The most common types of securities, created or entered into by an investor in relation to financing of acquiring or developing real estate are:
Mortgages are typically established in the form of a notarial deed. However, exceptions are possible if the mortgagee is a Polish bank. It is then subject to registration in the land and mortgage register, which may take several months (with retrospective effect). Typically, the application for the registration of the mortgage is a condition precedent to drawdown. Mortgages are usually established up to 150% of the original loan amount. Mortgages are enforced in judicial enforcement proceedings (sale in public tender), which is a very lengthy procedure – it may take up to two years.
Registered pledges may be established over movables and rights; a floating charge over a collection of movables and rights (an enterprise) is also available. The establishment of a registered pledge is effective once the agreement is signed and registration is completed. This takes up to two months and, as in the case of mortgages, copies of the filed applications constitute conditions precedent. Enforcement methods include the seizure of ownership, sale in public tender, lease of the enterprise and management of the enterprise. As in the case of mortgages, registered pledges are typically established up to 150% of the original loan amount.
The main differences between financial pledges and registered pledges are that financial pledges can only be established for the benefit of financial institutions, they cannot encumber tangible assets or enterprises, and they do not require registration.
Under a security assignment, the property owners typically assign the claims and receivables under lease agreements, bank guarantees, construction agreements, property and asset management agreements and insurance policies. Although neither consent declarations nor notifications to debtors are required for the effectiveness of the assignment (unless the underlying agreement so requires), banks typically require evidence of the delivery of the notices to debtors as a condition for the disbursement of the loan. No enforcement procedure applies as the bank becomes the creditor under the assigned agreements as of the assignment date or other date specified in the security assignment agreement.
This unilateral voluntary statement in the form of a notarial deed can be made by the borrower or any other security provider. The signing of this deed, which is an enforcement title, expedites the potential enforcement process against its provider from a couple of years to a couple of days. As in the case of other types of Polish security, it is typically granted up to 150% of the original loan value. It does not require registration.
Last modified 13 Mar 2025
Real estate includes buildings and other facilities connected with it, as well as trees and other plants from the moment of having been planted or sown. Additionally, real estate comprises the rights bound to its ownership such as usufruct (right to the economic use of a property together with the right to collect money from it) or easement (which include real easements being rights that improve the utility of a property or personal easements such as a right of habitation).
Last modified 13 Mar 2025
The concept of a trust is not recognized under Polish law. However, there is an institution of pledge administrator and mortgage administrator under register pledge law and mortgage law.
Last modified 13 Mar 2025
In general, the secured debt may only by traded jointly with the mortgage. If secured by mortgage, the transfer requires an agreement between the lender (assignor) and assignee containing consent for the assignment and registration at the Act on Land and Mortgage Registers and on Mortgage.
The declaration of will of the lender must be in writing with his signatures notarised, while for the assignor plain written form would suffice. The transfer does not require the debtor’s consent, unless such requirement is stipulated in the agreement between the lender and the debtor (contractual agreement).
Last modified 13 Mar 2025
There are no restrictions on granting security over real estate for foreign lenders.
Last modified 13 Mar 2025
The creation of a mortgage requires at least the owner’s declaration of will in the form of a notary deed and registration of a mortgage onto the Land and Mortgage Register.
Notary fees depend on the transaction’s subject value. The maximum tariffs for the acts performed by a notary public are provided by the Minister of Justice’s Regulation (Regulation) and vary from PLN 100 to PLN 10,000. As the Regulation defines only maximum tariffs, the costs of the notary may not exceed them.
According to the Regulation, the notary fees for a draft of the notary deed on the creation of a mortgage amount is half of the rate which would be charged for a transaction of the same value and a quarter in the case of a mortgage created to secure bank credit for housing development, house purchase or business activity.
The court fees for the registration of a mortgage into the Land and Mortgage Register amount is PLN 200. It is the notary public who charges the parties for creating a mortgage and forwards the registration fees to the relevant court, together with the application for registration of a mortgage into the Land and Mortgage Register.
The debtor is additionally charged with a tax on civil law transactions. It is the value of the secured claim that constitutes the base to be taxed. The rate amounts to 0.1% in the case of claims with a specified value and PLN 19 in the case of a claim of an undefined value.
