PROPERTY LAW – ALL SUMMARIES FROM BOOK CHAPTERS

CHAPTER 1:

- Property law is the law that deals with entitlements to property. It concerns rights that a
person has against a considerable group of other persons concerning an object (erga omnes
rights / rights against the world.) It is mandatory law, limiting the parties’ freedom to shape
the content of proprietary relationships.
- Offers legal certainty & predictability
- Property rights are absolute rights (external effect: binding upon every other person)
- A property rights rests immediately and direct on the physical thing which is its object and
remains resting on that thing, wherever it is located and in whose hands it may have passed.
- The person entitled to a property right has a right to follow the object of his right (droit de
suite) and can demand revindication (possibility to demand the thing by a property action
from who holds the thing in his hands.)
- Right of preference –> a person entitled to a property right that rests on a specific thing has
priority over all property rights of a later date on that same thing (prior tempore) and over
all creditors whose claims are not secured by a property security right.
- Includes land law, the law of personal property, the law relating to claims, trust law and the
law on security rights.
- Concerns movables & immovables but also intangible / ‘incorporeal’ objects; intellectual
property and rights to performance by another party arising from a contract (claims).
- Civil law: uniform approach towards property law. Nevertheless, fragmentation can also be
found in civil law systems; e.g. formalities for transfer  delivery of movables requires the
passing of possession; delivery of immovables generally requires registration in the land
registry of an authentic (notarial deed).
- EU: fragmentation due to uniform European property law next to law of MS
- Common law: fragmented approach – land law, trust law, personal property law & claims

Ownership:

- Common law does NOT recognize ‘ownership’ in the civil law sense and does not
differentiate ownership and possession.
- Ownership  title to land (fee simple); based on the fact of possession (best right to
possession). The person with possession has title against anyone who does not have a
‘better right’, or a right still based on earlier possession.
- In civil law, there is a sharp distinction between ownership and possession: the owner has a
right to possession, mere possessor does not. Ownership is absolute.

- Civil law recognises a limited number of types of interests in property  numerus clausus
Third persons must be adequately informed about their existence ( principle of publicity)
principle of specificity

NUMERUS CLAUSUS

- Method to decide which legal relations belong to the law of property: parties involved can
only create those rights, which are allowed by the law. (=Limitation on party autonomy) The
number of property rights is therefore closed. Limitation with regard to (a) the number and
 content of property rights, (b) the way in which these rights can be created, transferred and
destroyed.
- For reasons of certainty and transparency, in all four legal systems.
- Restricts number and content of PR
Legal provisions on Numerus Clausus:
FR  Art. 543 Code Civil
NL  Art. 3:81(1) BWB
ENG  Section 1 (1)-(3) (Legal Estates and Equitable Interests) Law of Property Act 1925 –
for Land !

Caquelard v Lemoine Case (1834): FR

 Two parties can very well be co-owners, even with an unfamiliar division of rights.
(Ownership, servitude)
 Art. 544, 546, 552 Cciv – general law on ownership
 Art. 543 is NOT exhaustive; theoretically new property rights can be added to the list.

TRANSPARENCY: SPECIFICITY AND PUBLICITY

- The rights should be transparent to everybody concerned.

- Two aspects: specificity (the object of the property right must be precise enough- it must be
clear which objects are controlled by that right) and publicity (third parties must be able to
obtain information about such a right)

GER: §93  essential components of an object cannot be the subject of specific rights, i.e.
rights in rem, it is impossible for several persons to own parts of a house (exception:
apartment-ownership)
The German Civil Code makes a strict separation between the legal act creating a duty and
the legal act by which the duty is fulfilled. (Principle of separation).
The real contract is abstract; its effect is independent of the effect of the causal transaction
(e.g. when a causal transaction has not been established, is void etc., the real agreement still
has effect.)= Principle of abstraction
Principle of publicity

ENG: Publicity is reached through possession (movables) and through registration (land,
houses and movables of considerable value; ships, aircraft).

NL: Art. 1376 BWB: agreements can only be valid between the parties to it and their
successors under universal title, who continue them as persons, but cannot – outside of a
situation that does not present itself in this case – bring any advantage or disadvantage to
third parties (Blaauboer/Berlips case (1905): A contract obliging the owner of land to
construct a public road on his land does not bind successive owners of that land.)
Art. 721, 722 BWB permits placing a permanent burden on a piece of land
(1) Contracts cannot burden nor benefit third parties. Only by consent from the creditor can
the debtor pass his duty to another person.
(2) Concept of servitude: it is a burden for the benefit of a parcel of land (dominant
tenement) and burdening a neighbouring parcel of land (servient tenement). This
burden can only be passive / negative: a duty to accept / abstain not to do sth.)
 (3) Principle of transparency: duties burdening third parties must be made public.

Ground rules:

(i) One cannot transfer more than one has (nemo dat)
(ii) Older property rights have priority over younger property rights (prior tempore), with the
exception of a younger property right created with the consent of the older property right or
if the holder of the existing property right is a party to the creation of the new property
right.
(iii) Limited rights have priority over fuller rights. (E.g. right of mortgage is a limited right that
burdens the right of ownership.)
(iv) Once it has been established that a right is a PR, the law will give such a right special
protection. (E.g. revindication- right given to the owner to (re)claim his property from
anyone who is holding it without title)
(v) The principle of accession: the security right follows the claim - (Only) If a property right is
securing the repayment of a loan  the existence of the security rights depends upon the
existence of an underlying debt (accessority rule)
(vi) Third parties can only be bound by negative burdens in rem.
(vii) Droit de suite: property rights follow the object
(viii) Property rights should be decided ex ante, not ex post (must be clear from the
beginning who has a property right)

Basic order of property rights: = The ‘classical model’ – found in both legal systems

 Primary rights  confers the most extensive property right on a person

 Secondary rights  confer lesser (limited) property rights on persons
 Tertiary rights  intermediary category between personal and property rights

Trust in English law = mechanism to separate management of property from benefit. A relationship
in which one or more persons (the trustees) hold property, but administer it either for the benefit
for someone else (the beneficiary) or to further some particular purpose.

- Common law & Equity (duplex ordo); distinction between ‘legal’ and ‘equitable owner’: both
have property rights with regard to the object of the trust: The ‘trustee’ (manager of
property) is entitled to it under common law and the ‘beneficiary’ (person in whose interest
the property is managed) is entitled to it under equity.
- Requirements: (i) the relationship must have more than a momentary duration, (ii) there
must be some specific asset (real property or chattels), (iii) it must have a lawful purpose, (iv)
there must be a remedy against the trustee for breach of his duties as a fiduciary.
 A moral duty to hold property for another does not qualify as a trust unless there is a
realistic way of enforcing it.

Fiducie in French Law: the owner of the rights over a patrimony (constituent) must consent to the
transfer of a part or the entirety of his rights to the patrimony of another person (fiduciaire), for the
benefit of a third party (bénéficiaire.)

Germany:

§90 object = physical thing (encompasses the (corporeal) objects and (incorporeal) rights)
CHAPTER 2 – THE PROTECTION OF PROPERTY RIGHTS

- Property rights have effect against third parties by their nature. The holder of such a right
can therefore enforce his right against third parties and can also take action against them
when these parties interfered with the holder’s property rights.

Limited PR  contains certain powers of the right of ownership that are temporarily in the hands of
another person. When ownership and limited PR are combined, the powers contained in the limited
PR return to the owner and the PR ends to exist through a merger with the powers of the right of
ownership (Exception in GER law: §889 BGB – possibility of holding a PR and ownership over the
same object “Rechte an der eigenen Sache”. When a limited PR is created, the holder of that PR is
awarded claims to protect his right vis-à-vis third parties.

EU: Article 1 First Protocol of the ECHR: protection of ownership from interference from the state
and obligation of the state to guarantee the existence and the protection of private ownership.

GER: § 14 BGB

§§227, 229, 230 BGB: when property is illegally attacked, the owner may even be allowed to defend
it by use of reasonable force.

§823(1) BGB: If an object is harmed or destroyed by the tortious behaviour of another, the holder of
a property right is entitled to damages and, where another uses the object without consent, the
holder of the right may recover the obtained profits or claim a decent price for the use of the object.

Interference:

(1) Protection of the holder of a property right against dispossession,

(2) Protection against disturbance of the enjoyment of possession

Civil law countries distinguish between ownership and possession

In Common / English law, there is no concept of ownership in the civil law sense and the protection
of property rights means primarily the protection of possession.

I. Civil Law
I.A Possession and Possessory Claims

Ownership and limited property rights deal with the legal entitlements a person may
have with respect to an object.
Possession relates primarily to the factual control of an object.
Functions of possession: indicates the existence of a property right / publicity function
FR & GER law: legal presumption that the possessor of a movable object is also the
owner (Art. 2276 Cciv; §1006 BGB)

Functions of possession:

• 1. Presumption of ownership

• 2. Preservation of peace and order

 • 3. May be used as a method of publicity

• 4. Can lead to acquisitive prescription

• 5. Plays a role in the transfer of ownership of movables

• 6. Having possession of an object may lead to duties in tort (liability)

France Netherlands Germany

- Holding an Detentor Holder Fremdbezitzer

object for
!POSSESSOR
someone else

- Intention to
return the
object

- Holding the Possessor Possessor Eigenbezitzer

object for
!POSSESSOR
yourself

- Intention to
keep

France

Art. 2255  Definition of possession; possession relates to corporeal objects and to claims which are
incorporated in a corporeal title. The holding or enjoyment of a thing or a right.

It is sufficient to exercise the actual control of the object by an intermediary in order to become a
possessor, despite the loss of actual control, possession may be maintained under certain conditions
only by the will to possess.

Art. 2261 Cciv  Possession requires two factors: (i) the actual control of the object (corpus), (ii) the
will to hold the object as an owner respectively as the holder of a limited property right

To hold an object for another does NOT constitute possession but DETENTION

Art. 2266 Cciv  the detentor cannot acquire ownership of the object by way of acquisitive
prescription.

Art. 2256  one is always presumed to possess for oneself and in the capacity of an owner

Possession is terminated when the actual control (corpus) or the will (animus) is lost.

Art. 2257

Art. 2261-Art. 2266 Code Civil

Protection of possession  Art. 2278, 2279 Cciv, Art. 2264-2267 Nouveau Code de Procedure Civile
(NCPC)

Germany

No general definition of ownership, but rather protection of possession

Possession = actual control of a corporeal object, comprises movables and immovables

German law distinguishes between different types of possession; Eigenbesitz and Fremdbesitz and
direct (unmittelbarer) and indirect possession (mittelbarer Besitz). The distinction between
Eigenbesitz and Fremdbesitz depends on the intention of the possessor.

The direct possessor has actual control of the object, whilst the indirect possessor exercises his
possession by an intermediary (=Besitzmittler; §868)

Creation of indirect possession is the result of a legal transaction (e.g. creation of a lease and
delivery of possession of the leased object).

Indirect possession is terminated if the direct possessor loses the possession, or if the direct
possessor shows by way of a perceptible act that he no longer accepts the position of the indirect
possessor, or if the indirect possessor loses the claim for restoration of property.

Not only material interference, but also immaterial interference (contesting the possession of
another, uttering threats or prohibitions as well as noise) may constitute a disturbance of possession
(§858 BGB).

§854 BGB  Acquisition of possession: direct possession is acquired by gaining actual control of the
object. Can be done by way of original acquisition or by transfer (derivative acquisition).

§855 BGB  Servant in possession (Besitzdiener) – an agent without any right of his own

§856 BGB  Termination of possession direct possession by the loss of the actual control over the
object (wilful or not)

§857 BGB  Transferability of possession by succession; no need of actual control required

§858 BGB  Unlawful interference (interdiction) is also an infringement of possession

§859 BGB  Self-help by the possessor: 859 (1) (Besitzwehr)- specific form of self-defence against
actual force (! Must be proportionate; within the scope of the absolute necessary), (Besitzkehr)
entitles the possessor to recover the object from the dispossessor immediately after the interfering
act.

§860 BGB  Right to exercise self-help applies to the direct possessor and the servant in possession

§861 BGB  Claim on account of deprivation of possession (dispossession)

§862 BGB  Claim on account of interference with possession

§863 BGB  Defences of the dispossessor or interferer

§864 BGB  Extinction of possessory claims; the right to file for possessory protection under §§861
and 862 BGB expires after one year after the performance of the unlawful interference.
§865 BGB  Part possession; possession may also extend only to an integral part of an object

§866 BGB  Co-possession; possession can be shared by several persons. If all the co-possessors can
use the object only together = joint possession

§867 BGB  Rights of pursuit of the possessor

§868 BGB  Indirect possession – Besitzmittler: has the position of a possessor and enjoys
possessory protection. Fremdbesitzer

§869 BGB  Claim of the indirect possessor

§870 BGB  Transfer of indirect possession; assigning a claim for restoration of property

§871 BGB  Multistage indirect possession

§872 BGB  Possession as owner (Eigenbesitz) – A person who holds an object for himself is
Eigenbesitzer, no matter whether he is the rightful owner or even a thief. The finder of an object is
Eigenbesitzer, if he keeps the object for himself. §§1106, 937 BGB apply only to Eigenbesitzer.

Fremdbesitzer: person who hold the object for another. If a person finds an object and has the
intention to return it.

§937 BGB  preconditions of acquisitive prescription

§1006 BGB  Presumption of ownership

§1007 BGB  ONLY applies to MOVABLES. Claims of the former possessor of the object to claim
restoration of possession of the actual holder of the object.

France

Possessory protection for movables: Art. 2276 Cciv. –> the possessor of a corporeal movable is
regarded as its owner. Unlawful interference with movables is remedied by vindication.

Protection of possession: (relates only to immovables)

Harhouz v Kherif (1996) the protection of possession only applies to immovable property.

Machicoisne v Thomas (1982)  each co-owner is entitled to claim for possessory protection.

Cornilie v Pierson (1995)  the holder of a servitude granting a right of way is entitled to ward off
interference by possessory action, based on Art. 1264 NCCP

Only possession or detention which is free of defaults is protected. Possession or detention must be
unequivocal and continuous.

Three different types of possessory actions: complainte, dénonciation de nouvel ouvre, action en
réintégration

- The action for complainte is available in case of actual disturbance or dispossession by a

non-violent act, while dénonciation de nouvel ouvre can be claimed against imminent future
interferences caused by construction works. (For both the claimant must has been enjoying
possession or detention for at least one year.)
 - Complainte: possessor or detentor, may claim for the abatement of the interference and the
preservation of the previous status of possession. Also covers the removal of erected
constructions.
- Action de nouvel ouvre: only allows claiming the cessation of the works
- Action en reintegration: for recovery of possession and restoration to the original condition,
including the removal of erected constructions and restoration of damaged constructions.

Art. 2278 Cciv.  the detentor of an immovable property also enjoys possessory protection against
interference by third persons. However, he cannot rely on possessory protection against the person
from whom he received his rights, but is restricted to the rights deriving from the underlying
obligatory relationship.

Art. 2279 Cciv.

