AUSTRIA Law and Practice Contributed by: Christoph Urbanek, Irena Gogl-Hassanin and Mario Schiavon, Urbanek Law
Registration Fee in the Land Registry For the registration of the mortgage or a lien in the Austrian land registry, a registration fee of 1.1% of the loaned amount is due. Notary Fees Notarial certifications are not mandatory in Aus - tria for the creation of mortgages, unless special agreements or documents are involved. Howev - er, if a notarial certification is carried out, the fees can amount to between 1% and 3% of the value of the secured loan, depending on the complex - ity of the transaction, with the exact rate varying depending on the scope and agreement. Administrative Fees Administrative fees may also be incurred for making the entries and checks in the land regis - try, but these are usually relatively low. Costs of Enforcing the Security If it comes to enforcing the security (eg, foreclo - sure), court fees and other costs may also be incurred, which vary depending on the case and the proceedings. Attorney fees for legal repre - sentation may also be incurred. Summary To summarise, the main costs when creating a security interest in real estate are the registra - tion fee at the land registry and notary fees (if required), while no land transfer tax is payable when the security itself is created. 3.5 Legal Requirements Before an Entity Can Give Valid Security In Austria, when a company creates security over its property assets, it must ensure that this is done in line with the company’s interests, ie, the security must provide a legitimate business advantage. A company must not provide finan - cial support that merely benefits a third party and
endangers its own assets, which is regulated in Section 225 of the Austrian Commercial Code (UGB). In addition, the approval of the share - holders’ meeting may be required, especially for extraordinary or risky decisions. In the case of listed companies, additional transparency and reporting requirements must also be observed. It is therefore crucial that the company’s manage - ment ensures that the provision of collateral is in the company’s interest and that all legal require - ments are met. 3.6 Formalities When a Borrower Is in Default When a borrower defaults on a loan, lend - ers typically need to initiate a legal process to enforce their security, such as a mortgage. This often starts with a warning and a deadline before applying for foreclosure. The timeframe for enforcing security varies, but is typically between six months and two years, depending on the complexity of the case. The priority of a security interest is determined by the order of entry in the land registry, with earlier entries being given priority. Pandemic-related restrictions on foreclosures and repossessions have now been lifted, and lenders can resume enforcement in the usual manner. However, in the current mar - ket, many lenders tend to refrain from enforcing and often prefer negotiations or restructurings instead of foreclosures. There is an active market for the sale of non-performing loans, which is used by investors who buy problematic claims at a discount in order to collect the claims or realise the underlying collateral. 3.7 Subordinating Existing Debt to Newly Created Debt It is possible for existing secured debt to be sub - ordinated to newly created debt by contractual agreement, usually by means of a subordination agreement. In such an agreement, the creditor
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