Are there any material costs that lenders should be aware of when structuring deals (for example, stamp duty on security, notarial fees, registration costs or any other charges or duties), either at the outset or upon enforcement? If so, what are the costs and what are the approaches lenders typically take in respect of such costs (e.g. upstamping)?
Lending & Secured Finance
When structuring deals, lenders should be aware of associated (pertaining) material costs such as:
a) Fees of the notary public – for security agreements in the form of a notarial deed, which are prescribed by the notary’s tariff and depend on the value of the collateral. For example, if the value of the secured claim exceeds approximately EUR 100,000.- the notary public fees and duties for each such security document amount to approximately EUR 450.-;
b) Registration fees (land registry, Register of court and notary public secured claims kept by the Financial Agency (FINA), the Central Depository & Clearing Company – the fee for the registration of the collateral in the Register amounts to approximately EUR 35.- per application;
c) Court fees to be paid in enforcement proceedings – the amount of court fees is determined in accordance with the value of the claim;
d) Other expenses of enforcement proceedings – there may be other expenses associated with enforcement, such as attorney’s fees, expenses of the court bailiff for the attachment of movables, expenses of the appraisal of the value, etc.
The most significant costs tend to be notarial fees for execution of notarial deeds on pledges which shall be registered in the Pledge Register. A fee of the notary for execution of such deed is based on the value of the underlying transaction/asset and may reach up to approx. EUR 4,000 for a notarial deed. A similar amount is applicable to execution of a notarial deed on direct enforceability agreement which is a legal instrument allowing for direct enforcement of the claim without a need to sue the obligor in court.
This amount in roughly a cap on the notarial fees for this kind of transaction.
No. For the registrations (please see question 8 above), minor registration fees apply.
The notarisation of share pledges and land charges and the registration of land charges with the land register incur considerable cost the amount of which depend, in case of the share pledges, on the higher of the (i) secured obligations and (ii) the value of the company the shares of which are being pledged. In case of the land charge, notarial fees and registration cost depend on the face value of the land charge. While notarial fees follow mandatory laws there are certain (legally permissible) technics available to keep notary’s as low as possible.
Real estate and chattels bear a significant stamp duty tax (up to 0.5%-1.5% over the amount of the secured obligation) and other fees, such as notarial and registration fees.
Notarial fees are calculated based on the secured amount. If the secured amount is higher than € 6,000,000 notarial fees can be negotiated with the Spanish notary. Registration fees depends on the relevant registry, but generally speaking do not significantly differ from the notarial fees.
Clauses imposing expenses on the borrower are usually included.
Notwithstanding the above, in relation to mortgage loans signed with consumers, the Supreme Court has rendered as unfair those terms that pass all the loan and mortgage formalization expenses of the mortgage loans on to the borrower based on the following reasons: (i) due to the fact that costs, which by virtue of its nature or law should be borne by the creditor are charged to the borrower and (ii) because there is not a minimum fair distribution of the costs among the parties.
Based on the case law, this leads to a relevant imbalance in the rights and obligations of the parties which the consumer would have not reasonably accepted in the context of an individual negotiation.
The Real Estate Credit Act (which was passed, but still pending to be published in the Official State Gazette) transposes the European Directive (Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property) and seeks to enhance the transparency of mortgage contracts to be signed with individuals (customers). It states that notarial fees, registration fees and stamp duty tax will be paid by the lender.
Depending on the nature of the lending transaction, structuring a deal may involve the following costs:
i. Filing fees for the application for BSP approval of publicly-guaranteed private sector foreign loans - 0.02 percent of the loan amount applied for approval, with a minimum of US$300 and maximum of US$50,000;
ii. Documentary Stamp Taxes (DST)
a. on debt instruments – P1.50 on each P200, or fractional part thereof, of the issue price of the debt instrument;
b. DST on mortgage/pledge of real or personal property as security for a loan – P20 for every P5,000, or fractional part thereof, of the amount secured;
iii. Registration fee for registration of deeds (mortgage and other real right over property), with the Registry of Deeds – P8,796 plus P90 for every P20,000, or fractional part thereof, of the value of the consideration in excess of P1,700,000;
iv. Registration fee for registration of security agreements – the regulations providing for the rates have yet to be issued by the Department of Finance (“DOF”).
v. Notarial fees
Parties can agree to allocate the costs of the transaction between them by creating stipulations to that effect in the agreement. However, the amount and payment of such costs cannot be reduced or otherwise be the subject of a compromise with the relevant government agency.