Art. 1264 NCPC (Nouveau Code de Procedure Civile)  action en réintégration ; covers the loss of
actual control by a violent act of the dispossessor. This action is also available if possession, or
detention, lasted for less than one year.

Art. 1265 NCPC  Possessory action is irrespective of an underlying entitlement to the property.

Art. 1266 NCPC  The possessor who is also the owner of the property, or the holder of a limited
property right, can choose between possessory protection and vindication of the object. When he
decides to raise an action for vindication, the possessory claim becomes inadmissible.

Art. 1267 NCPC

I.B Protection of ownership

- Ownership = most extensive property rights, right in rem

- An individual who has ownership has a title, which can be invoked erga omnes by this
person. However, third persons can challenge it.
- Specific claims for the assertion of ownership
- Rei vindication: right of the owner to assert his right of ownership and to claim the return of
the object from any third party who holds the object without sufficient entitlement. Owner
is granted right to protect his object from negative interference.

France

- Code Civil does not explicitly provide for rei vindication, but implicitly recognises this right
(e.g. Art. 549, 1653 Cciv.)
- No explicit comprehensive right of the owner to ward off unlawful interference by third
parties
- Rei vindication covers movable and immovable property
- Besides requesting the return of the object by way of the rei vindication, the owner is also
entitled to claim damages for harm caused to the object on the basis of general tort law.
- Proof of ownership is essential as registration in the French land register has no constitutive
effect and does not presume / prove ownership. Possessor of the object is presumed to be
owner.

Art. 549 Cciv.  The possessor in good faith becomes the owner of the fruits, the possessor in bad
faith is obliged to return the fruits, or if he is unable to do so, must compensate the owner for their
value. The possessor who is obliged to return the object may claim the reimbursement of the
expenses incurred for the object depending on the type of expenses.

Art. 545 Cciv.  no person may be compelled to cede his property, except if the public good so
requireds and subject to equitable prior compensation

Art. 646 Cciv.  action en bornage; land owner can request his neighbour to set the boundaries of
their contiguous tenements.

Art. 1315 Cciv et seq.  entitlement to an object (must be proven by the claimant who files for an
action of revendication)

L’action confessoire; the holder of servitude or usufruct is entitled to assert his right and to ward off
unlawful interference by a specific type of revindication

Action négotoire de servitude; specific claim of the land owner to ward off an unjustified claim of
servitude  The owner of a parcel is entitled to request the removal of a building encroaching onto
his land which was constructed without his consent.

Art. 544 Cciv.  An owner’s right to enjoy his property in the most absolute manner

Art. 1383 Cciv.  limits an owner’s right by Art. 544. Requirement not to cause to another’s
property a prejudice going beyond the normal inconveniences inherent in the neighbourly proximity.

To deprive the neighbour of sunlight may constitute an unlawful interference and create an
obligation to pay damages.

Movable objects

FRANCE

Revindication –> allows the owner to require the restoration of the object from a third party who
holds it without sufficient entitlement. In order to recover the object, the claimant must prove his
ownership, it suffices to show that he has a better entitlement to the object than the defendant.

Art. 2276

Art. 2277

GERMANY

Assertion of ownership (rei vindication):

§985 BGB  Recovery of property (rei vindicatio): the owner of an object has the right to request
the return of the object from any person who holds the object without sufficient entitlement
(unlawful possessor). Extends equally to movables and immovables. (Does not cover monetary
compensation for lost value.)

In order to recover the object the owner must prove his ownership and that the defendant has
direct or indirect possession of the object

§986 BGB  Defenses of the possessor: up to the possessor to prove his right to possession.

In order to prove ownership owner can rely on

§891 BGB  legal presumption of ownership for parcels

§1006 BGB  presumption of ownership for movables for the possessor

§1011 BGB  Right to recovery also obtains to co-owner of an object. The co-owner may either
claim the granting of joint possession, or the recovery of the whole object.

§432 BGB  If the co-owner claims recovery of the whole object he must demand performance to
all co-owners.

The right to claim recovery of the object applies to the holder of a hereditary building right (§11
ErbBauRG), a right of usufruct (§1065 BGB) or a right of pledge (§1227 BGB)

The possessor is not obliged to return the object if he has a right to possession. This right may derive
from a property right (usufruct, servitude, pledge or an acquisition right), a contract (sale, tenancy
agreement) or another legal obligation (e.g. spouse’s right to use the matrimonial home).

The right to claim the return of the object is also blocked by a retention right under §273 or §1003
BGB.

§§978-93 BGB describe the claims the owner may rise against the possessor (right to compensation
under tort law or unjust enrichment, entitlement to the fruits of the object…)

§§994-1003 BGB define the rights of the possessor against the owner for the claim to
reimbursement of the expenses incurred for the object. Distinguishes between different types of
possessors and between types of expenses (necessary, useful, and other expenses).

Difference between possessor in good faith , in bad faith (§990) and wrongful possessor who gained
possession by way of unlawful interference or criminal offence (§992 BGB).

When litigation is pending the possessor is subject to the rules applying to the possessor in bad faith
(§989 BGB)

In case of loss or deterioration of the object during the time of the possession, the possessor in good
faith in not liable at all (§993 BGB), the possessor in bad faith is liable when at fault (§990 BGB) and
the wrongful possessor is even liable for accidental damage (§848, §992 BGB).

The same pattern applies to the obligation of the possessor to restore any gained uses or fruits of
the object. The possessor in good faith must only return the fruits if he has obtained possession
without payment (§988) or gained the fruits by way of excessive management (§993 BGB), the law
obliges the possessor in bad faith to restore all gained uses, to compensate the owner for all the
fruits he cannot return and for the profits and benefits the possessor negligently failed to gain from
the object (§990, §987 BGB). The wrongful possessor is fully liable in tort (§992 BGB)

Ownership is also protected when the object is included in an execution or insolvency proceeding of
another: §771 ZPO, §47 InsO (Insolvency Act) allow the owner to assert his ownership.

Recovery of the object from the indirect possessor (Bowling Alley 1969)  The owner may claim
recovery of the object from the indirect possessor either by claiming the assignment of the indirect
possessor’s claim for restoration of property or directly by claiming recovery of the object. Direct
recovery may not be claimed if the indirect possessor is unable to return the object unless the
indirect possessor is liable to the owner under §§989 et seq. §985 BGB owner is entitled to direct the
claim for restoration against the indirect possessor.
§283 BGB gives the owner the right to claim monetary compensation when the possessor does not
deliver the object within the time limit set by the owner or the trial court.

Injunction and claim for removal: Movables & immovables

Germany:

§1004 BGB  Covers interference by human behaviour; claim for removal and injunction: right of
the owner of an object to ward off impairment caused by third parties by way of judicial action.
Complements §985 BGB which enables the owner to regain possession of the object. Provides for
two claims: (i) the right to removal of actual interference (Beseitigungsanspruch), (ii) the right to an
injunction (Unterlassungsanspruch) in order to prevent the occurrence of future interference. The
owner must prove that the interference is either imminent, or that there is a concrete danger that
the interferer who already caused an interference will repeat the interference
(Wiederholungsgefahr).

Requires a detriment of the property. Examples: causing damage to the object, entering a house or
garden without consent or even planting a tree and thus setting the cause for the damage to the
neighbour’s watercourse by penetrating roots or causing noise from frog croaking by erecting a
garden pond. The owner of a house is responsible as indirect interferer for the fire damage on the
neighbour’s house caused by a technical defect of the electrical installations; liable according to
§906(2) BGB – general responsibility for the impairing condition of the object or undertaking.
‘Indirect interferer’ in the past is still liable

Applies also to the holder of other property rights; holder of a right of servitude (§1027, §1090 (2)
BGB), the usufructuary (§1065 BGB), the pledgee (§1227 BGB), the holder of a security interest in
land (§1134 BGB) and the holder of a right of superficies (§11 ErbBauRG).

The entitlement lies with the owner of the object including the co-owner (§1011 BGB). In respect to
claim one co-owner raises against the other, the claimant, must observe the obligations deriving
from their internal relationship and the mutual obligation of each co-owner to consider the rights
and interests of the other (§745 BGB)

The action must be addressed to the interferer (Störer)

- Handlungsstörer= person who causes the interference by his own active behaviour
- Zustandsstörer / ‘indirect interferer’  liable under §1004 BGB due to his responsibility for
the impairing condition of the object or undertaking.

The owner is not entitled to claim an injunction or the removal, if the owner is obliged to tolerate
the interference. Such an obligation may derive from a property right (e.g. right of servitude) or an
obligatory right of the interferer or be directly provided by law (e.g. public use of a privately owned
object).

§242 BGB principle of good faith; obliges neighbours to mutual respect for the interests of the
other.

COMMON LAW

- Protection of property interests mainly by tort law – property torts when damage to
property is caused (applies to both; movables & land)
- NO concept of a general right to claim the compulsory return of the object
 - However, return still possible; esp. with regard to land  specific action for specific recovery
of possession of land. Goods: specific recovery may be attributed as a tort law remedy upon
discretion of the court.
- Right to claim injunction – part of tort law, in discretion of court
- Injunction in respect to trespass to land and nuisance usually granted
- Comprises – the right to claim that the defendant refrain from committing breaches of legal
obligations in the future (prohibitory /negative injunction) and – the right to force the
defendant to observe a legal obligation or to undo the effects of a past breach of legal
obligation (mandatory injunction). Interlocutory injunction: gives provisional relief until the
hearing of the case on the merits, quia timet injunction: prevents an imminent future wrong.
- Tort of negligence – available when damage is caused by the breach of a duty of care
- Primary remedy for protection of PR  attribution of damages.
- In property torts, even the mere infringement of a PR without inflicting any actual damage
may oblige the tortfeasor to pay a certain sum of money for the violation of the right per se
(nominal damages).

II.A LAND

- DISPOSESSION

The holder of a title to land which enables exclusive possession has the right to recover possession
from a person who entered the land without his consent. The dispossessed title-holder may either
retake the land himself by way of self-help, or obtain an order from the court that possession of the
land be given up to him. (Rule 1(1) The Civil Procedure Rules 1998, Sch. 1, R 113 – Summary
Proceedings for Possession of Land).

The ‘owner’ of a house occupied by squatters may use reasonable force to turn them out without aid
of the courts of law or apply for an order for possession. The court has no discretion to suspend the
order. (The use of force must be proportionate)

- TRESPASS TO LAND

- Interference other than dispossession allows for a remedy in tort. Trespass to land is available
where the defendant has entered the land without consent of the title-holder, or actual possessor,
and leads to an entitlement to claim for damages and an injunction to prevent future interference.
The interference must be direct and immediate. It need not be persistent or cause harm to the land
itself or to property on the land. NO fault need to be established. In order to be entitled to sue in
trespass to land, the actual possessor must control the land and have the will to exclude others from
its possession.

Damages may be given in substitution for an injunction in cases where the injury to the claimant’s
rights is (i) small, (ii) capable of being estimated in money, (iii) can be adequately compensated by a
small money payment, and (iv) where the case is one in which it would be oppressive to the
defendant to grant an injunction (L Smith LJ in Shelfer v City of London Electric Lighting Company
1894)

- NUISANCE

Can be invoked in case of indirect interference when pollutants cause a disturbance to the use and
enjoyment of land. Fault need not to be established. The interference with enjoyment of land must
be ‘unreasonable’.
If land is let (for a definite purpose), the landlord is liable for any nuisance caused by the tenant
which arises as the natural and necessary result of such use. (Sampson v Hodson-Pressinger) 
shows that not only the person who creates interference is liable in nuisance, but also the person
who authorised it (landlord), either by way of implied or express consent or as a result of the
responsibility a landlord has for the construction of the house.

3 remedies are available: damages, injunction and abatement of nuisance (very limited form of self-
help)

Rylands v Fletcher –> Where damage to land is caused by the non-natural use of land, a special strict
liability tort for hazardous activities might apply

Liability under Rylands v Fletcher requires:

(i) A non-natural use of the land by the tortfeasor,

(ii) A dangerous thing or substance
(iii) The escape of this thing or substance onto the land of another

Liability in nuisance requires foreseeability of the harm (Cambridge Water Co Ltd v

Eastern Counties Leather)

Storage of chemicals in substantial quantities cannot be regarded as ordinary use of land.

Only a person with a right to exclusive possession of the land affected has the right to sue in
nuisance.

II.B GOODS

- The right to exclusive possession of goods (movable objects) is protected by various torts;
torts of conversion (trover), trespass to goods and negligence.
- Negligence: deals with entitlement to compensatory damages when property is harmed in
breach of a duty of care
- Conversion & trespass: legal instruments to protect the holder of movable property against
misappropriation or other interference. ONLY apply to corporeal objects. Do NOT require
that damage is shown or fault is established. Principle of relativity of title: the party in
possession has a title good against any person who cannot show a better title.

TRESPASS

Section 1 of the Tort (Interference with Goods) Act 1977  Definition of ‘wrongful interference with
goods’

Section 3(2) of the Tort (Interference with Goods) Act 1977  available relief in case of wrongful
interference with good; the court may, at its discretion, besides attributing damages, also issue an
order for delivery of the good.

Limitation Act 1980, sect. 2,3  Time limit to bring an action of conversion is six years

Trespass to goods requires a direct physical interference with the good of another (e.g. scratching
another person’s coach panel, killing another’s animal, removing a car from a garage). It is not
necessary that the interference causes material damage (e.g. unauthorised act of riding a horse).
Indirect interference or a mere accidental and not wilful act does not constitute Trespass.
The finder of a jewel has such a property as will enable him to keep it against all but the rightful
owner, and consequently may maintain trover.

- CONVERSION
 Hollins and others v Fowler and others

“Any person who, however innocently, obtains possession of the goods of a person who has been
fraudulently deprived of them, and disposes of these goods for his own benefit, or for that of
another person, is guilty of a conversion.”

(I) The defendant’s conduct was inconsistent with the rights of the owner (or other person
entitled to possession)
(II) The conduct was deliberate, not accidental.
(III) The conduct was so extensive an encroachment on the rights of the owner as to exclude
him from use and possession of the goods.

E.g. the taking, detention or disposition of a chattel in a way that is inconsistent with the claimant’s
title.

CIVIL LAW AND COMMON LAW: THE FUNDAMENTAL DIFFERENCE

- Civil law countries differentiate between ownership and possession and provide for specific
actions for the protection of possession and ownership. These actions allow (apart from tort
law instruments) for specific recovery and injunctive relief in case of dispossession and
disturbance of possession.
- Common law: no unitary concept of ownership, protection of property rights is dealt with
under the notion of protection of possession by tort law.
- French law does not explicitly discuss self-help of the possessor, German and English law
admit it under certain restricted preconditions.

PROTECTION OF PROPERTY RIGHTS IN CIVIL LAW

III.B. Possession

Possession does not depend on the legal entitlement towards the object; in all three legal systems
the defendant cannot raise objections based on the proprietary entitlement to the object.

