An amendment to the Land and Mortgage Registers and Mortgages Act of 1982 (Ustawa o księgach wieczystych i hipotece) entered into force in February 2011. The modifications are very broad and significantly simplified 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 (hipoteka zwykła) and capped mortgages (hipoteka kaucyjna) 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 respective entry into the register. It is crucial that the consent of the mortgage debtor or other lower priority mortgage creditors is not required for this. In addition, in the case of a mortgage securing more than one claim, the assignment of one claim results in the automatic division of this mortgage and transfer of this mortgage proportionately to the value of the transferred claim in relation to all claims secured with the mortgage prior to division, unless the proportions are contractually specified otherwise. Excessive Mortgage Prior to the amendment the owner of an encumbered property could not demand that the value of a mortgage be limited if the encumbrance was excessive. What is more, a mortgage debtor did not have any claim to delete a mortgage from the register if it had been established to secure a future claim and the future claim never came into existence irrespective of whether this future claim could yet come into existence at that point or not. The amendment provides the mortgage debtor with new claims, consequently enhancing its position towards the mortgage creditor. Firstly, the mortgage debtor is now entitled to claim for a reduction of the mortgage if the encumbrance is excessive (nadzabezpieczenie). Secondly, a mortgage debtor is granted a claim for remunerated removal of the mortgage if ten years after its establishment no claim to be secured with this mortgage came into existence. Disposal of vacant mortgage position Before, if a mortgage expires, mortgages of lower priority received higher priority. Newly established mortgages always had lower priority compared to those established beforehand, unless the mortgage creditors gave their consent to changing the existing priority. The amendment has introduced a solution permitting a mortgage debtor to dispose of a vacant mortgage position (as a result of its expiry or reduction by court). After the expiry of a mortgage previously encumbering a real estate, the debtor may establish a new mortgage with the same priority or move a mortgage of lower priority up to this priority. It can also reserve its right to later dispose of the vacant mortgage position if the reservation is entered into the register at the same time as the existing mortgage is deleted. Entry into force The current provisions are also applicable to capped mortgages established based on motions for registering mortgages filed before the amendment entered into force, except for provisions on disposal of vacant mortgage positions. Author: Jędrzej Górski is a PhD candidate at the Faculty of Law of the the ChineseUniversity of Hong Kong. Before joining the faculty he worked for two years in the Real Estate and Construction Department of CMS Cameron Mckenna LLP, Warsaw office and had apprenticed in Allen & Overy LLP, Sołtysiński Kawęcki Szlęzak Sp.k. and LTA Legal and Tax Advisors. In his real estate practice he specialized in the due diligence of the commercial and office properties as well as investment land for the purposes of prospective buyers and/or financing institution, adopting and amending local zoning plans, obtaining zoning, construction, environmental and occupancy permits, conducting environmental impact assessments, closing real estate transactions (asset, transfer of business and share deal), preparing master leases, sale and lease-back of properties, general contractor agreements for infrastructural projects governed by public procurement (wind and gas power plants) and protection monuments. Jędrzej is also known for his academia research. His doctoral research regards “new goal in public procurement as the obstacle in free trade”. He obtained his long cycle masters from the Faculty of Law and Administration of the University of Warsaw (summa cum laude), the certificate from the Center for American Law Studies co-organized by the University of Warsaw and University of Florida, and attended Federick Levin College of Law, University of Florida and the Faculty of Law of the University of Padua, each one semester as the exchange student.