PORTUGAL Law and Practice Contributed by: João Gonçalo Galvão, Carolina Cardoso Alves, Miguel Paquete and Mafalda Oliveira Cordeiro, CS’Associados
Lenders are also normally designated as co-ben - eficiaries of the insurance policies relating to the financed real estate assets. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no restrictions on granting security over real estate to foreign lenders. However, to directly benefit from a mortgage (ie, other than through the appoint - ment of a security agent, the validity of which needs to be suitably ascertained), foreign lenders are required to apply for a Portuguese corporate identification number (a relatively straightforward formality). There are no restrictions on repayments being made to a foreign lender under a security document or loan agreement. Note that withholding tax on payment of interest under a loan will nevertheless apply; if the financing is structured as bond issuance registered with Interbolsa (a Portuguese centralised securi - ties register), foreign bondholders will, as a rule, be exempt from withholding tax. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security The granting of security is generally subject to stamp duty, calculated based on the maximum secured amount at rates of up to 0.6%, depending on the maturity of the underlying secured obligations. How - ever, stamp duty may not apply if the security is pro - vided to secure liabilities arising from a loan granted simultaneously with the security, provided that the loan itself is subject to stamp duty. Registration and notarial fees are also applicable, the amounts of which may vary depending on the number of securities being granted. 3.5 Legal Requirements Before an Entity Can Give Valid Security Companies may grant security as collateral to their own liabilities within the performance of their activity. However, the granting of security as collateral for third- party liabilities is restricted by corporate benefit rules. Any security interest provided for third-party liabilities is deemed null and void, unless it secures the liabilities of a company with which the security provider is in
a control relationship or if it has a justified corporate interest therein (which may include a direct or indirect economic benefit to its activities). Regarding financial assistance restrictions, any secu - rity granted by a company to secure liabilities related to the direct or indirect acquisition of its share capital is considered null and void. 3.6 Formalities When a Borrower Is in Default Contractual provisions requiring the prior accelera - tion of secured liabilities as a requirement for security enforcement are standard. Judicial enforcement pro - ceedings involve a court application, seizure of the property and public sale (a 90-day standstill period from default applies to housing loans, during which the creditor cannot take enforcement measures). In relation to enforcement of security, the principle is that the priority of a security interest is determined based on the date of its creation (this being assessed, in the case of a mortgage, by the priority of its regis - tration with the LRO). The lender’s mortgage, if reg - istered as a first-ranking mortgage, gives priority to the proceeds of the property’s judicial sale over credi - tors that do not benefit from statutory liens (such as legal expenses, real estate tax and transfer taxes) and allows the property to be sold free of prior security interests. The timeframe for enforcing a mortgage can vary from several months to over a year, depending on court workload and the parties’ statements. At the time of writing, lenders are actively exercising their foreclosure rights whenever necessary, and there is an active market for non-performing loan portfolios. 3.7 Subordinating Existing Debt to Newly Created Debt Existing mortgage-secured debt may become subor - dinated to newly created debt by agreement between secured creditors, such agreement to be entered into as a public deed or authenticated private document and submitted for registration. Furthermore, creditors may agree to subordinate secured debt through intercreditor agreements in
495 CHAMBERS.COM
Powered by FlippingBook