French Civil Code  notion of possession for both movable and immovable property, covers
corporeal objects and claims which are incorporated in a corporeal title. However, possessory
protection relates ONLY to immovable property. Distinction between three possessory actions; (I)
complainte, (II) dénonciation de nouovel ouevre, (III) l’action en réintégration

German BGB  only corporeal objects can be the object of possession. No distinction between
possessor and detentor. However, no differentiation between movable and immovable property for
possessory protection. Distinguishes between two types of self-help: (I) the defence against actual
force (Besitzwehr) and (II) the right of the possessor to recover the object immediately after the
interference (Besitzkehr).

A person who holds an object for another is considered a detentor under French law and a possessor
in Germany (Fremdbesitzer)

OWNERSHIP
The rei vindicatio gives the owner the right to assert his right and to claim the return of the object
from any third party who holds the object without sufficient entitlement. Applies to movable and
immovable property alike.

All three civil law systems provide for rules regarding the reciprocal rights and obligations of the
possessor and the owner when the object is vindicated (damage claims, right to the enjoyment of
fruits and reimbursement of expenses).

All three countries have rules concerning the protection of a neighbour against excessive
interference by noise and polluting substances (GER-BGB, FR-case law on basis of tort law)

France  main importance protection of immovable property ; Art. 2276 Cciv – possession of a
movable object usually establishes ownership. Does not provide for actio negatoria, but deals with
such claims under the rei vindication.

German law  Eigentümer-Besitzer-Verhältnis; §1004 BGB – right of the owner of an object to ward
off impairment caused by third parties by way of judicial action (actio negatoria). Comprises (I) the
right to removal of actual interference (Beseitigungsanspruch) and (II) the right to injunction
(Unterlassungsanspruch) in order to prevent the occurrence of future interference. For this, the
owner must prove that the interference is either (a) imminent, or (b) that there is the concrete
danger that the interferer who already caused an interference will repeat the interference
(Wiederholungsgefahr). For both movable and immovable property and also apply to the holder of
other property rights (servitude, usufruct, pledge, etc.)

PROTECTION OF PROPERTY RIGHTS IN COMMON LAW

- Primarily by tort law; primary remedy for infringement of property rights = attribution of
damages.
- Property torts do NOT require that damage is shown / fault established and allow the
attribution of nominal damages.
- Interference with the possession of land may give rise to the torts of trespass to land and
nuisance. Trespass to land is available where the defendant has entered the land without
consent of the title-holder or actual possessor. Nuisance can be invoked in case of indirect
interference, when pollutants cause a disturbance to the use and enjoyment of land.
(Equivalent to neighbourhood law in GER). Like in FR, part of tort law.
- The right to exclusive possession of goods (movable property) is protected by the torts of
conversion (trover) and trespass to goods. Only apply to corporeal property.
- ENG law has no comprehensive claim comparable to rei vindication (civil law), but specific
recovery is also obtainable; land  Civil Procedure Rules; a person entitled to possession of
land can obtain a court order for possession against a person who entered into or remained
in occupation without his consent. Also available against unknown persons (contrary to civil
law rei vindication). In respect of goods  specific recovery may be attributed as a tort law
remedy upon discretion of the court (section 3(2) of the Tort (Interference with Goods) Act
1977).
- Tort law remedies also comprise the right to claim for an injunction  discretion of courts.
CHAPTER THREE – TYPES OF PROPERTY RIGHTS – IMMOVABLES AND MOVABLES (GOODS)

CIVIL LAW

- Numerus clausus of property rights  number and content of available PR defined by

legislation (or by case law in exceptional cases)
- Lease –> law of obligations
- PR can also be used to secure performance of an obligation, usually the payment of a debt
(PR secures the claim).
- Ownership = most extensive entitlement a person can have with regard to an object. From
this right, other PR are derived:
Three main groups  (I) Rights of real servitude
(II) Rights of personal servitude
(III) Rights of emphyteusis and superficies

+ FR  construction lease

+ GER  limited personal servitude

+ NL  apartment right

OWNERSHIP

GER  §903 BGB: allows the owner to use the object as he thinks fit. Ownership cannot be
separated into more limited types of ownership. Another person holding another property right over
the same asset will hold it as a ius in re aliena (right in the land of another) or limited PR.

Limited PR = allows a person to have some limited PR on his own object of ownership (§889 BGB).
ONLY for immovables – a person is both owner and holder of a limited PR over the same object at
the same time.

§1004 BGB (1),(2) There is an obligation to refrain from interfering with so.’s right of ownership.
(Also extends to the airspace §905 (2) BGB). Whoever undertakes interferences has to demonstrate
that the owner does not have an interest in the prohibition thereof.

FR  Art. 544 Cciv: 3 powers of the owner: (I) Right to use, (II) Right to enjoy, (III) Right to alienate.
The right of ownership is the right to enjoy and include the right to use, the right to transfer the right
of ownership to so. Else or to establish a limited PR (e.g. granting a right of usufruct).

NL  Art. 5:1 BW

Right of the owner against third parties to stop others from interfering with the object of his
ownership. Two possible remedies available against those who interfere; either an order for the
return of the object itself (vindication), or the award of an injunction against a third party restraining
them from interfering with the object (actio negatoria).

Ownership can be abused therefore the law establishes limits to the right of ownership:

FR  Art. 544 Cciv (last part): If a party acts with the sole intent of causing nuisance to his
neighbour, this will constitute an abuse of his right of ownership (Coquerel v. Clément-Bayard).

Art. 545 Cciv.: no one can be compelled to give up his right of ownership
Art. 555(1),(2) Cciv.: the lessee remains owner for the duration of the lease, of the buildings he
erected on the land of the lessor. (The right of ownership of a plot of land comprises the land and
any building erected upon it.)

NL  Art. 1401 BW –> due care towards his neighbour – abuse-of-rights-jurisprudence; damage
caused by the act of the owner, through use, enjoyment or disposal, with the intent to disadvantage
another without any benefit for the owner can constitute an abuse of the right of ownership and will
lead to an obligation to remove or stop the disturbance to the third party and pay damages.

(i) Effect of the act of the owner who abused his right of ownership
(ii) Prove that the owner had the intention to harm him or at least cause nuisance

Art. 5:54 BW  construction work, limitation on right of ownership

Another way to limit the right of ownership and the exercise of the right of ownership: through
agreement. Non-transferability clauses  enables an owner to limit the powers of the owner to
which he transfers the object under ownership. Concern the right to dispose of the owner and can
include a prohibition to transfer in general / prohibition to transfer partially (i.e. create other PR).

FR  Art. 900-1 Cciv.: Non-transferability clauses only possible when temporary and justified by a
serious and legitimate aim. Effect: owner cannot dispose of the object. Can include the impossibility
to establish a PR on the object, particularly a property security right. Effect of transfer of an object
for which a non-transferability clause is established – transfer void. Only the person in whose
interest the clause was made is able to invoke the voidness.

GER  §137 BGB: The power to dispose over a transferable right CANNOT be limited or excluded by
legal act. However, an exception is offered through the use of Treuhand. It can limit the owner in his
powers for a certain period of time.

The right of ownership can be transferred to so. Else by fiduciary transfer (zu treuen Händen).
Treuhänder  full owner to outside, but tot he internal relation to the Treugeber, he is bound by
contract, to only exercise his right (‘Treuhand-ownership’) in the way that parties agreed.

NL  Art. 3:83 BW: the transfer of a claim can be specifically excluded by agreement but NOT
possible for PR. Prohibits the restriction of powers of the owner by contract other than the creation
of the recognised limited PR.

Limitations in neighbour law: (!ONLY applies to IMMOVABLES, in particular land)

If part of a building is placed on a piece of land owned by another, the person owning the bulk of the
land on which the building is placed can, under certain conditions, be forced to tolerate the building.
Either by: (a) allowing the creation of a limited PR burdening the ownership of the latter owner or by
(b) recognising a legal duty to tolerate.

NL  Art. 5:57 BW: right to a path

GER  §242 BGB: Notwegrecht – a right to a path can contain a duty for a neighbour to tolerate an
underground sewer on his piece of land (Requirements must be met: §917 BGB: the piece of land of
the claimant must lack a connection, which is necessary for normal use). Involves the principle of
good faith. Right to a path presupposes a lack of an external connection of a piece of land. It does
not exist where another possibility to connect is possible that also assures a normal use of the piece
of land. Only where another possibility of connection would be so as to remove the profitability of
the use of the piece of land or if they would limit the use of land in an unacceptable manner, the
neighbour is required to provide a way on his own land.

 In German and Dutch law the recognition of a right to path is NOT constructed as a
limited PR. In case of acceptance of a right to path, the owner is forced by law to
tolerate a neighbouring owner entering his land. Notweg / Noodweg – where land is
fully enclosed by other pieces of land and no public area, usually a road, can be reached,
the owner of the enclosed land is entitled to a path to the public area.
 FR: right to a path = limited PR. Legal servitude: A right of servitude comes into
existence creating the possibility for the owner of the enclosed land having access to the
public area. Limitation of the right of ownership by the recognition of a right of
servitude, created and enforced by law.
 In neither case (GER&NL / FR) is an agreement between the parties necessary. Where
they do reach an agreement, the right to a path ceases to exist.

FR  Art. 682 Cciv.: right of way – extends to space below the way including the possibility
of a way for gas, water and electricity.

CO-OWNERSHIP

- Each civil law system adheres to unitary concept of ownership; refuses to accept
fragmentation of the right of ownership  concept of a share is created.
- Idea behind unitary concept of ownership: an owner could not be forced to do sth., at least
not without his consent.
- Co-ownership results in several shares of the complete right of ownership to which the ‘co-
owners’ are entitled. It is not a distinct PR: each share entitles its holder to the whole of the
right of ownership. Spouses: 50-50 share
- FR & NL  concept of co-entitlement (indivision / gemeenschap). Different types of
entitlement can be shared. This can include other PR, such as a right of usufruct. Concept is
also used in case of inheritance and marriage to denote the joint entitlement of the right
holders.

NL: general concept of co-ownership Art. 3:166 BW (right of ownership is subject to a community of
shares).

GER: Two forms of co-ownership: (I) Right of co-ownership in equal, undivided shares (Miteigentum
nach Bruchteilen). §§741 et seq BGB, §§1008 et seq BGB, (II) Pure type of co-ownership
(Gesamthandseigentum): undividable community over which the owners can only acting together
exercise their powers. Only exists where specifically provided for by legislation. E.g. partnerships in
company law, marriage, receipt of an inheritance (§§718, 105 et seq, 161 et seq, §§1405 et seq and
§2032 et seq BGB).

FR: co-ownership is an exception to normal ownership. Co-ownership regime can either arise by law
or through agreement. Co-owners each have the right to use and enjoy the object under co-
ownership but must share the object between them - Art. 815-9 Cciv. The parties are bound by each
other through the community. Unless otherwise provided, unanimity is required when one co-owner
intends to sell and transfer an object in the community or his share in the community – Art. 1873-8.
Art. 1873-3 Cciv. Expressly allows parties to deviate from theses provisions. Art. 815 Cciv. Does not
provide a max. duration.
SECURITY OWNERSHIP

- REAL SERVITUDES

Real servitude = A property right granting access to a neighbour over an owner’s land. PR which
burden a piece of land. Limits the ownership of the owner over which the burden runs. Comes into
existence between two owners of a piece of land (Requires two pieces of land (I). (II) The owner of
the servient land must tolerate a specific act of the owner of the dominant land over his land. (III)
The dominant land should benefit from the existence of the servitude (monetary value / aesthetic
value). The owner of the servient land CANNOT be compelled to do sth. (Positive duty cannot be
subject to real servitude). Two exceptions!: (I) parties may agree to the creation of a right of real
servitude containing a positive duty. E.g. real servitude of support, where one building supports the
other. (II) A negative primary duty (e.g. access) can be combined with a positive secondary duty (e.g.
the duty to construct safety bridges).

Cannot restrict the owner’s exercise of his right to dispose of the land.

FR  Art. 637, 686 Cciv. Art. 696-696 Cciv.: Positive obligations are accessory to the PR of servitude
containing a negative duty.

A real servitude may not comprise a prohibition to make use of a piece of land due to the concept of
ownership (Art. 544, 637 Cciv. – ownership is the right to enjoy and dispose of objects in the most
complete manner (…) servitude must not be a burden imposed for the use and utility of land of
another owner.)

GER  §1018 BGB, §1090 BGB: A servitude (real servitude or limited personal servitude), grants its
holder a right of usage of the piece of land limited in content and imposes on the owner of the piece
of land the duty to tolerate or refrain from doing sth. Law of obligation applies  content of
secondary obligation can be a positive duty.

NL  Art. 5:70(1), 5:70(2)  secondary obligations are part of the servitude only as long as the
content the parties attempt to give the servitude is not contrary to the nature of the right of real
servitude. Art. 5:71(1) BW

FRENCH LAW: LEGAL SERVITUDES

- Comes into existence by operation of law

- PR  erga omnes effect even without registration
- Art. 640 Cciv.
- The owner of one piece of land is entitled to bring an action against the other owner of the
land who is forced to tolerate that action.
- Art. 649 Cciv.: two categories of legal servitudes: (I) for private purposes; right to a path
where there is a dominant & servient land, (II) Servitudes for public purposes; arise from
specific legislation- no dominant land. A public legal person benefits from the existence of a
public legal servitude.

Dutch BW: Art. 5:38: a lower piece of land is forced to tolerate natural water flowing from a higher
piece of land (others: Art. 5:47, 5:48 BW).

Ger BGB: §906: an owner is forced to allow emissions of neighbouring pieces of land, including
natural water such as rainwater, in so far as they do not affect the use of his own land.
PERSONAL SERVITUDES

- PR established on behalf of a person as such and not in his capacity as owner.

- Connected to the person holding the right . When the person holding the right ceases to
exist, the right also ceases to exist.
- (i) Right of usufruct, (ii) Rights of use and habitation
- Can also be held on movable assets (unlike real servitudes. One exception)
- GER law additionally recognises two further personal servitudes; limited personal servitudes
& real burdens (Reallasten)

USUFRUCT

- PR which grants the holder the right to use (includes right to lease but only with the purpose
for which the right was established) and enjoy a thing of the owner as well as a right to take
the fruits this thing produces. When a right of usufruct is created, the owner of the asset can
no longer exercise his right to use and enjoy the asset. The only power he has left is the right
to transfer ownership of the asset to another person. (Bare ownership / bare owner). End of
usufruct  right of ownership full and complete again.
- A right of usufruct can also be created by a will so as to distribute the right to use and enjoy
to another person for the duration of that person’s life. (Allows parties to deal with their
assets after their death.)
- It enables a permanent transfer to a person who becomes owner, whose heirs will inherit
the object and a temporary transfer to someone who, for the duration of his life, is entitled
to use the object, but whose heirs do not inherit his right to use.
- Although the holder of a usufruct may use things for the duration of his PR, he is under the
obligation to take care of them.
- When a usufruct is created, an inventory is drafted to establish which assets fall under the
right of usufruct. DUTY in FR, NL law. Parties MAY choose to do so in GER.
- Other duties of the holder of the usufruct: obligation to provide security when the usufruct
is established, provide insurance for the assets under his care. Usufructuary liable to pay
costs of repair and maintenance of the assets. (Art. 608 Cciv., §§1047, 1045, 1048(2) BGB
and Art. 3:220 BW.
- PR which is connected to the life of a person.
- GER: right cannot be assigned to another person (§1059), FR & NL: right of usufruct CAN be
assigned (Art. 595 Cciv., Art. 3:223) (existence of right remains connected to life or duration
which was agreed upon (Art. 3:223).