Except for stamp duties in relation to the issuance of mortgage certificates and corporate mortgage certificates (as set out in our answer to question 4), no material notarial fees, registration costs or other charges or duties need to be considered when structuring deals in Sweden.
In general, for any security that requires registration or notarisation, such as the movable assets pledge under Movable Pledge Law or mortgage over real estates registration and notarisation fees would arise.
Any document indicating a monetary value is, in principle, subject to stamp tax imposed by Stamp Tax Law of Turkey (Law No. 488) in the amount of the TL equivalent of zero point nine four eight (0.948) per cent. of the highest monetary figure indicated in the relevant document. However, as per Article IV.23 of Table No. 2 of the Stamp Tax Law of Turkey (Law No. 488), loansloan agreements in respect of the loans that are granted to Turkish residents as well as any security documents in connection therewith are exempt from stamp tax.
In addition to the above the following charges and fees may be applicable:
(i) court charges imposed pursuant to the Law on Charges of Turkey (Law No. 492), in the amount of six point eight three one (6.831) per cent. of the TL equivalent of the amount in dispute;
(ii) court charges payable in connection with the making of an appeal from an adverse judgment;
(iii) the deposit at the court's discretion of security for such costs (cautio judicatum solvi); however, the court may, in its discretion, waive such requirement for security in the event that the plaintiff is considered to be a national of one of the contracting states of the Convention Relating to Civil Procedure at The Hague on 1 March 1954 (ratified by Turkey pursuant to the Law No. 1574) or a national of a state that has signed a bilateral treaty with Turkey, which has been duly ratified and containing, inter alia, a waiver of cautio judicatum solvi requirement on a reciprocal basis;
(iv) lawyers' fees payable in accordance with the most recent tariff in force at the time of judgment as published in the Official Gazette, together with the other court expenses;
(v) fees and charges payable in connection with execution and attachment proceedings, if initiated, imposed pursuant to the Law on Charges of Turkey (Law No. 492); and
(vi) advances on expenses imposed pursuant to the Civil Procedure Code of Turkey (Law No.6100) based on the tariff published annually by the Ministry of Justice (payable at the commencement of any suit or action).
Filing and recording costs in most U.S. jurisdictions are de minimis. Some states have recording/filing taxes and fees based on value of the collateral or the debt secured. In some cases, this motivates real property owners and financers to refinance real property mortgage debt in a manner that may not attract a new mortgage tax payment (such as assignments and assumptions between old and new parties).
The following are the main material costs to be taken into account:
a. if loans are secured over real estate, the following fees may be payable depending on the transaction: notaries’ fees; registration fees (land register); and cantonal and communal stamp duties. The rates depend on the securities’ face value and the location of the real estate. The rates for fees vary widely from canton to canton.
b. stamp duty may be triggered in relation to the transfer of ownership of shares, bonds, notes or other securities, calculated on the transaction value, if a Swiss bank or other securities dealer as defined in the Swiss stamp tax law is involved as a party or intermediary.
Registration fees are payable in relation to security registrations at Companies House and (where applicable) to the relevant asset register.
Registration fees at Companies House are not high - currently no more than £23 for each security document entered into by each charging company.
Land Registry fees are calculated on a sliding scale, There is a fee payable but it does not exceed £250 for registration of the charge alone (if there is a registration involving both a transfer of title e.g. to a purchaser who then grants a charge, the fee will not exceed £910 for registration of the transfer and the charge).
Other registration fees vary depending on the location of the registry and the value of the asset. The cost of registering the security would be taken into account in structuring the security package on a case by case basis.
Stamp duty taxes
There is no stamp duty payable in the UK on creating a security interest.
Enforcement costs will vary according to the size and complexity of the enforcement.
Fees payable in relation to the registration of security under SIL are as follows:
- registration – £8 per year (up to a maximum of £150);
- amendment of registration - (other than expiry date) £8;
- discharge – no fee;
- extension of expiry date – fees for registration apply;
- affecting a global change of multiple registrations (other than expiry date) - £100;
- search – free to view search results (with limited data) and £4 to obtain copy financing statement; and
- filing of change demand - £25.
