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Finance

Finance providers

What are the typical providers of real estate financing in your jurisdiction? Are there any restrictions on who may provide financing?

Banks are the typical providers of real estate financing through bank loans, project finance schemes or sale and lease-back contracts. Investment capital can be raised through the stock market, institutional funds or by issuance of bond loans. Real estate investment companies may be considered as a tool for financing large-scale investment projects. Only licensed finance and credit institutions are entitled to provide financing.

Financing structures

What are the most common structures used to secure real estate financing and how are these security interests perfected?

The most common structures to secure real estate financing are:

  • pre-notation of and/or mortgage over the property;
  • pledge over shares and/or accounts of the property owner;
  • notional pledge (ie, without delivery of possession to the pledgee) or floating charge;
  • personal or corporate guaranties (granted by the shareholders or entities affiliated with the borrower); and
  • assignment of rent and receivables generated by the property.

Mortgages are perfected by registration of a notarial deed or a court decision granting the right in the land registry or cadastre. Pledge over shares is perfected by the delivery of the company’s shares to the pledgee, the notification of the pledge to the issuing company and the annotation of the pledge on the share titles and on the shareholders’ book. For listed shares, the pledge is perfected by registration with the Dematerialisation Securities System. A floating charge is perfected by registration of a standard form (containing the terms of the pledge agreement) with the Movables Pledge Registry. Assignment of secured contracts is perfected by means of notification to the borrower’s counterparties.

What covenants are typically made in financing agreements?

Covenants in financing agreements include:

  • information about the financial and legal status of the borrower;
  • compliance with applicable laws and regulations;
  • prohibition against disposal of receivables;
  • prohibition against encumbering or disposal of the property and/or a change of its use or actual condition; and
  • a prohibition against the corporation’s transformation and/or distribution.

Enforcement of security

How are security interests enforced in the event of default?

Depending on their type, security interests are enforced by either court procedures or execution of the contract and/or a notarial deed (if such an agreement is concluded). In general, securities interests are enforced by execution of a notarial deed, seizure, compulsory public auction of the property, step-in rights, liquidation of the borrower’s collateral held against the loan and compulsory auction.

What is the typical timeframe for the enforcement of security?

The timeframe for enforcement of security depends on the enforcement method and varies from one month to several years (eg, if court proceedings are involved).