FR  Art. 578 Cciv.: A usufructuary is obliged to preserve the purpose of the land. He should
manage the object in due diligence, according to the purpose for which it was intended. Not allowed
to change the nature of the object under usufruct.

Art. 600, 601 Cciv.

GER  §1030 BGB  usufruct grants the right to make use of an object

§1036  usufructuary acquires the right to possession of the object

§1037  obligation to maintain the object under usufruct

A right of usufruct cannot be restricted to specific uses only

NL  Art. 3:201, 3:216 BW

Art. 3:207

The holder of the right of usufruct is under an obligation to preserve the assets he has been
entrusted with. Exception in NL: Art. 3:215 BW  possibility of creating a usufruct on assets which
are perishable or can be consumed combined with a power for the holder of the usufruct to allow
those assets to perish or to consume the assets.

FR & GER  Quasi-usufruct: where a right of usufruct is established on assets which are perishable
or intended to be consumed. Not really comparable to a usufruct, but more to a transfer of
ownership of a thing. The usufructuary is under an obligation to return either similar objects or the
value of those objects. The right can be combined with a normal usufruct.

Art. 587 Cciv.

§1067 BGB

USE AND HABITATION (lesser personal servitudes)

- The right of use is mainly used for immovable objects; it only awards the rights to use
(particularly used to give another the right to use land rather than use an object.)
- Includes the same right of use as a usufructuary, but doesn’t include the right to take the
fruits, except when needed for private use (Art. 630 Cciv).
- The rights are strictly connected to the person to whom it was granted; cannot be
transferred, right-holder cannot allow another access to the exercise of the right (Art.
3:226(4) BW, Art. 631 / 634 Cciv.)
- Right holder under the same obligation as a usufructuary; duty to take care of the land and
preserve its value.

FR  Art. 625 Cciv. Both rights are PR-bind third parties

NL  Art. 3:226(1) BW:

GER  instead of the other civil law’s right of habitation  Limited personal servitudes (§1093
BGB): A limited personal servitude can have a specific right to use a building or part of a building as
its object (Wohnungsrecht). Rights to creation, duration & cessation similar to usufruct and rights of
use & habitation.

- Established on behalf of a person

- Burdens the use of land of another person: §1090 BGB
- The servitude can be directed to a specific usage of the burdened land, toward the omission
of certain action on the burdened land as well as on the exclusion of the exercise of a right.
(But not positive duties to perform, should not limit legal power of disposal)

Security servitudes (GER)

- Right of servitude established to secure the performance of an obligation/ agreement,

usually the purchase of a certain product
- Content must be negative
 - Right-holder of this type of limited personal servitude can impose very serious restriction on
use of land
- When the owner of the servient land does not perform his duty under the contract, the
right-holder of the limited personal servitude may invoke his property right and prevent the
owner of the servient land from conducting his business.
- Does NOT secure the payment of a debt

Real burdens (Reallasten) (GER)

- Entitles a person to a certain value connected to the land (IMMOVABLES ONLY)

- Right can be established both between a person and a person in his capacity as owner,
creating a normal real burden, or between a person and another person not in a capacity as
owner (real burden).
- The right will secure the payment of a certain sum of money or a certain act. If that act is not
performed, the right holder CANNOT force the owner or person bound by the real burden to
perform. The right-holder will be entitled to payment of a monetary sum.
- The contents of a real burden can only be a positive act of giving or doing.
- Real burden frequently registered in land register
- A personal real burden can transfer to an heir upon death of the person burdened with the
real burden.
- PR – effect against third parties, even upon death.

§1105 BGB: A real burden creates a burden on a piece of land to the effect that recurring
performances from the land are to be made to the right-holder.

EMPHYTEUSIS (FR, NL)

- Agreement between an owner and another person for the use and enjoyment of a specific
piece of land for a long period.
- PR on land with effect against the world
- Rights of the holder can be assigned (diff. to lease: an agreement for the use and enjoyment
of land, only having effect betw. Parties- lessee cannot assign his right under the lease
agreement.) Means that the right-holder is entitled to transfer his right of emphyteusis to
another person. The obligation to pay the canon will pass to the transferee.
- Possibility of several right-holders to share right of emphyteusis among themselves.
- Owner remains owner and when right comes to an end, will have the full right to use and
enjoyment of the object again.
- Right rests on the object, is not connected to the holder himself. (Distinguishment from
usufruct)

FR  Art. 451-1

NL  Art. 5:89(1): right of emphyteusis can be perpetual.

The holder of a right of emphyteusis becomes the owner of the buildings constructed by him

NL: In exchange of a right of emphyteusis, an agreement for payment (canon) can be made
FR: THE CONSTRUCTION LEASE

In order to remedy any possible restriction on positive building duties (usually established by
municipality).

Art. L251-3 Construction and Housing Code

- Purpose of construction lease is to create a right which has effect against third parties, in
particular subsequent acquirers.
- Separate PR in France but rather specific type of emphyteusis
- Can be established for only a limited period of time, not less than 18 years and no longer
than 99 yrs.
- Right is capable of transfer as well as seizure by a creditor.
- Imposes a positive duty to build on land. If right-holder fails to perform his duty under the
contract, the owner can rescind the contract and thereby bring the PR to an end. The
contract will also contain an agreement on ownership of constructed building. Absence of
agreement: holder of construction lease becomes owner of building for the duration of the
PR. Normally agreement about compensation for expenses and efforts of the right-holder at
end of construction lease.

SUPERFICIES

- Separates ownership of a building or construction from ownership of land. PR is given to so.

Other than the owner of the land and burdens the right of ownership.
- ONLY IMMOVABLES
- Superficies solo cedit – buildings / construction on land follow the ownership of land. (Art.
552 Cciv., §§93,94 BGB, Art. 5:20 BW)
- Enable parties to separate the entitlement to a building from the entitlement to the land
through agreement.
- Holder of superficies entitled to ownership of building.
- When the right ends, so does the ownership of the right-holder.
- The right-holder may use, enjoy and dispose of his ownership as an owner, including the
establishment of other PR.

FR  Art. 522 Cciv.: Only by agreement betw. The parties will the application of the principle of
accession be postponed to the end of the existence of the PR.

GER  §1 Regulation on Superficies (ErbbauVO) For the effective creation of a right of superficies it
is necessary that the contract specifies the approximate condition of the building(s) which the
beneficiary of rights of superficies may erect.

NL  Art. 5:101(1) BW: Right of superficies not only entitles the right-holder to use or construct a
building, but also any other construction than a building. (Trees, bushes- determined by agreement
betw. parties)
APARTMENT RIGHTS (GER, NL)

- Distinct PR which allow several people to co-own a building, but entitling each to a separate
exclusive area.

FR  separate type of co-ownership specifically intended to enable parties to share ownership of a

building. Co-ownership of common parts of a building with an exclusive ownership of private parts of
a building.

GER  WEG (Wohnungseigentumsgesetz) §1

By agreement; only effect against third parties if registered

§1004 a co-owner can exclude other co-owners from his exclusive ownership of a part of the
building.

§1093 BGB: a right to live in a building (Wohnungsrecht) can be established

NL  Art. 5:106 BW: definition

Art. 5:112 BW: requirement

OPTIONS TO PURCHASE (GER)

When two parties make an agreement that one party will have a right to buy a piece of land;
dingliches Vorkaufrecht. Between the parties the holder of that right will have the option to
purchase the land.

§1084 BGB: PR which protects the right-holder against the owner selling and transferring the object
to a third party and entitles the right-holder to resist the conclusion of a contract of sale concluded
btw the owner and a third party (and under certain conditions to demand a transfer of ownership
§1098 BGB)

LEASE OF ASSETS

- Maxim ‘a sale does not break the lease’

- When a lessor sells and transfers the building in which the lessee leased space, the new
owner takes over the rights and obligations of the old lessor. The sale and transfer will NOT
break the lease agreement and therefore the agreem. Transfers to the new owner.

FR  Art. 1743 Cciv

GER  §566 BGB

NL  Art. 7:226

COMMON LAW

LAND

- NUMERUS CLAUSUS OF PR IN LAND AT COMMON LAW

 - Closed list of PR; a right which is not in this closed list of PR is incapable of binding strangers
to its creation (Personal right, binding only its grantor.)

POSSESSION

- Instead of ownership; ‘title’ (entitlement). Content= exclusive possession. Can arise from the
mere fact of possession
- A title is capable of transmission to and of binding third parties.
- The mere taking of possession of land gives the possessor a fee simple estate over the land.

ESTATES IN LAND

- English law uses a system of PR in which a person holds various PR in respect of land, but
never owns it.
- Lease of land – full PR at common law ‘estates in land’
- Lease = PR giving its holder a right to exclusive possession of land. For a lease to exist, there
must be a grant of a right of exclusive possession for a ‘term’, a period with an end (no limit).
- Interest of the lessee can be assigned. If the lessor, the landlord, assigns his interest
(‘reversion’), the rights of the lessee are capable of binding his successor in title.
- The burden of the lease runs with the land.
- Covenants (promises) in that lease are also capable of binding successors in title of both the
landlord and the tenant
- All covenants in a lease run unless the covenant is expressed to be personal to a particular
person.
- Life estate  lasted for the lifetime of the original grantee
- Fee simple absolute in possession  lasts forever
- Entail  lasted only so long as there were heirs of a specified class of the original grantee
and which could only descend to such heirs.
- A lease will come to an end on the expiry of the term. It may be brought to an end
prematurely by the landlord where the tenant is in breach of certain terms of the lease
(forfeiture).
- Lease – long-term arrangements, Tenancy – short-time

FEE SIMPLE

- English law protects the rights of the holder of a fee simple absolute in possession through
the law of torts; torts of trespass to land and nuisance.
- For trespass, any direct interference with possession, no matter how reasonable, will be
wrongful.
- Nuisance is concerned with balancing the rights of neighbours.
- The fee simple estate (and other PR) may be held by more than one person concurrently as
‘co-owners’.
- 2 forms of co-ownership  (I) Joint tenancy, (II) tenancy in common
(I) Joint tenancy  no individual owner is seen as having a share, though together they
own it all. Right of survivorship: where one joint tenant dies, nothing will pass under his
will or intestacy.
 (II) Tenancy in common  co-owners are seen as having distinct shares. Shares must
remain undivided for co-ownership to continue, for once there has been a division
(‘partition’), there is no longer co-ownership but two or more lots of sole ‘ownership’.
No right of survivorship

EASEMENTS

- A right to use land in the possession of another.

- E.g. Rights of way, rights to run drains under land, rights of light, rights of storage, right to
use chimney flues.
- Requirements: (i) there must be a dominant and a servient tenement, (ii) the easement
must ‘accommodate’ the dominant tenement, (iii) the rights to possession of the dominant
and servient tenements must belong to different people, (iv) the content of the right must
be certain, (v) no positive obligation may be imposed on the person in possession of the
servient tenement, (vi) the right must not be negative in nature, but must entitle the holder
of the easement to do sth. on the servient tenement (subject to limitations).
- For a right to exist as an easement, it must benefit land in the possession of another /must
allow its holder to do sth. on the servient land-e.g. walk across it
- Negative rights can only exist as restrictive covenants

PROFITS À PRENDRE

- Right to take sth. from the land of another (either part of the land itself, to fish etc.)

ESTATE CONTRACTS

- PR recognised in Equity
- The benefit of a contract to purchase a title to land = estate contract
- ‘licence’ = permission

GOODS

- Common law does not recognise such a thing as an estate in a chattel, no concept of
‘ownership’ of chattels
- No equivalent to revindication in Civil Law; in Common Law only claims under the various
torts protecting possession.
- The mere fact of possession in English law, both of land and goods, generates a right to
possession.  It is possible for two or more titles to exist at the same time. One person can
have a better title than another.
- ‘Title’  a right to exclusive possession, created by the mere fact of taking possession of the
thing. A person with a title can sue so. Who deprives him of possession of the thing, or who
touches the thing without the title-holder’s cosent, or who carelessly damages the thing.
- A title lasts as long as the physical object lasts itself. (Without limit of time)
- A title can be transferred both, inter vivos and post mortem.
 - A person with title can licence others to use the thing, either gratuitously or for reward, or
destroy the thing with impunity.
- Power to rescind a contract of sale (thereby revesting title) is confined to cases of
fraudulently induced sales.
- A right to rescind for negligently / innocently induced mistakes, spontaneous mistakes,
undue influence …  ONLY IN EQUITY
- NO SERVITUDES over goods / chattels

SECURITY RIGHTS OVER GOODS

(i) Mortgage
(ii) Pledge
(iii) Lien
(iv) Stoppage in transit
(v) Charge

COMMON LAW VS CIVIL LAW

- Civil law systems resist imposing positive burdens on the holders of a PR (only some
exceptions attached to servitudes.)
 At Common Law, positive burdens can run with a lease.
- A right of real servitudes in civil legal systems only binds parties in their capacity as owners
of a piece of land and not personally.
 English law resists the recognition of easements in gross.
- Civil law: lease of land / goods is a personal right between lessor and lessee (lease= contract;
privaty of contract applies – only parties to the contract are bound by it.) The lessee cannot
transfer his right to another person
 Lessor and lessee both have rights they can assign and which may bind their respective
successors in title. Lease of land = Property Right!
CHAPTER FOUR – PROPERTY RIGHTS IN RESPECT OF CLAIMS

GER & NL  restrict the system of property law almost exclusively to corporeal objects

FR & ENG  PR can be held in respect to incorporeal objects in mostly the same way as they can be
held in respect of corporeal objects. Of all incorporeal objects, the claim, a right to performance of
another, is the most important.

Claims in ENG law = ‘choses in action’

Claim: A personal right, which can only be invoked against another person; e.g. right to the purchase
price after a contract of sale is concluded. A right to performance (claim) of the purchase price
results from the contract and is ‘held’ by the seller. It can be transferred, or assigned to so. else (e.g.
for security purposes). Purchaser: right to delivery of the goods the contract was about. If the
purchaser does not pay immediately, but waits for an invoice of the seller before he pays, a claim of
the seller on the buyer results. Buyer: debtor, Seller: creditor. The claim also represents a value – can
be used in property law.

A right of usufruct can be created in respect to a claim, giving the usufructuary the right to the
enjoyment of the claim.

A right of pledge, a property security right, can be created on the claim for payment, which will serve
as security for a loan obtained by the seller.