Stamp duty is payable when a lender registers any hypothec. It is calculated at a rate of 0.5% of the amount of the debt secured over the property in favour of the lender plus the registration fee (currently £80). Stamp duty must be paid in full before the required charge document can be registered at the Jersey Public Registry.
Land transaction tax (LTT) is payable when a lender takes security over a share transfer property situated in Jersey and is calculated at a rate of 0.5% of the amount of the debt to be secured. LTT only applies to residential property or those companies whose articles confer rights of occupation to their shareholders.
All costs associated with a transaction, for example, registration fees and stamp duty costs are reimbursed by the principal debtor to the lender in the usual manner under the terms of the specific security agreement or more likely the underlying facility agreement.
- Registration costs in Hong Kong are minimal. Such fees can be summarised as follows:- Registration of a security document at Hong Kong Companies Registry - HK$340
- Registration of a real property mortgage at Hong Kong Land Registry - HK$450 or HK$230 (depending on the value of consideration)
- Registration of a ship mortgage at the Hong Kong Shipping Registry – Free of charge
- Registration of a security document at the Trade Marks Registry - HK$800
- Registration of a security document at the Patents Registry - HK$325
Hong Kong does not currently impose stamp duty or other documentary, transfer or similar taxes on the granting of a loan. Pursuant to s4(1) of the Stamp Duty Ordinance (Cap. 117) ("SDO"), only instruments specified under a "head of duty" in the First Schedule to the SDO are subject to stamp duty. The heads of duty are:
(a) Real Property: immovable property (i.e. instruments in respect of real property);
(b) Equities: Hong Kong stock (i.e. shares, stocks, debentures, loan stocks, funds, bonds or notes, units under a unit trust scheme; and any right, option or interest in or in respect of any of the foregoing, subject to certain exemptions);
(c) Bearer Instruments: Hong Kong bearer instruments (i.e. any instrument to bearer by delivery of which any stock can be transferred, subject to certain exceptions); and
(d) Duplicates: duplicates and counterparts of the above.
No stamp duty is payable in connection with the taking of security (unless the share mortgages over shares in the Hong Kong stock take the form of legal mortgages, then a nominal duty of HK$5 will be chargeable on each instrument of transfer transferring the legal title to the lender or its nominee), but any transfer of the beneficial interest in shares and real property at the time of enforcement (including a sale of a mortgaged property) will attach ad valorem stamp duty.
Loan agreements or guarantees do not trigger any taxes or stamp duties (Rechtsgeschäftsgebühr) under Austrian law. Pursuant to the Austrian Stamp Duty Act (Gebührengesetz) certain kind of agreements, in particular assignment agreements (Zessionen) and surety agreements (Bürgschaften) are subject to stamp duty. For assignment agreements, a stump duty in the amount of 0.8% of the consideration will apply and for surety agreements a stamp duty of 1% of the secured interest will apply.
However, the Austrian Stamp Duty Act also provides for exemptions, the most important exemption refer to transactions concluded to secure loan or guarantee obligations, which do not trigger any stamp duty. Therefore, assignment agreements and surety agreements do not trigger stamp duty, if they secure loan or guarantee obligations.
Further, there are certain practices to avoid Austrian stamp duty, for instance by not signing any agreement, the offer of one party will be accepted by the other party by oral acceptance or by paying the purchase price for example. Another possibility would be that the parties do not sign the security agreement in Austria and the document never reaches Austrian soil (by no means).
In case of a required notarisation (e.g. for the establishment of a mortgage agreement), notary fees may be payable, depending on the transaction value. Further, for the registration of a mortgage with the respective land register a registration fee in the amount of 1.2% of the secured amount applies. For the registration of pledges over trademarks and patents, a fee in the amount of EUR128.00 (as of January 1 2019) per registration applies.
Yes. In general, when structuring a transaction, lenders have to consider, inter alia, notary fees (which are legally established; in some jurisdictions notary public fees represent a considerable transaction cost when the value of any involved real estate is high), registration fees (which vary depending on the security interest or guarantee) and periodical trustee fees (honorarios fiduciarios) payable during term of trust agreements.
There are not stamp duties in Mexico.
Typically, borrowers are charged with paying for transaction costs.