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A Hypothecation Agreement (Hypothekarbestellungsurkunde) lets you pledge property as security for a loan while keeping possession of it. Under Austrian law, these agreements are commonly used in real estate financing and must be notarized to create a valid lien (Hypothek) in the land register (Grundbuch).

Banks and lenders rely on these agreements to secure their interests when providing mortgages or business loans. If the borrower defaults, the agreement gives the lender the right to sell the pledged property through a court-supervised process, following Austria's strict enforcement rules. The property owner keeps using the asset but can't sell or transfer it without the lender's approval.

Use a Hypothecation Agreement when seeking substantial financing while wanting to keep your property assets in active use. This agreement proves especially valuable for Austrian businesses needing working capital but preferring not to sell their real estate or equipment outright. It's particularly common in commercial real estate development and manufacturing sectors.

The timing typically aligns with major business expansion plans, equipment purchases, or when refinancing existing loans at better terms. Austrian banks require these agreements before releasing funds for large commercial mortgages. Having the agreement prepared and notarized early in loan negotiations strengthens your position and speeds up the financing process.

• Traditional Property Hypothecation: Most common form used for real estate, requiring land register entry and full notarization
• Maximum Amount Hypothecation (Höchstbetragshypothek): Secures multiple future debts up to a set limit
• Joint Hypothecation (Simultanhypothek): Covers multiple properties under one agreement
• Commercial Equipment Hypothecation: Used for business machinery and equipment while maintaining operational use
• Conditional Hypothecation: Includes specific trigger events or performance metrics that activate the security interest

• Banks and Financial Institutions: Act as primary lenders, drafting and enforcing Hypothecation Agreements through their legal departments
• Property Owners: Sign as borrowers, pledging their real estate or assets while maintaining possession and use
• Notaries: Required by Austrian law to authenticate the agreement and ensure proper registration in the land register
• Legal Counsel: Review and negotiate terms, ensuring compliance with Austrian banking and property laws
• Land Registry Officials: Process and record the hypothecation in the Grundbuch, making it legally binding

• Property Details: Gather complete land register extracts (Grundbuchauszug), property valuations, and current encumbrances
• Loan Parameters: Document the exact loan amount, interest rates, and repayment terms from your lender
• Identity Verification: Collect authorized signatories' official IDs and proof of authority to pledge assets
• Corporate Documents: Prepare company registration excerpts and shareholder resolutions authorizing the hypothecation
• Notary Appointment: Schedule notarization early, as Austrian law requires this for land register registration
• Digital Platform: Use our system to generate a compliant agreement that includes all mandatory Austrian legal requirements

• Property Description: Precise legal identification of the pledged asset, including land register details and cadastral numbers
• Secured Amount: Clear statement of the loan sum, interest rates, and maximum liability limit
• Party Details: Full legal names, addresses, and registration numbers of lender and borrower
• Rights and Obligations: Terms for property use, maintenance requirements, and insurance obligations
• Default Provisions: Specific conditions triggering enforcement and foreclosure procedures
• Notarization Clause: Mandatory statement confirming the agreement requires notarial authentication
• Registration Consent: Express permission to record the hypothecation in the Austrian land register

A Hypothecation Agreement differs significantly from a Credit Agreement in several key aspects, though both relate to lending arrangements. While a Credit Agreement outlines the basic terms of borrowing money, a Hypothecation Agreement specifically deals with pledging property as collateral while maintaining possession.

• Security Structure: Hypothecation Agreements focus solely on creating a property lien, while Credit Agreements cover the entire lending relationship, including payment terms and conditions
• Legal Registration: Hypothecation requires mandatory land register entry and notarization in Austria; Credit Agreements often don't need these formalities
• Asset Control: Hypothecation lets borrowers keep using pledged assets; Credit Agreements might restrict asset use more broadly
• Enforcement Process: Hypothecation follows specific Austrian property enforcement rules, while Credit Agreements rely on general debt collection procedures