In today's article from the series entitled " Tuesday Mornings for Construction Workers ", we would like to introduce you to the topic of establishing a mortgage on shares.
Let us recall that, in accordance with the Act on Land and Mortgage Registers, a mortgage may be established on the following rights:
- real estate ownership law,
- the right of perpetual usufruct of real estate,
- cooperative ownership right to the premises,
- receivable secured by a mortgage (so-called "subintabulate").
Where the selected right is held jointly by several individuals, the mortgage will encumber the individual shares held by those individuals . However, it should be noted that if the property is owned by a single owner, rather than several, it is not possible for such a sole owner to "separate" their share in the property and encumber it.
It is permissible to establish a mortgage on a share in joint ownership , which should not be confused with encumbering a physically marked part of the property, for example a geodetic plot.
However, it is possible to establish separate mortgages on individual shares. However, such a mortgage established on a share must cover the entire share .
To establish a mortgage on a share, the property owner must submit a declaration of establishment of the mortgage. This declaration should be submitted in the form of a notarial deed.
Generally, if one co-owner or co-tenant wishes to encumber their share with a mortgage, they do not need the consent of the other co-owners or co-tenant . This stems from the provisions on co-ownership in the Civil Code, which apply to mortgages. However, this rule does not apply to the provisions concerning shares included in an estate – for which, if encumbered, the consent of the other heirs is required. In the absence of consent, such an action is considered ineffective.
An interesting issue related to encumbering shares with a mortgage is the issue related to the abolition (judicial or contractual) of joint ownership of premises in a situation where some of them are encumbered with mortgages, which was the subject of a decision by the Constitutional Tribunal.
In the factual circumstances that formed the basis of the tribunal’s judgment of 10 July 2012 (ref. P 15/12), an application was made for the unencumbered separation of premises in favour of those persons whose shares in the joint property were free from mortgage encumbrances, leaving the mortgages in section IV of the land and mortgage register kept for the land and mortgage property on the shares of the previous debtors in rem (mortgage debtors) entered in the land and mortgage register from which the premises were to be separated.
It was pointed out that otherwise the mortgage creditor would be overly privileged and "oversecured", which would occur at the expense of those persons who are not participants in the proceedings for entry of the mortgage in the land and mortgage register.
Furthermore, it was argued that if mortgage debtors failed to satisfy their creditors after the dissolution of joint ownership, each co-owner (even one who was not a debtor) would be exposed to the risk of having their own premises sold at auction. This would create a situation in which the mortgage creditor would have greater influence over the legal status of a given premises than the owner of the premises, who is not a personal debtor.
In the aforementioned ruling, the Constitutional Tribunal indicated that it is impossible to agree with the view that any encumbrance on a share brings all co-owners into the orbit of the relationship between the mortgagee (e.g., a bank) and the debtor (i.e., the co-owner of the property) and affects their legal situation in the event of certain events, such as the termination of co-ownership . It emphasized the need for the legislature to protect the interests of the owners of the premises, whose shares are not and should not be encumbered. It ruled that the creditor should assume the risk associated with the temporary nature of co-ownership .
To summarize the above considerations, it should be noted that when a share in real estate is mortgaged, the mortgage should only encumber that specific share in the real estate. Therefore, the mortgagee may seek satisfaction solely from that share, for example, through enforcement proceedings, but does not have the right to "take over" the entire property.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of April 14, 2025
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