THE NOTION OF ‘CLAIM’

- Corporeal /tangible objects: (i) immovables, (ii) movables in Civil Law,

(i) land, (ii) personal property in Common Law
- Incorporeal /intangible objects: rights. Claim = most important – right to performance of
another

FR  Code Civil does not contain a definition of a claim

Claim = the right of one person (the creditor) to demand of another (debtor) a performance (action
of abstention)

NL  Claims generally result from an agreement or from an unlawful act (tort). Reciprocal
obligations arise; creditor and debtor oblige themselves to certain performances

ENG  ‘choses in action’: describes all personal rights of property which can be claimed or enforced
by action, not by taken physical possession. Includes rights to debts, rights of action on a contract of
a right to damages for its breach, rights arising by reason of the commission of tort or other wrong,
rights to recover the ownership or possession of property real or personal.

Distinguishes between real and personal property. REAL PROPERTY: interests in respect to land,
PERSONAL PROPERTY: ‘everything else’. (Divided into tangible movables and intangible movables-
‘choses in action’). + Documentary intangibles, pure intangibles

GER  claims can NOT be the object of PR. German law of property ONLY deals with CORPOREAL
objects, movable or immovable, but accepts incorporeal objects to be charged with a right of
usufruct or pledge.
‘OWNERSHIP’ OF CLAIMS

 FR: claims = movable objects; movables can be the object of the right of ownership, the right of
co-ownership, the right of usufruct and the right of pledge.

FR  Art. 544 Cciv.

GER  only deals with corporeal objects. Only physical / tangible objects can be owned. §90, §903
BGB

§1068 BGB: A right of pledge in respect to incorporeal objects is recognised

§1273 BGB: A right of usufruct in respect to claims is recognised

CHAPTER FIVE – SECURITY INTERESTS

 A property security interest grants a priority right in favour of one or more secured
creditors allowing them to be paid out of the proceeds of that asset before other
creditors.
- Insolvency of a debtor  risk for payment of creditors
- Value of the available assets in the insolvency proceedings must be distributed to all
creditors (Paritas creditorum)
- Creditors aim to protect their claims through security interests, both personal and property
security interests; aims at securing a personal obligation so the creditor is protected against
the insolvency of his debtor. Allows a creditor to be paid out of the sales proceeds of an
asset, without having to share with other creditors.
- A personal security interest consists of the ‘object of execution’; the extension of the assets
on which a creditor can exercise his claim. A creditor ca exercise his claim on the assets
belonging to the debtor himself and also on assets which belong to the provider of the
personal security (e.g. a guarantor).

 Possessory & non-possessory rights of pledge

 Right of hypothec
 Lien
 Security ownership – lease, - retention of title, - security transfer of ownership

FR  Art. 2094 Cciv.: All security rights can be classified as a lien or hypothec.

NL  Art. 3:227(1) BW: Right of pledge and hypothec are limited rights

COMMON FEATURES OF SECURITY RIGHTS

- ACCESSORY NATURE OF THE SECURITY INTERESTS

‘Accessory PR’  can only come into existence and continue existing to the extent that the secured
claim has come into existence and continues to exist. Secured claim and the security right can be
consensual as well as non-consensual. The release of the claim by the debtor also releases the
security for the debt.

Property security rights = accessory with regard to the claim they guarantee. (Double meaning):
(I) They do not grant any power to make use of the economic value of the asset except for the
priority right they confer when exercising the right to fulfil the obligation. (II) The existence, transfer
and extinction of the property security right is dependent upon existence, transfer and extinction of
the claim of which they guarantee the payment. A change in the proprietary status of the claim will
automatically entail a similar change in the proprietary status of the property security right.

FR  Art. 1692, 2424 Cciv.

GER  §1250 BGB Assignment of the claim

SPECIFICITY OF THE SECURED CLAIM

 The amount of the secured claim must be sufficiently determined at the moment that
the security right is realised.

FR  Art. 2333, 2421 Cciv.:

NL  Art. 3:321 BW – the claim for which the right of pledge or hypothec serves as security must be
sufficiently specified (only requires the mentioning of a max. amount with regard to hypothecs, but
NOT with regard to pledges.

A hypothec is only valid up to the amount of the estimated value, which the parties have to register
in the deed. Art. 1221(2) BW

GER  §1204 BGB – Legal Content of the Right of Pledge on Movable Objects

PROHIBITION OF UNJUST ENRICHMENT

A security right exists for the sole purpose of payment of secured claim.

 The secured creditor may not have any interest in the default of his debtor.

In all legal systems prohibition of unjust enrichment on behalf of the secured creditor.

ENG  the secured creditor is even obliged to make restitution of the interest on the surplus value
which he was due.

FR  same principle as for ENG – Art. 2347, 2348 Cciv.

PUBLICITY OF PROPERTY SECURITY RIGHTS

As exception to paritas creditorum, property security rights affect the position of other (potential)
creditors of the debtor.

Traditional rule (mainly corporeal assets): creditors can rely in good faith that the assets which are
possessed by their debtor will be subject to the execution rights of the creditor in case of default by
the debtor (Principle of reputed ownership).  ABOLISHED

 Principle of publicity through (direct) possession

 Requirement that a pledge can only be constituted through a transfer of possession
from the pledgor to the pledgee
 Two forms of publicity: (a) registration in a public register, (b) dispossession of the object
of the security right by the debtor or the third party granting the security right.

NL  Osby case: “A creditor is liable if he enters into a security agreement of which it knows or
ought to foresee that it exhausts all creditworthiness of the debtor at the expense of a new creditor.

GER  Security limits: If the security right is disproportionate with regard to the secured claim, the
creditor can be obliged to release the security right.

- FR & GER: creditor has to take care not to be oversecured.

- FR: Art. L341-4 Cosnumer Code  oversecurity is grounded in the wrongful act of a
professional creditlendor. “A professional creditlender is not entitled to claim any tights out
 of a surety agreement in which a natural person has obliged in a manifestly disproportionate
manner in relation to his income and patrimony at the moment of the conclusion of the
agreement, except if the surety can comply with its obligations at the moment that the
creditor has recourse to the security right.”
- GER: prohibition of oversecuritisation based on good-faith principle. Securities exceeding the
limit necessary to secure the creditor are released ipso iure. §307BGB: terms and conditions
in standard form contracts which impose an unreasonable disadvantage upon the party
which has not provided the contract are considered as contrary to public order  void.(Max
of 150% of secured obligation)
- ENG: NO limit on value of object of security right

RIGHT OF PLEDGE

- RIGHT OF PLEDGE OF CORPOREAL MOVABLE ASSETS

A pledge is a limited PR with regard to movable (corporeal or incorporeal) assets which grants to the
pledgor a right to be paid from the proceeds of the forced sale of the subject matter of the pledge, in
discharge of the debt or obligation secured.

Usually, a pledge secures payment of a monetary debt, but can in principle also secure the
performance by the pledgor of some other obligation.

Dutch Civil Code limits the definition of pledge and hyporthec to money claims

GER: ‘Grundpfandrechte’: deals with immovables and includes both; hypothec and Grundschuld and
Rentenschuld..

FR  Art. 2333 Cciv.

GER  §1204 Statutory content of pledge on movable assets

NL  Art. 3:227 BW

DISPOSESSION OF THE PLEDGOR

FR Art. 2337 Cciv.

GER  §1205 BGB: Creation

NL  Art. 3:236(1), Art. 3:237(1) BW

- The pledgee / or third party about whom parties have agreed, has to receive the exclusive
control of the pledged objects; delivery can be actual, constructive or symbolic but pledgor
must lose control over the object of pledge.
- NL, FR  parties have choice between dispossession and registration of pledge agreement.
- GER  sticks to requirement of dispossession - only acknowledges a registered pledge with
regard to specific objects which are valuable & volatile, e.g. aircrafts. Ger law recognises a
transfer for security purposes without any publicity requirement.
- Possible to pledge future objects
Draft Common Frame of Reference (DCFR): Art. IX-2:103 ‘unless otherwise agreed by the parties, the
creation of a security right by contract does not require possession of the encumbered asset by the
secured creditor’. Two alternative methods of publicity: (I) granting of possession, (II) registration

ENG  general distinction between a possessory pledge and non-possessory pledge (‘charge’).A
pledge is a transaction in which the debtor (pledgor) transfers possession of a thing to the creditor
(pledgee) to hold as security.

A charge is a security right which does not require that the creditor (chargee) take possession of the
charged asset. A charge can have both; movable and immovable assets as object.

REALISATION OF THE PLEDGE

Prohibition of self-help  pledgee is not entitled to sell the object of a pledge without prior judicial
authorisation. (FR)

It is not allowed that parties agree prior to the debtor’s failure to pay the obligation that the secured
creditor should obtain full ownership of the pledged movable.  Prohibition of pacta commissoria.

(GER; NL; ENG (Carter v Wake- but statute or contract can provide otherwise))

FR  Art. 2346 Cciv.: prohibition of self-help –> a pledgee is not entitled to sell the object of a
pledge without prior judicial authorisation.(Subject to increasing numbers of exceptions)

Art. 2347 Cciv.

Art. 2348 Cciv.: French pactum commissorium applied both to fixed and floating charges. This
provision does not apply to consumers, who are protected by the French Consumer Code.

GER  §1228- Satisfaction through sale of the object of pledge, 1229 BGB: prohibition of a forfeiture
agreement. The creditor can sell the object of the pledge without judicial authorisation, except if the
agreement has required prior authorisation.

ENG  The creditor can sell the object of the pledge without judicial authorisation, except if the
agreement has required prior authorisation.

Nl  Art. 3:235, Art. 3:248BW. The creditor can sell the object of the pledge without judicial
authorisation, except if the agreement has required prior authorisation.

FIXED CHARGE-FLOATING CHARGE

Charge (COMMON LAW) = security right which does not require that the creditor (chargee) takes
possession of the charged asset.

A floating charge is a security right which covers all or most present and future assets of a debtor,
but does not attach to these assets until a certain specified event happens  then it becomes fixed
charge.

3 distinct features are recognised for a floating charge: (1) if it is a charge on a class of assets of a
company present and future; (2) if that class is one which, in the ordinary course of the business of
the company, would be changing from time to time; and (3) if you find that by the charge it is
contemplated that, until some future step is taken by or on behalf of those interested in the charge,
the company may carry on its business in the ordinary way as far as concerns the particular class of
assets I am dealing with.

French Law

Art. L142-1,-2, Commercial Code, Art. 2342 Cciv.--> expressly restricts floating charge to fungible
assets.

- Non-possessory pledge on commercial fund of debtor but as a security right rarely used in
French legal practice.
- ‘Floating charge’ – legal device deling with whether a security right is granted to a creditor
during the precedent period (‘suspect period’) preceeding the bankruptcy, this security right
is not effective against the insolvency.

GER law

- Recognises a floating charge with regard to claims. This possibility enables a debtor to grant
a security right over all present receivables of the debtor or a clearly distinguishable part of
them.

RIGHT OF PLEDGE IN RESPECT OF CLAIMS (INCORPOREALS)

- Notification of security right to debtor important legal effects: in order to ensure that debtor
can no longer discharge the debt by paying to chargor

FR  Art. 2355-2357, Art. 2361-2366 Cciv.

Requirement of written agreement

Possible to pledge a large number of receivables at the same time

NL  Art. 3:94(1), 3:236, 3:239 BW

Two methods of pledging incorporeal assets (I) with notification to debtor (II) ‘Silent pledge’ (same
as non-possessory pledge for corporeal objects)

Possible to pledge a large number of receivables at the same time

GER  §1273-1275, §1279-1281 BGB

ENG  Section 136 ‘Legal assignments of things in action’ – Law of Property Act 1925

Section 860 ‘Charges created by a company’ – Companies Act 2006

- NOT possible to create a pledge on receivables, as the possession requirement plays an

important role in case of a pledge.
- An equitable charge on receivables can be effected without notification to the debtor of the
object of security. However, notice to debtor necessary in order to determine the priority
conflict (Dearle v Hall doctrine)
THE RIGHT OF OWNERSHIP AS SECURITY INSTRUMENT

- Distinction between Retention / Reservation of ownership for security purposes and

Transfer of ownership for security purposes.

RETENTION OF TITLE:

- Title retention by an owner makes the transfer of ownership of the sold assets dependent
on the fulfilment of a condition precedent, usually one of full payment of purchase price.
The seller remains owner of the assets as long as the purchase price remains unpaid. Upon
fulfilment of the suspensive condition, the right of ownership will automatically pass to the
buyer, who is already in possession of the assets. The ownership does not pass at the
moment of consent of parties (consensual systems) or of the delivery (tradition systems),
but is delayed –> seller retains property security right, as the sold assets remain out of the
insolvent patrimony if the buyer becomes insolvent before having paid the full purchase
price. As the seller remains owner of assets, he continues to bear the risk of destruction or
deterioration of the asssets.
- To reserve ownership in the assets to the seller until the price is paid in full, notwithstanding
that the assets are delivered to the buyer. Seller has some security in the event of insolvency
of the buyer. If the sales agreement relates to manufacturing process, the buyer will
transform the sold assets, if the sales agreement relates to the distribution process, the
buyer will readily proceed with a sub-sale.
- Requires that the assets are identifiable in the estate of the buyer at the moment of its
exercise.
- Majority of civil law systems; title retention is restricted to claims which arise directly or
(indirectly) from the sales agreement.

FR  Art. 2367: The right of ownership that is retained is accessory to the claim the payment of
which it secures. Parties can contractually exclude the title retention from the assignment 
transfer of ownership to purchaser.

Art. 2368 Cciv., Art. L624-16 Commercial Code

Requires that a written document is made by parties. (Must be given to and accepted by the buyer
at the latest at moment of delivery of assets.)

GER  §449 BGB

NL  Art. 3:92 BW

Retention of title NO clear security right; does not necessarily result in any realisation of the claim on
the object of title retention.

‘Principle of non-accessority’ to all forms of ownership / transfer of assets for security purposes.

ENG  Section 17, 19 Sale of Goods Act 1979

POSITION OF THE PURCHASER UNDER TITLE RETENTION

- RESALE OF THE ASSETS UNDER RETENTION OF TITLE

If the sales agreement containing the title retention clause is situated in the distribution process
/retail stage of the assets, it is likely that the buyer wants to resell the assets to his own clients as
soon as possible.

 The buyer under title retention has NO PR on the purchased goods until he pays the full
purchase price. Until then, he merely holds the assets for the account of the seller.
 However, most legal systems recognise possibility to grant the buyer the right to resell
the goods.

GER & ENG  buyer’s entitlement to resell the assets gives him the power to transfer ownership
directly from the original seller to the sub-purchasers

GER  title retention can continue on the resale claim, except if the buyer has lawfully resold the
initial goods with consent of the initial seller. §48 Insolvency Act.

Manufacturing clauses: It is possible and effective to extend a retention of title to the product of
manufacturing. Valid and effective against third parties. Seller under title retention can claim his
ownership to product of the manufacturing process, this ownership will even be effective after the
buyer has become insolvent, against the other creditors.  Seller has proprietary claim on the
product of the manufacturing against the insolvency patrimony.

ENG  title retention will not impose upon the buyer an obligation to account to the seller for the
proceeds of sale of the goods in which property is retained.

