MALTA Law and Practice Contributed by: Damien Degiorgio and Ramona Galea, Fenech Farrugia Fiott Legal
the purchaser or a third party, which hypothec will continue to attach to such properties irre - spective of who shall have possession of the property and irrespective of whether it is sold. The parties may even choose to create a privi - lege which will ensure that the lender has a right of preference over all the other creditors of the purchaser, should there be others. The differ - ence between a general and a special privilege will determine the ranking of the lender. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders Currently, there are no restrictions on the grant - ing of security over real estate to foreign lend - ers. The same applies in relation to repayments being made to a foreign lender under a security document or loan agreement. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Securities in the form of privileges and hypothecs are ineffectual unless registered in the Public Registry within two months by a notary public, the cost being the registration fee paid to the public registry together with a service fee. Once such security is preserved, the enforcement of the securities can only be done through court proceedings to obtain a court judgment recog - nising the debt. Any costs in this regard are com - puted by the court registrar, who then issues a taxed bill of costs. 3.5 Legal Requirements Before an Entity Can Give Valid Security It is essential that an entity giving security over its real estate assets be duly recognised as pos - sessing full ownership of the property over which it is providing security. Given that it is an entity, it is also important to demonstrate that it has been
incorporated as legally required under Maltese law, clearly showing its assets and liabilities. 3.6 Formalities When a Borrower Is in Default If a borrower defaults in its repayment obliga - tion, the procedure normally followed is that the lender will call upon the debtor by means of a judicial letter to be filed and presented in the court registry and to be notified to the bor - rower/debtor. Should the latter remain in default, the lender has the option to apply to court to have the pending debt recognised by means of a judgment and subsequently to execute it. Once given, the court judgment shall constitute an executive title granting the lender the right to issue the necessary executive warrants available under Maltese law. It is important to keep in mind that the ranking of the lender shall depend on the other creditors of the borrower. If there are creditors competing on the same property, the court will have to estab - lish a ranking. In general, financial institutions providing loans for the acquisition of real estate are seen to rank first. The time required to successfully enforce and realise real property security is highly dependent on various factors such as the type of security being enforced and, if applicable, the applicable timeframe if property is to be sold by judicial sale by auction. No ongoing restrictions on a lender’s ability to foreclose or realise collateral in real estate lend - ing have been implemented since the pandemic. 3.7 Subordinating Existing Debt to Newly Created Debt With respect to privileges, the priority of the debt is made in accordance with the nature of each
598 CHAMBERS.COM
Powered by FlippingBook