A security right (zekerheidsrecht) gives a creditor additional certainty that a claim will be paid. Dutch law distinguishes property security, such as pledge and mortgage, which gives priority on a specific asset (article 3:227 Dutch Civil Code, BW), and personal security, such as suretyship, which gives a claim against a third party.
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What types of security exist under Dutch law?
Property security consists of the right of pledge (pandrecht) and the mortgage right (hypotheek). A mortgage covers registered property and is created by notarial deed and registration in the public registers (article 3:260 BW). A pledge covers other assets, such as movables and receivables (articles 3:236-3:239 BW).
Personal security includes suretyship (borgtocht, article 7:850 BW), joint and several liability (hoofdelijkheid, article 6:6 BW) and bank guarantees. Retention of title (eigendomsvoorbehoud, article 3:92 BW) and the right of retention (retentierecht, article 3:290 BW) work in a similar way and are often called quasi-security.
Why does security matter in insolvency?
Pledgees and mortgagees are secured creditors (separatisten). They may enforce as if there were no bankruptcy (article 57 Bankruptcy Act), subject to a cooling-off period ordered by the supervisory judge (article 63a Bankruptcy Act). Unsecured creditors only share in what remains, which is often little. Pledge and mortgage also rank above most statutory privileges (article 3:278 BW).
Can you transfer ownership as security?
No. A transfer made only for security purposes is not a valid title, so ownership does not pass (article 3:84(3) BW). Lenders must use a pledge or mortgage instead.
Where does security commonly fail?
- A silent pledge only covers receivables that exist, or arise directly from an existing relationship, when the deed is made (article 3:239(1) BW).
- A personal suretyship by a married person or registered partner can be annulled without the spouse’s consent (articles 1:88 and 1:89 BW).
- Retention of title can be lost once the goods are processed or mixed with other goods.
Related terms
Our civil law team advises lenders, suppliers and businesses on taking and enforcing security. Want to know what this means for your situation? Book a free introductory meeting.