Property in manufactured good vests in seller as security. Effectiveness of manufacturing clauses

when they are registered (charges  valid & effective)

NL  NO transfer of ownership for security purposes!

Resale is a condition of title retention. No possibility of contractually extending retention of title to

claim arising out of the resale.

A registered charge over future movable objects is the only legal device enabling the buyer to grant
to the seller a PR into the manufacturing process.

FR  NO transfer of ownership for security purposes!

Art. 2279 Cciv.: sub-purchaser will only acquire ownership on the basis of bona fide purchase.

The title retention continues on resale claim after the sale of the initial goods.

A title retention can never cover the profit margin of the resale. PR of the original seller are limited
to the original sales price.

No possibility of contractually extending retention of title to claim arising out of the resale. NOT
possible to cover manufactured assets.

TRANSFER OF OWNERSHIP FOR SECURITY PURPOSES

- A retention of title is often NOT considered as a property security right because it is not
granted but reserved.
- Transfer of ownership for security purposes: debtor transfers to a creditor ownership of
assets as security for whatever claim the transferee might have against the transferor, under
 the obligation for the former to make restitution of the assets if the secured claim has been
fully discharged. (Uses ownership as property security.

FR  Art. L313-23 Financial and Monetary Codes: a credit institution can acquire the fiduciary
ownership of professional claims to which the debtor is entitled. This transfer is effective in case of
insolvency of the assignor, even if the assigned claim only becomes due after the insolvency of the
assignor.

The fiduciary transfer for security purposes constitutes a pledge over a claim. It ‘temporarily’ grants
all the powers to the assigned claim to the creditor. The creditor has the power to grant delay to his
debtor, to sue his debtor in bankruptcy.

GER  fiduciary transfer for security purposes is effective based on §930 BGB; allows parties to
transfer ownership without actual delivery. (A contract by which the transferor agrees to grant
possession of the collateral to the transferee is substituted for actual delivery.)

NL  Art. 3:84(3) BW: PROHIBITS the use of the right of ownership as a security device. (Security
ownership is only valid if the ownership arises within the framework of a sale-and-leaseback option).
 Fiduciary transfer for security purposes is INVALID

RIGHT OF RETENTION / LIEN

= Consensual Security right based on ownership: right to retain factual possession over a good until a
claim connected with that good is fulfilled. This right is awarded to a creditor, to suspend his
obligation to make restitution of a good until payment has been effected of a debt connected with
that good. Depends on possession.

Right of pledge: based on security agreement, involves a delivery of possession.

Right of retention: non-consensual, depends on holder already having possession

All legal systems grant the actual possessor of another’s asset a right to withdraw the asset as long
as the owner did not meet an obligation with regard to that asset. In all systems, the right of
retention has effect in insolvency proceedings.

Draft Common Frame of Reference (DCFR) recognises the right to retain possession: Art. IX-2:114
‘where under a contract or rule of law a person is entitled as against the owner of an asset to retain
possession of the asset as security for a right to performance, this right of retention of possession
gives rises to a possessory security right.’

The factual possessor of the asset must meet several conditions in order to be entitled to exercise a
right of retention:

(a) The person exercising the right of retention must have a claim which has become due by the
owner or by a third party. (Connectivity between asset that is retained and claim which is
factually secured).
(b) Possession must be lawful
(c) Factual possession must not have been lost in the meantime
(d) Existence of a legal / material connection between secured claim and withheld asset. (GER)
(e) Most legal systems allow creditors to exercise a right of retention on an immovable thing.
FRANCE

Art. 2266 Cciv.

Art. L624-14 Commercial Code  right of retention can have effect in the case of insolvency of the
debtor. It is effective against general creditors and creditors whose claim has a priority rank.

A right of retention is a PR, effective against everyone, also against them who are not obliged by the
debt.

A creditor can only exercise a right of retention if there is a connection between the secured claim
and the asset that is withheld.

A right of retention can be exercised on immovable goods. Not subject to any publicity
requirements.

GERMANY

§273 BGB Right of retention: the claim which is secured by the right of retention must be arising
from the same obligatory relationship as the relationship which has granted him factual possession
of the asset.

§369 Handelsgesetzbuch Right of retention by merchants: the right of retention can be exercised in
order to secure payment of any claim arising in the relationship between the actual possessor of the
object and its owner, even if this claim does not have any connection with the claim that is exercised
by the counterparty.

§51 Insolvenzordnung ‘Other secured creditors’  right of retention can have effect in insolvency
proceedings.

NETHERLANDS

Art. 3:290, 3:291, 6:53 BW

A right of retention may also be exercised in respect to an immovable object.

Legal effects of a right of retention  (i) can be opposed to a holder of a PR which has come into
existence after the object had come into his possession, (ii) can invoke the right of retention against
the holder of older PR if the debtor has the power to enter into the agreement which gave rise to
the claim in security of which the right of retention is exercised.

COMMON LAW LIEN

Section 41 (Seller’s lien), 42 (Part delivery), 43 (Termination of lien) Sale of Goods Act 1979

Four categories of liens: (a) common law (possessory, equivalent of civil law right of retention), (b)
statutory (possessory, unpaid seller’s lien), (c) equitable (lien of the unpaid seller of land) and (d)
maritime.

Requirement of connectivity between secured claim and retained assets. A general lien is only
allowed if (1) parties have agreed so and (2) if the general lien follows from a general usage, which
has been long established so as to afford a presumption of its being commonly known.
SECURITY RIGHTS IN IMMOVABLE ASSETS

Civil law  securities on movables separated from security on immovables

ENG  Some security devices (mortgages) can cover both movables and immovables.

DEFINITION OF A RIGHT OF HYPOTHEC – COMPARISON WITH THE (ENGLISH) MORTGAGE

FR  Art. 2393

GER  §1113 Content of a right of hypothec

NL  Art. 3:227(1)

ENG  land in England held under two systems: (i) registered – legal charge, (ii) unregistered – two
possibilities for creating legal mortgages (a) a mortgage by demise, (b) a legal charge (‘charge by
way of legal mortgage’).

A person holding a legal charge over land has the power to create a sub-charge over his charge.

A mortgage is a transaction in which the mortgagor transfers to the secured creditor his entire title,
on condition or subject to an undertaking that when the debt is repaid the title will be transferred.

Mortgage  creates a conditional ownership on behalf of the mortgagee, not restricted to

immovables (can also have movables as objects)

Hypothec  holder of a right of hypothec merely has a limited property security right, restricted to
immovables, or at least registered goods. – Equivalent in common law = charge on land

Pledge  movable object as subject matter, requires dispossession of pledgor (hypothec does not
require dispossession of hypothecor).

ENG: non-possessory security rights = charges, independent of whether they involve movables or
immovables.

MAIN FEATURES OF A HYPOTHEC

- IMMOVABLE NATURE OF A HYPOTHEC

FR  Art. 2397, 2419, 2420 Cciv.

NL  Art. 3:227 BW

GER  §1113, 1114 BGB

Principle of specificity  a hypothec must have a specific thing as subject matter.

In most legal systems, a hypothec can only be vested on immovable assets or right in an immovable
asset.

(Dutch law distinguishes between registered and non-registered instead. Registered aircrafts and
ships can also be the object of a hypothec: Art. 8:197, 8:199 BW).

All legal systems provide for a protection of the hypothec in case of destruction or deterioration of
the immovable object of the hypothec. If the object is destroyed, and was insured by debtor, the
hypothec will be transferred to the insurance sum as long as the latter is identifiable. The hypothec
holder will be entitled to exercise a right of priority on this insurance sum.

FORMAL NATURE OF A HYPOTHEC

- An agreement to create a right of hypothec is a formal agreement; it requires a document in

writing and, in GER & NL a notarial deed (+registration of deed in public register)
- Same is true for legal charges in ENG (equitable charges – not registered)

FR  Art. 2416

NL  Art. 3:260(1) BW

GER  §873 Acquisition through agreement and registration

ENG  Section 2 Contracts for sale etc of land to be made by signed writing – Law of Property Act
1989, Section 27 Dispositions required to be registered – Land Registration Act 2002, Section 52
Conveyances to be made by deed – Law of Property Act 1925

ACCESSORY NATURE OF A HYPOTHEC

A right of hypothec has, as other security rights, an accessory nature. (It follows the status of the
secured claim: if the secured claim is extinguished or destroyed, the hypothec will also be
extinguished or destroyed.) If the secured claim is transferred, the hypothec will automatically be
assigned to the assignee of the claim.

Semi-exception: rechargeable hypothec (FR)

Full exception: security land charge (Sicherungsgrundschuld) (GER)

GER  §1153, §1162 BGB

§1191 Legal content of the right of Grundschuld

§1192 Applicable provisions

§1199 Legal content of the right of Rentenschuld- covers a periodic amount. Always includes
possibility for owner to pay a lump sum in order to discharge the land from the burden. Only applies
to an immovable asset.

Rentenschuld is similar to Reallast- both devices have as object the payment of a periodic amount
which is secured by a land burden.

Reallast: owner burdened with a Reallast is personally liable with all his assets.

Grundschuld: non-accessory property security right on land: a land is charged with a PR which
entitled the holder of the Grundschuld to a certain amount of money out of the value of the
burdened land. This land burden can be created and continue to exist independently from a debt
between the right-holder and the owner of the land. Not necessary that the owner of the
Grundschuld is creditor of the grantor. Similar to right of hypothec:
secures payment of a claim (capital sum) through a property security right on an immovable object
but not accessory to secured obligation (non-accessory right).
Advantages to creditor: he can exercise his security right in order to recover the money he has lent
to the debtor, even if the secured claim is void. Can secure claims which are not determinable at the
moment of creation of Grundschuld.

§812 BGB: the Sicherungsgrundschuld can come into existence even if no secured obligation has
come into existence. The security right even remains in existence if the secured obligation is
destroyed afterwards. The debtor can only claim on the basis of unjust enrichment.

FR  Art. 2421-2424 Cciv.

Art. 2422 cciv.  rechargeable hypothec : makes it possible to secure (future or present) claims on
which the deed of hypothec remains silent, which are unknown or cannot be determined at the
moment of the creation of the hypothec. The debtor who granted the hypothec can determine the
claims which will be secured by the hypothec in the future. The debtor has the right to ‘charge’ his
hypothec in favour of the original creditor or in favour of another creditor (2) but must be effected
by notarial deed. It does not extract the object from the rights of the other creditors. If the hypothec
has not been charged by the debtor, the object will be subject to execution measures by his
creditors or will be part of the insolvency patrimony. (Rechargeable hypothec merely grants a
priority to the claims with which the right of hypothec has been ‘charged’.)
CHAPTER SIX – MANAGEMENT: TRUST; TREUHAND & FIDUCIE

Management of rights on behalf of others  transfer of title to manager takes place but these rights
do not become part of his personal patrimony. In all three systems, the manager has a duty to keep
the assets he is managing separate from his own.

- Common Law  TRUST

- GER  FIDUZIARISCHE TREUHAND
- FR  FIDUCIE

THE COMMON LAW TRUST:

‘Trust’ = the holding by one person of a right or rights on behalf of another or, in limited
circumstances, for a purpose. Independent source of rights.

Possible to create a trust on death

A right-holder can make himself a trustee

Trust is able to confer rights on third party beneficiaries

Trustees never act as the agents of their beneficiaries, but as principals.

- Property rights (land & goods)

- Intellectual PR (patents, trademarks, copyright)
- Personal rights (shares, benefits of debts, non-assignable rights)

Settlor: person creating the trust

Trustee: person holding the rights for the beneficiary in order to use those rights for the good of the
beneficiary.

If the trustee is holding a title to land, he will not be entitled to occupy the land himself, or install his
family/ friends: He must exercise his rights in ways benefiting the beneficiary, usually by leasing it
out and paying over the income to the beneficiary, or by selling the title and investing the proceeds
of sale, or allowing the beneficiary to occupy.

If the rights are not so exercised, the trustee will be liable to a money remedy in favour of the
beneficiary. E.g. investment: declaration of trust places a primary duty on the trustee to invest the
rights he holds on trust. If the trustee invests in rights which he is not permitted by the declaration
to purchase, or carelessly invests in rights  breach of trust; liable to make good the loss from his
own pocket  rights transferred to third party who does not come under the same investment
duties as the trustee and cannot be sued for breach of those duties.

Money claims against trustee: trustee’s insolvency  beneficiaries fall into class of unsecured
creditors

Trustees not only have duties and powers but also rights; rights to remuneration

Beneficiary: person for whom the rights are hold. He is not given a right to exercise the right held by
the trustee; therefore cannot sue third parties who interfere with that right. Has rights to control the
exercise by the trustee of the rights he is holding on the beneficiary’s behalf.

Expression of intent  ‘declaration’ of trust

‘constructive trusts’: trust created by courts

  To speak of a trust only describes the fact that there is a certain relationship between
persons in respect of a right.
 If a sole trustee were to die, the rights concerned would have to be conveyed to new
trustees.
 Trustees are personally liable for contracts made in respect of the administration of the
trust

ENGLAND

Section 19 of the Trusts of Land and Appointment of Trustees Act 1996  beneficiaries who are all
of full age and sound mind and between them absolutely entitled under the trust can require
trustees to retire and appoint new trustees nominated by beneficiaries.

GERMANY – FIDUZIARSCHE TREUHAND

Devices by means of which rights are held by sb. to be managed for the beneficiary or for a specified
purpose

- Reversionary heirship (Nacherbfolge)

- Mutual will (gemeinschaftliches Testament)
- Charitable foundation (Stiftung) §§80-88 BGB
- Treuhand; when a person (Treuhänder) is entrusted with certain rights which he can dispose
of, not in his own interest, but only in the interest of another person or a specific purpose.

Treuhand: depending on the type of power conferred upon the Treuhänder, three different types of
Treuhand can be distinguished:

- Fiduziarische Treuhand -where the Treuhänder acquires the title to the assets he is to
administer;
- Ermächtigungstreuhand -where the manager is simply authorised to dispose of the assets of
which the transferor remains the owner;
- Vollmachtstreuhand -where the manager merely receives a power to dispose of the assets.

NATURE AND SCOPE OF THE FIDUZIARISCHE TREUHAND

- Arises out of a contractual agreement – Treuhandabrede /Vertrag, concluded between a

transferor (Treugeber) and a transferee (Treuhänder), which is followed by a transfer of
assets.
- No limits apply to the duration of the Treuhand
- Treugeber transfers to the Treuhänder a full and unconditional title to the assets –
commitment of the Treuhänder to dispose of it only within the scope of the agreement.
Treuhänder becomes full owner, so far as third parties are concerned, of the assets
transferred to him (Treugut), but bound, as regards the Treugeber, by the obligations
assumed through Treuhandabrede.
- Represents a security (Sicherungstreuhand) as well as a management device
(Verwaltungstreuhand).

