Pursuant to the principle “superficies solo cedit” if a mortgage over land is established, such mortgage extends to the buildings thereon because they are an integral part of the land and follow its legal status; therefore, generally it is not possible to mortgage a building without the land on which the building is built on. The only exception is a so-called “superstructure” (Superädifikat) which is a building erected on land of another person which are built with the intention not to stay on the land on a continuous basis.
2.1 The distinction between mortgages on land and buildings on the land?
There is no distinction. In both instances, the mortgagee would have the benefit of the same rights.
2.2 Are mortgage certificates for a certain value issued? What is the cost? Are they transferable?
Under Austrian law, such mortgage certificates do not exist.
2.3 Can second ranking security be taken? If so, how is it registered? Is a priority deed also registered?
Yes, second ranking security can be taken. The registration procedure is the same as in the case of the first ranking land charge. The rank and priority of a land charge depends in principle on the time of receipt by the court of the respective application for registration. Change of the ranking in the land register is possible by way of an agreement between the respective secured parties.
Priority deeds (Anmerkung der Rangordnung) with respect to an envisaged land charge have to be registered in the land register to become effective.
2.4 Can the real estate be transferred to a third party (being still subject to the mortgage) without the lender’s consent?
Yes, mortgaged real estate can be transferred to a third party without the lender’s consent. The mortgagor and the mortgagee may agree that the mortgaged real estate cannot be transferred, however, such prohibition of transfer cannot be registered with the land register and has therefore no in rem effect. Such prohibition of transfer may only be registered with the land register if the agreement is made between spouses, parents and children (including adopted children) or brother/sister-in-laws.
2.5 Are there any preferred creditors (other than prior ranking mortgage holders)?
Yes, privileged security interests (Vorzugspfandrechte) exist; such security interests come into existence when such claims become due and do not require a registration with the land register. Therefore, such security interests are not always recognizable in the land register and override mortgages which were registered earlier. The most important privileged security interests are the security interests in connection with real estate taxes.
2.6 Can “all monies” mortgages be taken?
An “all monies mortgage” (being a mortgage where the mortgaged property stands as security for an indebtedness that is not determined at all at the time the mortgage is created) is not possible under Austrian law because claims must be determined following the principle of speciality. However, the principle of speciality is weakened by the maximum amount mortgage, i.e. a mortgage under which only the maximum amount to which the land can be encumbered is entered into the register. However, also in case of a maximum amount mortgage the mortgage secures an individual claim originating in a specific legal relationship.
2.7 Can a landlord’s right to receive rent be charged, assigned or transferred to a lender by way of security? If so, how?
Yes, claims for rent can be pledged and assigned. The landlord and the lender shall conclude an agreement assigning/pledging the landlord’s existing and future claims towards the tenant. To become effective, the assignment/pledge has either to be notified to the tenant or the assignment/pledge has to be entered into the accounting books of the landlord. Since claims are not immovable objects, no registration with the Land Register is required. In the event of the borrower’s default, the lender may be directly repaid from the assigned claim.
It should be noted that according to the Austrian Rental Act, certain lease agreements may only be pledged if the mortgage is granted as security for loans financing useful improvements of the real estate.
2.8 Is it customary/possible for a lender to take a charge/security over bank accounts of the borrower? Is it usual for lenders to contractually restrict rights to withdraw funds in accounts until the scheduled interest and capital repayments are made?
Yes, it is possible and common practice to pledge bank accounts. However, most general terms and conditions of banks provide for a right to preferentially settle claims by using the funds on the client’s account. Thus, the lender usually asks the pledgor to agree with the account bank to waive such preferential right. Usually, if the bank account is pledged, the debtor can dispose of his account, as long as no default occurs; it is however also possible to additionally block the pledged account.
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