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THE LAW ON SECURITIES (PLEDGE LAW) AND RETENTION OF TITLE

Imagine the following situation: you have put a lot of effort into drafting your terms and conditions, including a well-developed retention of title clause. However, your debtor sold your goods to a third party, despite this clause. And now? In this case, the pledge law will protect you!

Start at the beginning: retention of title

Where you, the supplier, have included a retention of title clause in your general conditions, you remain the owner of the delivered goods until the full price of the goods has been paid to you.

You can invoke this clause when:

the buyer has not yet paid for the goods, in full, by the due date of the invoice.

the clause is explicitly recognized by the buyer, proof can be provided (required, even in B2B) and, these conditions have not been contested.

the goods are still physically present at the buyer’s premises (hence, have therefore not been sold to third parties).

Pledge law

So, there are a few pitfalls to spot:

What happens if the buyer does not authorize the return of the goods? You will then need an enforceable title to be able to exercise your retention of title.

What if the buyer turns out to be insolvent?

If the debtor is declared bankrupt, you, as a preferred creditor, can still claim the property or assert a lien on the proceeds of the property if it has been sold by the curatorship.

However, if the debtor is in judicial reorganization proceedings (JRP), you cannot invoke your retention of title. In these proceedings, the court granted a stay of payment to the buyer as a struggling business, so it “makes sense” that you have not (yet) been paid. There is always the possibility of terminating the contract by registered letter, and with the request to pay within x days to avoid this termination. However, if this is not done voluntarily, you must apply the dissolution by procedure.

The law on pledges and the pledge register

Retention of title was contained in Article 101 of the Bankruptcy Law, which allowed recovery of assets if the debtor was declared bankrupt (subject to recognition and physical presence of the assets).

The “law on real movable securities of July 11, 2013” (the Pledge law), which came into force with delay on January 1, 2018, included the retention of title clause in the civil code and abolished article 101 of bankruptcy law.

This anchoring meant an extension and generalization of the possibility of applying the retention of title:

The retention of title can be invoked regardless of the legal nature of the agreement in which it is included (sales contracts, exchange agreements, donation, acceptance, contribution agreements, etc.).

The retention of title can be invoked in any circumstance. Its effects are therefore not limited to bankruptcy but also apply to collective debt settlements, foreclosures, liquidations, etc.).

The retention of title can be linked to a resale right: the property in question must no longer be physically present at the buyer’s premises. It now also applies to all claims arising from or replacing these goods. It persists when the goods in question have been mixed or incorporated with other goods. It will therefore also be possible to recover goods from third parties.

Some important caveats:

The retention of title must be stipulated in writing (in the offer, the purchase order, the delivery document), at the latest at the time of delivery of the goods concerned. Make sure you include retention of title as a clause in your terms and conditions and make sure the terms and conditions are present on all your documents.

In B2C cases, explicit and signed consent to the clause is required.

Registration in the pledge register is not compulsory, but it is advisable and even gives you priority over mortgage creditors.

However, to assert the resale right in the event of incorporation (when the property in question is attached to a building), a registration is necessary.

Please note: the resale right only applies to B2B articles and not to B2C articles! Consumers are well protected by the law on pledges.

Registration in the pledge register makes the clause accessible online and publicly, so that it is known to all. It is therefore preferable to consult the pledge register before purchasing movable property to ensure that the property in question is not pledged or is the subject of a retention of title.

Entry in the pledge register is not free and, depending on the amount of the claim, will cost you between 8 and 500 EUR. Consulting the pledge register costs EUR 5.

Timing is important: the date on which the clause was drafted (before or after January 1, 2018) will determine the law applicable. You can find a schematic representation of this problem in this thesis (3.1.3.).

For other questions or comments on this topic, please contact us via info@tcm.be or +32 16 74 52 00.