E.g. where investors transfer money to investment companies which invest it in shares and
ownership of land and which constitutes a separate fund.
Content of Treuhandabrede: (i) define purpose of Treuhand, (ii) define content of obliagtions of the
manager, (iii) establishes whether manager has a right to receive remuneration, defines his right of
withdrawal from contract, (iv) determines whether the Treugeber can demand a re-transfer of the
fund at any time, (v) sets out when and for what reasons the Treuhand shall terminate.

The Treuhand terminates should the Treugeber become insolvent §115(1) German Insolvency Act;
manager has the duty to release the Treugut to the Treugeber. Same duty arises whenever the
purpose of the Treuhand has been fulfilled or when there was a gross breach of duty by the
Treuhänder.

PARTIES TO THE TREUHAND

Anyone with legal capacity can be Treugeber, -händer, or beneficiary. Both Treugeber and
Treuhänder can be either the sole beneficiary or one of many.

Treuhand used for security purposes  Treuhänder is usually beneficiary

Treuhand for management purposes  beneficiary often Treugeber himself

SUBJECT MATTER OF TREUHAND (TREUGUT)

All manner of rights can be held by Treuhänder. Assets can be transferred from Treugeber to
Treuhänder subsequent to formation of contract. Assets can also be transferred from a third party to
the Treuhänder at request of Treugeber. Possible for Treuhänder to acquire assets from a third
party. §§929 et seq BGB

Treuhänder is obliged to keep the Treugut separate from his personal set of assets and debts
(patrimony). However, he becomes fully entitled to the rights and can neither be seized by his
creditors nor fall within insolvency estate.

Treuhänder has a duty of care (Sorgfaltspflicht) to administer the Treugut in accordance with
Treuhandabrede. He must perform his duties in the interest of those indicated in contract.
Treuhänder is further obliged to keep an account of his activity and to provide the Treugeber with
necessary information §666 BGB, as well as to act personally, unless parties have agreed differently
§664(1) BGB.

FRANCE – FIDUCIE

Article 2011 Cciv: a fiducie is as a contract by which a company (the Settlor) transfers goods or rights
to another person (the Trustee) who holds these separate from his own property with the remit to
manage the property for the benefit of one or more Beneficiaries. A fiducie must comply with
various requirements.

Also arises out of contractual agreement

Art. 2011 Cciv: the fiduciaire receives the assets for the benefit of one or more beneficiaries.

Art. 2018 Cciv.: requires the contract to specify the beneficiary / beneficiaries / at least provide for
their ascertainment. (Fiducie cannot be created for furtherance of private or charitable purpose.)

Art 2018-1: constituant maintains the usage or usufruct of a business (fonds de commerce) or an
immovable used for prof. reasons  Constituant can remain in possession of the object of the
transferred right
Art. 2018-2: Assignment of a debt is good against third parties from the date of the stipulation of
contract of fiducie or that of the accessory contract that acknowledges it. It is NOT good against the
debtor UNTIL he will be notified by assignor or the fiduciaire.

Art. 2012 Cciv.

- Fiducie can be established either by statute or contract (usually arises from contract which
has to be made in conformity with Art. 2011-30 Cciv.)
- Special contract concluded between the transferor; constituant and the transferee;
fiduciaire – must be express.
- Involves transfer of assets from constituent to fiduciaire, no self-declaration possible
through which a constituent declares himself fiduciaire of fiducie.
- Fiduciaire cannot arise by means of a transfer of rights from a third person to the fiduciaire
- Object of transfer can be present / future things, rights / securities, immovables / movables,
corporeal / incorporeal things.
- Patrimoine fiduciaire = entirety of subject-matter of fiducie can also be composed of benefit
of debts, but not solely.
- The rights transferred to fiduciaire do not become part of his personal patrimony. He has the
duty to keep the assets received separate from his personal patrimony.

Art. 2013 Cciv: no possibility of gratuitous transfers from constituant to beneficiary  constituant is
seeking am economic remuneration

Some consideration has to be given by beneficiary

PARTIES TO THE FIDUCIE

Unless the constituant or the fiduciaire are themselves the beneficiaries (Art. 2016 Cciv.), the
relationship is a triangular one (nature of contract in favour of third parties, Art. 1121 Cciv.)

Art. 2017 Cciv.

Art. 2015 Cciv.  restriction on fiduciaries: only specific institutions or professions can function as a
fiduciaire.

Art. 2016 Cciv.  no restriction on identity of beneficiary (natural person or corporate body)

Both constituant and fiduciaire may be one of the beneficiaries or even sole beneficiary of a contract
of fiducie. Fiducie for security purposes  fiduciaire = beneficiary, fiducie for management purposes
 constituant = beneficiary

FORM AND CONTENT OF FIDUCIE

Art. 2018 Cciv.: - contract must be expressly defined as fiducie, - has to indicate the identities of the
beneficiaries or criteria by which they are to be ascertained

Art. 2019, 2020 Cciv.: requirement of registration

MODIFICATION; REVOCATION & TERMINATION OF THE FIDUCIE

Art. 2028 Cciv.: the constituant has the possibility to revoke the contract at any time up to the
moment at which the beneficiary accepts it. After acceptance, the contract can be modified or
revoked ONLY with his CONSENT or by order of the court.
Art. 2029 Cciv.: termination after Max. duration of 99 yrs. or if object has been achieved before or
upon death of fiducie or when court decides on termination if terms providing for the circumstances
in which the contract is to continue are absent and all beneficiaries wish it to come to an end.
Fiducie terminates as well when the fiduciaire becomes subject to compulsory liquidation or
dissolution, or ceases to exist as a result of an assignment or merger.

Art. 2030 Cciv. If contract terminates at a time when there are no beneficiaries – subject matter of
fiducie reverts to constituant

MISAPPROPRIATION OF ASSETS BY THE MANAGER

- ENGLISH LAW

Effect of trust on third party recipients of rights dissipated in breach of trust  beneficiary may have
(limited) rights against third party recipients, but NO rights against a transferee of a common law
right received in good faith, for value, without notice that the dissipation was made in breach of
trust. (Transferee  ‘equity’s darling’) Effect of transfer: destroys any rights the beneficiary would
have otherwise against him (beneficiary only has a claim in law of obligations against trustee)

Recipient NOT equity’s darling  recipient must restore the rights dissipated in breach of trust,
either to former trustee, or to other persons nominated by beneficiaries. Recipient holds rights as
trustee in the meantime (constructive trust- created by courts to safeguard rights until they are
reconveyed)

 A transferee of a right dissipated in breach of trust is bound to restore the rights to the
trustee unless he is equity’s darling.

GERMAN LAW

- Treuhänder = owner of Treugut; he can dispose of it

- Limitations set out in Treuhandabrede but dispositions made in breach of such obligations
generally valid.
- Where the Treuhänder conveys away the rights he is holding in breach of the contract, the
Treugeber (or the beneficiary, if the Treuhand is set up in favour of a third party beneficiary)
has a claim to compensation against Treuhänder who is liable for intentional or negligent
breach of his duties in accordance with the rules concerning mandates.
- Treuhänder not strictly liable for breach of Treuhandvertrag: if Treuhänder is solvent –
interests of Treugeber or third party beneficiary are sufficiently protected by their claim to
compensation.
- Treuhänder’s insolvency  if transferee was merely negligent in his receipt, he will acquire
the rights from Treuhänder free from any obligation toward Treugeber or third party
beneficiary. Not relevant that he knew / ought to have known that the assets were part of a
Treugut. Where third party transferee deliberately conspires with Treuhänder in an attempt
to damage Treugeber or third party beneficiary  Treugeber or beneficiary has a claim in
tort on basis of §826 BGB.

FRENCH LAW

Art. 2026 Cciv.: liability of the fiduciaire not strict, but depends on the degree of his wrongdoing.

Art 2027 Cciv

If the victim is party to the contract; he will probably sue the fiduciaire for breach of contract (Art.
1147 Cciv.)

If victim is a third party; rules on liability on tort applicable (Art. 1382 Cciv.)

THE DEATH OF THE MANAGER

- ENGLISH LAW

Trust rights generally vested in two or more trustees as joint tenants due to doctrine of survivorship
 on the death of one trustee, the rights remain vested in the surviving trustee(s) and not pass to
the estate of the deceased trustee (when trustee was sole trustee).

Recipients of trust rights on the death of the trustee are bound by trust; cannot retain such rights for
their own benefit.

GERMAN LAW

§673 BGB: Death of the mandatory - Treuhandvertrag provides whether or not the death of the
Treuhänder terminates the relationship. Only one Treuhänder and contract is silent on matter 
relationship usually comes to end.

§667 BGB: Duty to return – If Treuhand terminates, Treugut falls within residuary estate of
Treuhänder. Heir of Treuhänder has to continue managing Treugut until Treugeber can make other
arrangements. Heir has to release Treugut and, if necessary, account for his actions.

§736 BGB: More than one Treuhänder and they’ve founded a partnership: contract does not
terminate with death (provided that partnership agreement says so).

If Treuhänder is corporate body  Treuhand terminates with dissolution of corporate body

FRENCH LAW

Art. 2029(2) Cciv.: contract terminates if fiduciaire becomes subject to liquidation judiciaire or
dissolution, or ceases to exist as a result of a merger or an assignment.

INSOLVENCY OF THE MANAGER

GERMANY

- Protection for Treugeber or third party beneficiary in case of insolvency of Treuhänder, by

granting them a right to request the release of the assets of the fund; §47 German
Insolvency Act. (Treugut is considered to remain part of patrimony of Treugeber if Treuhand
fulfils management purposes)
- If Treuhand for security purposes: right to demand release of the asset is given if the debt
has been extinguished. Not extinguished: trustee in bankruptcy of Treuhänder is entitled to
keep asset §930 BGB
- Parties can agree upon a resolutory condition that in case of insolvency of Treuhänder, the
Treugut returns automatically to Treugeber.
- Principle of Immediacy  Treugeber has a right to demand the release of the assets against
other creditors of the Treuhänder only where rights were transferred to Treuhänder by
 Treugeber himself. (Anything acquired by Treuhänder from a third person on behalf of
Treugeber or third party beneficiary will NOT become part of Treugut.)
- Treuhand in a ‘proper sense’: direct transfer of assets from Treugeber to Treuhänder 
Treugeber / third party beneficiary have a right to demand the release of the assets + third
party claim to set aside compulsory enforcement.
- Treuhand in an ‘improper sense‘: no direct transfer

FRENCH LAW

Art. 2024  insolvency of fiduciaire brings fiducie to an end but does NOT affect patrimoine
fiduciaire.

INSOLVENCY OF THE SETTLOR

- ENGLISH LAW

Once a trust has been created, settlor drops out of picture; cannot revoke trust. Should he become
insolvent after setting up a trust, rights held by trustee or by settlor himself as trustee, not available
to satisfy claims of his creditors. Exception: where creditors can attack the trust on grounds of sham
or under general rules of English insolvency legislation (Insolvency Act 1986, section 423)

GERMAN LAW

§115 BGB: expiry of mandates

§116 BGB: expiry of management contracts

 Insolvency of Treugeber brings Treuhand to an end

 Treuhand for management purposes (Treuhand arose in interest of Treugeber): Treugut
belongs to insolvency estate; trustee in bankruptcy can request release of Treugut from
Treuhänder – Treuhänder has no right to keep assets.

FRENCH LAW

 No specific provision of fiducie dealing with insolvency of constituant

Art. 2025(1) Cciv.: assets transferred to fiduciaire are part of patrimoine fiduciaire – personal
creditors of fiduciaire cannot seize assets unless they have been defrauded or they have a right
attached to surety which has been registered before fiducie.
CHAPTER SEVEN – CREATION

FR, NL, GER: acquisition of rights through adverse possession = original acquisition (no transfer from
former owner to new owner)

ENG: adverse possession is held to lead to transfer by operation of law. The adverse possessor is
successor in title of former owner

AQUISITIVE PRESCRIPTION

- ACQUISITION OF OWNERSHIP BY PRESCRIPTION

Effects of prescription: (i) acquisition of a right= acquisitive prescription (ii) loss of a right or action=
extinctive prescription (a) extinction with strong effect: right itself lapses, (b) extinction with weak
effect: only action lapses but not right itself

ENG Law: extinctive prescription = limitation of actions; not only action but also underlying right
itself extinguishes – Limitation Act 1980, ss 3 (movables), s. 17 (immovables).

Acquisitive prescription in ENG law for IMMOVABLES only in relation to acquisition of easements and
profits

Adverse possession: acquisitive prescription of freehold or leasehold estate in land

FRANCE

FR Law: usucapion for acquisitive prescription Art. 2258

The right of ownership and its action of revindication do not extinguish as a result of non-use. The
action of revindication does not underlie extinctive prescription. If so. Other than the owner
possesses the thing and meets the requirem. Of acquisitive prescription, he will become owner and
the dispossessed owner will lose his right of ownership.

Prescription periods:

A PR, ownership or any limited proprietary right, can be acquired after 30 yrs. of continued
possession, even if the possession started in bad faith. The period for acquisitive prescription is
shortened to ten years if the possessor has acquired in good faith on the basis of a valid legal
ground, such as a contract of sale or a contract creating a servitude (=abridged prescription).

Abridged prescription required a legal ground – e.g. valid contract of sale

(Good faith – if he did not know / should have known that the transferor was not the owner of the
object.)

Art. 2272 Cciv.

Art. 2255 Cciv.: possession is holding or enjoying a thing for one’s own benefit. Possession can also
be exercised by e.g. a tenant who holds the thing for the possessor’s benefit.

Requirements for acquisitive prescription:

- Good faith
- Legal ground
- Possession should be continuous & uninterrupted (Art. 2261 Cciv.)
 - Possession should be exercised as an owner (in case of servitude: possession as holder of
right of servitude) Art. 2261
- Possession should have been known to persons against whom it is invoked
- Possession should be unequivocal

A right of servitude does NOT exclude the possibility of acquiring ownership through prescription.

Art. 2257, 2262, 2266-2268

Art. 2270 Cciv.: prevents a detentor from becoming a possessor through inversion of the cause of his
possession changing his precarious possession (detentorship) into possession as an owner.

A detentor is able to change his detention into possession under certain conditions – change from
detention into possession = interversion (inversion). If the inversion is valid, a prescription period
starts to run from that moment. Inversion is valid only if it can be known to the owner

Continuation of prescription period:

- Difficult to claim continuation of possession after sale (must be included in contract of sale).
Continuous use by successive possessors does not necessarily amount to transfer of
possession from one to other possessor.

DUTCH LAW

Prescription periods

Possession: possession for oneself as an owner – Art. 3:107 BW. Once possession has been
established, it continues to exist, even if no material acts of power over the object are currently
exercised by the possessor – Art. 3:117 BW).

Acquisitive prescription of a piece of land requires possession of land. Art. 3:99 BW: possession in
good faith (possessor did not / should have known that he did not own the thing in question -Art.
3:11) of registered property (e.g. land) leads to acquisition of ownership after 10 yrs. If possessor
cannot be regarded as being in good faith: acquisition of ownership after 20 yrs. Art. 3:105 BW:
person who possesses a thing at the moment when the action of revendication lapses through
extinctive prescription, acquires ownership of the thing. Art. 3:306 BW. Action of revindication is
extinguished after 20 yrs. (Right of ownership remains, does not lapse).