The costs of collateral transfers of ownership entails notary fees for the agreement transferring the property, such notary fees calculated as above. The registration of the new owner into the Land and Mortgage Register is also required as above. Collateral transfers of ownership are not taxed under the tax rules on civil law transactions.
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In general, the company may grant loans, provide security, make advance payments or in any other manner, whether directly or indirectly, finance the acquisition or taking up of its shares. Financial assistance is permitted if it is performed on open market terms and requires the resolution of a general meeting of the company's shareholders.
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There are no restrictions on payments to foreign lenders made under a security document or loan agreement. A borrower may be required to deduct withholding tax in respect of interest which is payable to a foreign lender.
Last modified 13 Mar 2025
If there are several mortgages encumbering the same property, the security established later cannot be exercised to the detriment of the earlier security.
However, the priority of mortgages may be changed through an agreement reached between the parties. The change of priority should be registered with the Land and Mortgage Register.
Last modified 13 Mar 2025
Pursuant to the Polish Private International Law any acquisition, disposal or any changes to limited property rights such as a mortgage should be assessed in light of the law of the state in which the subject of those rights is situated at the time of the relevant acts. This means as long as the real estate is situated in Poland, any legal acts concerning the mortgage over it will be governed by Polish law and a clause in a security document intending foreign law to apply will not be recognized and will not have any legal effect.
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The answer depends on the form that the defect in establishing the security is going to take. If the defect in establishing the security is that no entry in the land and mortgage register was made, then according to the Polish law the mortgage will not be effective, because in order to establish a mortgage there must be an entry in the land and mortgage register.
It should be noted that if the imperfection consisted of taking the security from the bankrupt within six months before the day of submission of the petition for declaration of bankruptcy, the security shall be ineffective. However, a person who received a security may demand by the court action or objection that this act be deemed effective if during its performance he has not been aware of the existence of the grounds for declaration of the bankruptcy.
Last modified 13 Mar 2025
The Polish legal system provides for the user of land to be liable for environmental damage. Pursuant to Polish law such an entity, in the case of a threat of direct environmental damage, is obliged to promptly take precautionary actions and when the damage arises it should take action aimed at limiting new damages from arising and starting recovery proceedings.
Therefore, the Polish legal system limits the liability for environmental damage to the entity using real estate (with an exception for the owner of the land who was aware of the fact that the entity actually using the real estate was causing damage and consented to it, in which case he is jointly liable for the damage). This means that as long as a lender holding or enforcing security over real estate is not an entity using real estate in a way that causes damage, it will not be liable under the environmental law.
Last modified 13 Mar 2025
Enforcement of the mortgage secured over real estate is conducted on the basis of enforcement proceedings. This means that the creditor has to obtain a writ of execution consisting of an 'enforcement title', together with an execution clause (granted by the court injunction), as those constitute an 'execution base' being the ground for initiating the execution procedure.
Under Polish law an enforcement title may amongst others take the form of:
The notary deed, under which the debtor submits himself directly to execution, is considered the best form for execution. The creditor does not have to sue the debtor in order to obtain a legal verdict to enforce its claims, but may request the court to append an execution clause to the notary deed itself.
This enforcement title is considered the most troublesome and expensive to the creditor. This is because the creditor has to bring the proceeding against the debtor and prove his claim before court.
Last modified 13 Mar 2025
On 1 January 2016 a new restructuring law of 15 May 2015 (the “Restructuring Law”) came into force. It amended the Polish Insolvency Law, including the introduction of new restructuring procedures, the establishment of a Central Registry of Restructurings and Bankruptcy and a new definition of an “insolvent debtor”.
Under the regulations that are in force with effect from 1 January 2016, in consequence of the coming into force of the Restructuring Law, the regulations which form part of the Insolvency Law relate only to bankruptcy procedures and the Restructuring Law relates to restructuring procedures.
The Polish legal system allows for parties to institute restructuring proceedings where they are threatened with insolvency, meaning despite complying with their obligations they are according to a reasonable evaluation of their economic condition due to shortly become insolvent. The proceedings are commenced upon submission of a statement made by the parties on institution of restructuring proceedings together with amongst others a rehabilitation plan, in which the obligations to be restructured are defined. The restructuring of these obligations takes place through an arrangement concluded at a creditors’ meeting, which is later accepted by the court.
