedure can restart not earlier than 1 year later. Ifthe property was sold at auction, then the court decides on the distribution ofthe amount paid among the lenders. The order in which lenders' claims are satisfied is regulated by the code ofcivil procedure. First to be covered are the execution costs, the outstanding alimonies, unpaid wages, injury-compensating annuities, taxes and other public duties subject to the tax liability laws, outstanding amounts under perpetual usufruct, and the mortgage debt. When a residential property is to be executed, then certain restrictions are imposed for social reasons. A bailiff responsible for collecting the debt must not deprive persons that have no other home ofa dwelling place - either their own or one provided by the municipality or the lender. This increases the lender's costs, because municipalities do not have funds to allow secure sufficient social, temporary housing. A lender wishing to conclude an auction sale ofa flat in satisfaction ofthe debt must remove the tenants, that is, provide them with a home. Ifa given real property has more than one mortgage and one ofthem is terminated, then the next mortgage moves by one notch.
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