War and the loan: there is no apartment, the debt remains. What next?

The situation in Ukraine has shown that the scenario of the destruction of the apartment bought on credit is not just a theory. What happens to the debt then? Patron Dariusz Wółkiewicz, a lawyer specializing in banking law and financial instruments, emphasizes in an interview with Forbes: the loss of real estate does not cause the expiry of the commitment. The mortgage is a collateral, not an element creating a loan – the contract is repaid according to the schedule, regardless of the fate of the premises.

Credit holidays and grace period

The lawyer indicates that it is a “paper version”. In the realities of the conflict, the state and the financial sector usually react. Example from Ukraine: The Central Bank ordered commercial banks not to treat the failure for the war for 30 days after the war, which suspended the debt collection and termination of contracts. In Polish conditions, solutions would be comparable to known from Pandemia – like credit holidays or gracefulness – but decisions would depend on the authorities and supervision.

What if the borrower stops paying and the building ceases to exist? The bank is not limited to the mortgage – it may satisfy the entire property of the debtor after obtaining an enforceable title. When there is no property, there is insolvency, unless systemic facilitations appear before. Wółkiewicz also reminds of the civil law clause “Rebus sic stantibus”, which, when an extraordinary change in relations, allows us to demand judicial modification of the contract, if the repayment difficulties are independent of the customer and not provided at the time of signing the contract.

Value drop

The decrease in the value of the apartment after the destruction of the surroundings does not reduce the capital to return, but may lead the bank to demand additional security, because the mortgage value decreases. Negotiations may relate to the bank’s salary (e.g. margin), which translates into the installment. At the same time, the patron emphasizes that the goal of financial institutions is to regain funds – hence the practice of restructuring and searching for compromises before terminating the contract.

The issue of insurance also does not bring simple answers. On the market, war damage is turned off as standard, so housing policies do not, in principle, cover such events. Wółkiewicz indicates that in the absence of special solutions, some owners could consider investigating compensation from the State Treasury, referring to constitutional responsibility for citizens’ security – this is, however, a path requiring separate decisions.