This means that the creditors participate and have their say in the process of restructuring the obligations by agreeing or disagreeing to the arrangement. Restructuring is approved if votes totaling two thirds of the total sum of the claims approve it. Non-conclusion of the arrangement within three months from the date of the restructuring proceedings being instituted, results in its discontinuation in the case of small and medium parties. In other cases the proceedings are discontinued four months from the day of institution.
It should be noted that upon the commencement of restructuring proceedings the party should suspend repayment of his obligations and security proceedings may not be instituted and outstanding security proceedings are stayed by law. This means that the lender’s rights are affected in such a way that, in case the arrangement is not concluded, they may not be able to take enforcement action for four months at the longest.
In order to combat economic consequences of COVID-19 pandemic, there is also a new simplified restructuring procedure introduced under the so-called Anti-Crisis Shield 4.0. This procedure had to be opened by 30 November 2021, and it may have be opened irrespective of whether the financial problems of the debtor or its insolvency were caused by the COVID-19 pandemic.
As of the date of opening the procedure, all pending enforcement proceedings against the enterprise were subject to an automatic four-month moratorium (stay), including proceedings related to secured claims (claims secured with pledge or mortgage). It was also not possible to initiate new enforcement proceedings. Secured claims can be included in the arrangement under this procedure without the creditors' consent, so long as the new payment terms provided that the creditors will receive 100% of their receivables (on the proposed dates).
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In some cases, the security must be created within a certain time period before the commencement of the insolvency process in order to be valid.
Pursuant to the Insolvency Law, any legal acts performed by the bankrupt within one year before the day of the submission of the petition for declaration of bankruptcy, with which he had administered his assets, will be considered ineffective to the bankruptcy estate if they were at an undervalue.
Secondly, security and payment of debt made by the bankrupt within six months before the day of the submission of the petition for declaration of bankruptcy will also be ineffective. However, a person who has received a payment or a security in that time may demand through court action or an objection for those acts to be deemed effective, providing that during their performance they had not been aware of the existence of the grounds for the declaration of bankruptcy.
Furthermore, at the request of the bankruptcy trustee, court supervisor, receiver or the judge commissioner there shall be an acknowledgement that security is ineffective to the bankruptcy estate when a bankrupt had not been a personal debtor, and this security has been established one year before the date of the submission of the petition for declaration of bankruptcy, and due to the establishment of this security, the bankrupt did not obtain any consideration. The same would apply if the burden of the security was established in exchange for consideration which was incommensurably low to the value of the provided security.
Where the bankrupt’s acts are ineffective by law or have been considered as ineffective, the portion of the bankrupt’s assets diminished or not entered into the bankruptcy estate as a result of such acts mentioned above, will be transferred to the bankruptcy estate and if the transfer is not possible, the equivalent in money will be paid into the bankruptcy estate.
Last modified 13 Mar 2025
Every creditor wishing to participate in the insolvency proceedings is obliged to report his claim to the judge commissioner within the time limit specified in the decision on the declaration of bankruptcy. After the declaration of bankruptcy, the trustee proceeds with the liquidation of the bankruptcy estate. The creditors are satisfied from the funds of the bankruptcy estate, consisting of all of the bankrupt’s assets. Their claims are divided into four categories and are satisfied according to the ascending order of those categories.
The claims secured over real estate such as a mortgage do not fall under these categories and are not satisfied from the funds of the bankruptcy estate. Pursuant to the Insolvency Law, the claims upon the sale of the properties over which they are secured, turn into the right to be satisfied from the proceeds of sale, in accordance with the priority they have. This means that with an exception to some obligations specified by the statute such as alimonies or minimum remuneration, the claims secured over real estate will be satisfied first and thus the creditors’ interest will be secured up to the value of the properties they encumber.
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Which assets and rights are considered to be real estate or real rights over which security can be granted to a lender?
Real estate includes buildings and other facilities connected with it, as well as trees and other plants from the moment of having been planted or sown. Additionally, real estate comprises the rights bound to its ownership such as usufruct (right to the economic use of a property together with the right to collect money from it) or easement (which include real easements being rights that improve the utility of a property or personal easements such as a right of habitation).
Last modified 13 Mar 2025