In today's article, as part of the series entitled "Tuesday Mornings for the Construction Industry," we continue our series on mortgages – one of the oldest and most frequently used security instruments in Polish civil law. As we pointed out in recent articles ( #244 , #245 ), mortgages are an institution that aims to satisfy a creditor's claim from a mortgaged property, regardless of who owns it and with priority over the personal creditors of the property owner. Mortgages are created through an entry in the land and mortgage register.
Today we will take a closer look at the subject of a mortgage and its scope of security.
Subject of the mortgage
The subject of a mortgage may be:
- real estate (land, premises or building),
- perpetual usufruct together with buildings and facilities on the used land that are the property of the perpetual usufructuary,
- cooperative ownership right to the premises,
- a fractional part of the real estate, if it constitutes a share of a co-owner, and the co-owner’s share in the common rights listed in the points above,
- receivable secured by a mortgage.
It is not possible to establish a mortgage on movable property such as cars, machinery or other movable items.
Importantly, a mortgage does not entitle the creditor to possess or use the mortgaged property. Furthermore, the person entitled to the mortgaged property (e.g., owner, perpetual usufructuary) retains all rights constituting their right until enforcement takes place. For example, a property owner who mortgaged a property to a bank under a loan agreement remains its owner.
It is also worth noting that a stipulation by which the property owner commits to the mortgagee not to sell or encumber the property before the mortgage expires is inadmissible. The owner is therefore free to sell or encumber the property despite the existing mortgage.
However, the property owner is not completely free to use the encumbered property:
- the creditor has the right to demand that actions aimed at reducing the value of the property be discontinued in a way that threatens the security of the mortgage,
- If, due to circumstances for which the owner is responsible, the value of the property has decreased to a degree that compromises the security of the mortgage, the creditor may set an appropriate deadline for the owner to restore the property to its previous condition or to provide sufficient additional security. After the deadline expires without effect, the creditor may demand immediate satisfaction from the encumbered property.
Scope of mortgage security
A mortgage secures only monetary claims (e.g., loans, bank credits, etc.) – regardless of whether the claim consists of a single payment or multiple payments, including future claims . Mortgage claims can be denominated in Polish zloty or a foreign currency (e.g., euros, Swiss francs).
It can therefore protect:
- a specific monetary claim arising from a specific legal relationship, including a future claim,
- several monetary claims owed to the same creditor,
- several monetary receivables owed to different entities for the purpose of financing the same project.
The scope of mortgage security is closely linked to the amount of the claim and the terms of the mortgage agreement. The value of the mortgage, i.e., the amount secured, does not always have to correspond to the value of the property:
- Mortgage secured amount – specifies the amount of the claim that can be satisfied from the mortgaged asset. This amount may include not only the value of the claim itself, but also interest, costs related to pursuing the claim, court fees, and enforcement costs. The mortgage amount is expressed in the same currency as the secured claim, unless the parties have agreed otherwise in the mortgage agreement.
- limitation of the scope of security – the mortgage agreement may introduce additional restrictions on the scope of security, e.g. by indicating that the mortgage covers only part of the property (e.g. part of an apartment or plot),
- Mortgage rights – a mortgagee secured by a mortgage has the right to pursue claims against the collateral, but only up to the value of the secured amount. The claim is satisfied by selling the mortgaged property.
If the mortgage security is excessive, the owner of the encumbered property may request a reduction in the mortgage amount.
In summary, a mortgage is one of the most effective tools for securing creditors' claims in Polish civil law. It provides creditors with the assurance that, in the event of a debtor's default, they will be able to pursue their claims against the property serving as collateral.
At the same time, it's worth remembering that a mortgage carries certain obligations for both the debtor and the creditor, including the requirement to submit an application for entry in the land and mortgage register and adhere to specific rules for pursuing claims. Therefore, properly drafting the agreement and understanding the scope of the security is crucial for both parties to the transaction. As a law firm, we have extensive experience in this area, and our legal advice also includes mortgage support.
At this point, we would like to invite you to read our next article in the series on mortgages, which will be published in two weeks, and next week, as every month, we will write about changes that have occurred in the law covering the real estate area.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of March 24, 2025
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