Sources

Legislation:

Master’s thesis:

https://libstore.ugent.be/fulltxt/RUG01/002/479/391/RUG01-002479391_2018_0001_AC.pdf

Articles:

22 June 2021

THE LAW ON SECURITIES (PLEDGE LAW) AND RETENTION OF TITLE

Imagine the following situation: you have put a lot of effort into drafting your terms and conditions, including a well-developed retention of title clause. However, your debtor sold your goods to a third party, despite this clause. And now? In this case, the pledge law will protect you!

Start at the beginning: retention of title

Where you, the supplier, have included a retention of title clause in your general conditions, you remain the owner of the delivered goods until the full price of the goods has been paid to you.

You can invoke this clause when:

the buyer has not yet paid for the goods, in full, by the due date of the invoice.

the clause is explicitly recognized by the buyer, proof can be provided (required, even in B2B) and, these conditions have not been contested.

the goods are still physically present at the buyer’s premises (hence, have therefore not been sold to third parties).

Pledge law

So, there are a few pitfalls to spot:

What happens if the buyer does not authorize the return of the goods? You will then need an enforceable title to be able to exercise your retention of title.

What if the buyer turns out to be insolvent?

If the debtor is declared bankrupt, you, as a preferred creditor, can still claim the property or assert a lien on the proceeds of the property if it has been sold by the curatorship.

However, if the debtor is in judicial reorganization proceedings (JRP), you cannot invoke your retention of title. In these proceedings, the court granted a stay of payment to the buyer as a struggling business, so it “makes sense” that you have not (yet) been paid. There is always the possibility of terminating the contract by registered letter, and with the request to pay within x days to avoid this termination. However, if this is not done voluntarily, you must apply the dissolution by procedure.

The law on pledges and the pledge register

Retention of title was contained in Article 101 of the Bankruptcy Law, which allowed recovery of assets if the debtor was declared bankrupt (subject to recognition and physical presence of the assets).

The “law on real movable securities of July 11, 2013” (the Pledge law), which came into force with delay on January 1, 2018, included the retention of title clause in the civil code and abolished article 101 of bankruptcy law.

This anchoring meant an extension and generalization of the possibility of applying the retention of title:

The retention of title can be invoked regardless of the legal nature of the agreement in which it is included (sales contracts, exchange agreements, donation, acceptance, contribution agreements, etc.).

The retention of title can be invoked in any circumstance. Its effects are therefore not limited to bankruptcy but also apply to collective debt settlements, foreclosures, liquidations, etc.).

The retention of title can be linked to a resale right: the property in question must no longer be physically present at the buyer’s premises. It now also applies to all claims arising from or replacing these goods. It persists when the goods in question have been mixed or incorporated with other goods. It will therefore also be possible to recover goods from third parties.

Some important caveats:

The retention of title must be stipulated in writing (in the offer, the purchase order, the delivery document), at the latest at the time of delivery of the goods concerned. Make sure you include retention of title as a clause in your terms and conditions and make sure the terms and conditions are present on all your documents.

In B2C cases, explicit and signed consent to the clause is required.

Registration in the pledge register is not compulsory, but it is advisable and even gives you priority over mortgage creditors.

However, to assert the resale right in the event of incorporation (when the property in question is attached to a building), a registration is necessary.

Please note: the resale right only applies to B2B articles and not to B2C articles! Consumers are well protected by the law on pledges.

Registration in the pledge register makes the clause accessible online and publicly, so that it is known to all. It is therefore preferable to consult the pledge register before purchasing movable property to ensure that the property in question is not pledged or is the subject of a retention of title.

Entry in the pledge register is not free and, depending on the amount of the claim, will cost you between 8 and 500 EUR. Consulting the pledge register costs EUR 5.

Timing is important: the date on which the clause was drafted (before or after January 1, 2018) will determine the law applicable. You can find a schematic representation of this problem in this thesis (3.1.3.).

For other questions or comments on this topic, please contact us via info@tcm.be or +32 16 74 52 00.