Originally published in IFLR/June 2012
In previous IFLR issues, this series of bulletins has covered parallel debt and pledge administrator as concepts allowing to secure a multi-facility syndicated structure with Polish lawgoverned security interests. As previously noted, the pledge administrator is available in relation to registered pledges, which may be established over rights and property other than real property. It is, therefore, time to see whether a relevant concept is available in respect of the only security interest that may be established over real property – a mortgage.
As of February 2011, the answer to the question has become positive. Amendments to the Act of July 6 1982 on the land and mortgage registry books and mortgage have brought revolution to the regime by permitting to secure with a single mortgage: more than one claim of an individual creditor; and several claims of several creditors.
Originally, the mortgage was based on the one claim–one security interest principle, which prevented any sophisticated structures from being implemented.
Securing of several claims of several creditors with a single mortgage is, nevertheless, subject to a few conditions. Firstly, the claims to be secured by the mortgage must serve the purpose of "financing of the same undertaking (venture)". The condition has been vastly criticised in legal writings as vague and imposing unnecessary limitations on the possible use of the structure. For example, while it appears obvious that financing of construction of an office building would meet the requirement, the same could not be equally easily concluded in respect of financing of an acquisition of shares of a company or refinancing of an existing indebtedness. Fortunately, authors of the new legislation followed by scholars and practitioners have opted in favour of an extensive construction of the condition allowing it to apply to financing of any "common goal".
Secondly, a mortgage administrator has to be appointed by all creditors whose claims are to be secured; the appointment is effected by way of an agreement between the creditors and the administrator. The administrator may be appointed from among the creditors or (unlike in the case of a pledge administrator) it may be a third party. The administrator exercises the rights and obligations of a mortgagee on its own behalf, but for the account of the secured creditors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
