TKpelnysklad2Concerning the scope of rights of financing banks in bankruptcy proceedings, the Polish Supreme Court ruled in a major and precedential case following arguments presented by Wolf Theiss.

The court  concluded that rents collected in the course of bankruptcy proceedings by a bankruptcy receiver out of real property encumbered with a mortgage are part of a separate distribution plan and, thus, may only be paid out to the creditors holding such mortgage.

The ruling was triggered by an appeal filed on behalf of an international commercial real estate financing bank against a refusal to award to the bank all the rents – approximately EUR 2 million – collected in the course of bankruptcy proceedings by the bankruptcy receiver out of two office buildings charged with the bank’s mortgages.

Previously the bank had been awarded EUR 20 million following a successful complaint filed by Wolf Theiss after taking over the matter from a major international law firm.

Wolf Theiss Counsel Daniel Klementewicz: “The Supreme Court ruling is of great importance for the commercial real estate market in Poland as it ensures the fullest possible scope of a mortgage and a coherent practice of the bankruptcy courts and the receivers in Poland.” Prior to the ruling, proceeds out of real property were usually distributed in a general division plan as they were treated as profits generated by the bankrupt’s enterprise.