Good faith during entire prescription period – Art. 3:118(2) BW

Possession must be unequivocal as against the owner against whom a prescription period runs.

Interversion of possession is possible ONLY by the owner or by denying the owner’s right of
ownership.

Only person holding for himself is called possessor (tenant= NO possessor). Person holding for so.
Else is a detentor. Permission CANNOT lead to acquisitive prescription.

GERMAN LAW

§900 BGB: Acquisition of immovable objects / PR over immovable objects by way of prescription is
ONLY possible if the person claiming prescription has been registered in the land register as the
owner of the land in question OR the holder of the right in question for at least 30 yrs. and has been
in possession during this period.
§937 BGB: Ownership of movable property can be acquired by way of prescription, when so.
Possesses for one’s own benefit, good faith and a prescription period of 10 yrs.

Good faith GER: good faith may lapse after the moment of acquisition of possession but ONLY as a
result of actual knowledge; if possessor who started possession in good faith should have learned
afterwards that he acquired from a non-owner, this does NOT prevent him from acquiring ownership
through prescription: §937(2) BGB

ENGLISH LAW

- Prescription confined to acquisition of limited PR; easements, profits à prendre

- ‘Adverse possession’: acquisition of fee simple estate and leasehold estate – operates as a
statutory transfer of the estate in question
- In order to acquire title, the possessor (squatter) must apply to Land Registry for registration
of his title. Possible if he has been in possession for at least 10 yrs.

Requirements for adverse possession: (i) factual possession with the intention to hold and use the
land for one’s own benefit, (ii) possession must be visible to outside world or to owner of land. (Also
includes that possession exercised on land is unequivocal – persons against whom a limitation period
runs should reasonably understand that the adverse possessor claims possession and wishes to
exclude them from possession), (iii) adverse possession cannot arise where the owner has given the
occupier of the land a legal right to use the land; e.g. lease / contract, permission to use land, (iv)
adverse possession should have been for at least 10 yrs. immediately preceding the adverse
possessor’s claim (Land Registration Act 2002, section 97, sch. 6 para 1(1)).

Irrelevant whether or not adverse possessor is in good faith!

CHAPTER EIGHT -TRANSFER SYSTEMS

 Tradition system: transfer of possession required, usually requires a separate legal act
aimed specifically at transferring ownership: real agreement; (i) legal act that obliges
transfer of ownership, legal act which effectuates transfer
 Consensual system: ownership passes the moment the contract of sale is made. A
person becomes owner without delivery of possession being needed.
 Causal systems
 Abstract systems

When the contract obliging one party to make a payment is void / has been avoided, and payment
was in cash – payment itself may be void as well, depending on the transfer system.

Payment = legal act of transfer  coins / banknotes may be revindicated, provided they have not
been mixed with other monies – unidentifiable – principle of specificity: buyer have lost ownership

Transfer from one bank account to another  NO payment as transfer of ownership: money in a
bank account is not regarded as an asset capable of being owned.

FRENCH LAW:

- Consensual system – Art. 1138 Cciv. (also Art. 711 Cciv.), for gifts Art. 938, sale 1538 Cciv.

ENGLISH LAW

- No unified transfer system: rules applying to immovables diff to movables

- Delivery unnecessary where either transfer was based on sale or transfer took place by deed
- In order for an oral gift to be valid, delivery is required
- Sale of ‘goods’ (movable tangible objects)  consensual system in ENG (property passes at
the moment the contract is made).

Sale of Goods Act 1979: Section 17(1) – parties’ intention or consensus suffices to let property pass,
no transfer of possession needed

Section 18 Rule 1, 5(1) –

DUTCH LAW

Transfer system – tradito / transfer of possession required: delivery of title in movable objects takes
place by transfer of possession

Art. 3:84(1), 3:90(1), 3:89(1)

GERMAN LAW

- Tradition system – principle of separation

- Art. 2279 – ‘in case of movables, possession equals title’.

EXCEPTIONS TO THE CONSENSUAL TRANSFER SYSTEM

 Principle of consensualism – solo consensus rule for specific existing objects

  Where the goods sold are generic or future goods, ownership cannot pass the moment
the contract is made.
 Ownership of movables passes when the contract is made and the objects have been
individualised (FR).

Sale of Goods Act 1979 – Section 16: requirement of identification / principle of specificity  if
ownership forms a relationship between a person and a certain object, it must be known to which
specific object the right relates: property of unascertained goods cannot pass to a buyer until they
have been earmarked as the objects to be transferred to that buyer (appropriation).

NL, GER, FR – goods lose their identity when being mixed with other identical goods.

SALE EX BULK UNDER THE SALE OF GOODS ACT

Section 20A Undivided shares in goods forming part of a bulk

The buyer whose goods have been appropriated and then mixed again, has a proprietary interest,
whereas the buyer, whiose goods have never been appropriated, has a personal right.

Section 20B Deemed Consent by co-owner to dealings in bulk goods

Co-ownership of a certain amount of goods: buyer will become co-owner of such number of goods
as corresponds with the amount bought and paid for.

Section 61(1): definition of ‘bulk’

 No property in the bulk goods passes to the buyers before appropriation.

GOODS THAT HAVE YET TO BE MANUFACTURED

Where an object is sold that has yet to be manufactured, ownership cannot pass at the moment the
contract was made – ownership and risk passes to the buyer when the object is finished. However:
in the case of a specific object, ownership can already pass before the object has been finished.

Sale of future generic object – ownership cannot pass before the objects which have to pass to the
buyer have been appropriated. It does not suffice for the goods to have been finished.

Section 17 Sale of Goods Act: property passes when the parties intend it to pass.

Risk passes at the same time as property, unless otherwise agreed.

When the buyer rightfully rejects the goods, property revests in the seller. Rejection  nullify
delivery; seller is treated as if he had not tendered delivery at all.

Even if the buyer does not request / desire repair or replacement of the defective goods, the seller is
as a rule entitled to do this if he still has time under the contract.

TRANSFER OF POSSESSION: TRADITIO VERA AND TRADITIO FICTA

Transferring possession of a physical object: handing over the object or, in case of bulky goods or
land, giving the transferee access to the object.

ALL law systems recognise fictious ways (by way of symbol; handing over a key) of transferring
possession in addition to the real transfer of possession (tradition vera).
NL  Art. 3:114 BW

Art. 3:115 BW: 3 methods of traditio ficta: (I) constitutum possessorium: possessor turns himself
into a detentor (holder) for the acquirer. (II) traditio brevi manu: delivery with the short hand- turns
the acquirer who first possessed as a bailee / detentor for the transferor into a possessor who holds
the object as an owner, (III) attornment by a third party who attorns from the transferor to the
transferee, first holding as a detentor for the transferor and afterwards holding as a detentor for the
transferee. (NL= traditio longa manu, delivery with the long hand)

ENG

- Documents give a right of delivery against the carrier: a document of title (bill of ladings)
document relating to goods. Transfer of it operates as a transfer of constructive possession
of goods. Attornment in advance to all holders: a recognition that the goods are being held
for each holder and giving the holder a right to call for delivery of the goods.
- Gives to the buyer 3 entitlements: (1) transfer of constructive possession of the goods by
reason of the transfer of the bill itself, the carrier undertaking to keep the goods for the
holder and deliver them to him.
- The right to demand delivery from the carrier on presentation of the bill.
- The right to sue the carrier under section 1 of the Bills of Lading Act 1855.

ABSTRACT AND CAUSAL TRANSFER SYSTEMS

- The causa traditionis – legal ground for transfer – makes clear what the legal reason for the
transfer of ownership is
- FR and ENG: transfer of ownership necessarily depends on the validity of the contract 
causal system
- In an abstract transfer system, a transfer can be valid even though the underlying
transaction is defective. The party who acted under the influence of a defect of will can bring
an action to annul the transaction but this remedy does not have any effect on the passing
of property. Property does not automatically revest in the seller. The avoidance of a contract
has no proprietary effect.  Transfer by the buyer to a sub-buyer is always valid, even if the
sub-buyer knew of the defect of will.

FRENCH LAW

Contract itself transfers ownership; must be valid in order to be able to pass ownership

If a voidable contract is avoided, ownership of the object, which has passed to the acquirer, reverts
to the transferor. Avoidance has retroactive effect: contract is deemed never to have been valid
(ownership has never passed to acquirer).

ENGLISH LAW

Property does NOT pass under a void contract.

Annulment of the sale before the buyer’s bankruptcy revests property in the seller.

Avoidance of the contract of sale revests property in the seller.

Section 23 Sale of Goods Act 1979: a seller who was defrauded by the buyer had the right to avoid
the transaction and that property in the goods reverted to the seller upon avoidance. This effect
does not take place when, before the moment of avoidance, the buyer in possession of the goods
had sold these goods to a bona fide purchaser for value. =Third party protection. Where the goods
have not been sold / sold to a mala fide purchaser or have been disposed without recompense,
property in the goods reverts from the third party to the seller upon the avoidance of the contract
between the defrauded seller and his buyer.

In the case of mistake the contract is void and the bona fide third party will never be protected. In
the case of fraud the third party will be protected unless the contract had been avoided before the
buyer sold the object on to the third party.

ILLEGAL CONTRACTS

- The law allows property to pass on the basis of an illegal contract.

THE ABSTRACT GERMAN AND THE CAUSAL DUTCH TRANSFER SYTSEM

- In a tradition system the act of transfer is considered as a distinct legal act

- Legal systems in which the validity of the transfer depends on a valid causa traditionis (NL)
 Causal tradition systems; if in such systems the obligatory contract is void or has been
avoided with retroactive effect, the transfer is invalid and either ownership has never passed
(void contract) or it is deemed never to have passed to the buyer (where contract has been
avoided). Seller is then able to claim back the object sold and delivered on the basis of his
ownership. (Action of revindication)
- GER: act of transfer independent of validity of obligatory contract – abstract transfer system:
the transfer will stay even valid if the legal act that obliged to make the transfer is void / has
been avoided. Where there is no valid causa traditionis; obliges buyer to retransfer the
object to the seller due to the unjustified enrichment.
- BOTH abstract and causal systems: if the contract of sale is avoided, the entire transaction
should be reversed: the money, if already paid, should be paid back to the buyer, and the
object sold should return to the seller.
- DIFFERENCE: where in a causal system ownership of the object sold and transferred reverts
automatically to the seller when the contract is avoided, in an abstract system the validity of
the transfer will not be affected. The buyer has an obligation on the basis of unjustified
enrichment and the seller a correlative Personal right to the retransfer of right of ownership.
Limited to transfer of object, not money due to the problem of bank transfer (does not
involve transfer of property) and when purchase price has been paid with banknotes, money
almost always mixed – rendering the money paid unidentifiable  money cannot
automatically revert to buyer after avoidance of contract.

NL  Art. 3:86 BW: Those who, unaware of the defects of a title from a previous acquisition have
had a thing delivered to them, are protected as bona fide acquirers. The same is the case with a title
presumed by the parties, which never existed.

Art. 2014 BW  A transfer of property required a valid legal ground (third party protection)

If delivery lacks lawful legal ground and the acquired is declared insolvent, revindication must be
accorded to transferor.
PRACTICAL DIFFERENCES BETWEEN CAUSAL AND ABSTRACT TRANSFER SYSTEMS

In a causal transfer system (NL), a valid transfer always demands a valid causa traditionis. As a result,
ownership cannot pass under a void contract, and, if at the outset ownership has passed under a
voidable contract, it automatically reverts to the transferor when the contract is avoided. Avoidance
of a contract has retroactive effect, so that when the contract is avoided after the transfer has taken
place, the causa traditionis is deemed never to have existed and accordingly the transferee is
considered never to have been the owner of the thing and as a consequence, cannot transfer the
thing to a second transferee (Nemo plus rule). In a causa traditionis system, the first acquirer is in
principle unable to transfer ownership to a second acquirer. NO third party protection however
both, Dutch and French law protect the buyer in good faith.

In an abstract system (GER), the transfer passes ownership to the first transferee and thus enables
him to transfer ownership of the object to a third party, even though the underlying contract is
invalid.

INSOLVENCY – sale of movables

Causal transfer system  Ex.: The seller has entered into the contract under the influence of a
defect of will, e.g. duress. Transaction does not correspond to his true will; seller has power to avoid
contract of sale. Where the object has already been delivered avoidance will oblige the buyer to
return the object to the seller.

Abstract transfer system  sale of movables: seller merely has a personal right to the retransfer of
the object. Seller does not have any priority in the buyer’s insolvency: he’s an unsecured creditor.

Causal transfer system insolvency  seller will in principle be able to claim back the object relying
on his right of ownership, normally revert to him as a result of the avoidance. When ownership
reverts to the seller the object does not form part of the buyer’s goods available for realisation and
satisfaction of the buyer’s debts. Should be returned to its owner by the liquidator / administrator in
insolvency. A causal system gives better protection against insolvency of the other party.

The seller’s protection against the buyer’s insolvency is limited by a few exceptions: protection
depends on transferor’s ownership; no longer available when for some reason it is impossible for
ownership to revert automatically to the transferor.

- When the transferee has sold the object to a bona fide third party
- As a result of original acquisition; when object has been mixed with identical things in the
hands of the transferee
- If the object has been used to make a new object
- If it has been attached to another object

GER; NL; FR – protection is offered only to transferor of object. The buyer, who has a duty to pay for
the goods, is not given a similar protection against the seller’s insolvency.

MITIGATION OF THE ABSTRACT SYSTEM IN GERMAN LAW

- Conveyance may be subject to a suspensive / resolutive condition (that conveyance only be

valid if and as long as the underlying contract is valid)
- A defect of the underlying contract rendering the contract void / voidable may affect the
transfer in the same way (identity of defect). E.g. minority – affects both contract and
 transfer. Defects of will (fraud, duress) will normally render both: contract and transfer
voidable. In case of transaction against good morals, conveyance may be void as well.
- Doctrine of excessive security  both the duty to give excessive security to the creditor and
transfer made to fulfil this duty are held to be void.
- In case of error, identity of defect is rarely accepted.
- Where the underlying contract infringes upon a legal prohibition, the transfer may be void if
the prohibition is specifically aimed at the transfer itself.

Excessive security: a creditor has an excessive amount of security interests in relation to his claim on
the debtor. Excess security from the outset, excess coming into being later as a result of part
repayments of the loan.

Excess from the outset: sanction of voidness is used only if the difference value is excessive. Transfer
is then void as well

Excess coming into being later: debtor has a claim against the creditor that the creditor should
release some of the security objects.

ENGLISH LAW: TRANSFERS OUTSIDE SALE OF GOODS ACT

Act does not apply to transfers which are not based on a sales contract, e.g. gift of a movable

Gifts are only valid if they have been effected by deed or if delivery of possession has taken place.
Oral gifts are invalid. Gift needs the donor’s will to give and the donee’s acceptance of the gift. Must
be an agreement between parties.

COMPARATIVE OVERVIEW

In a consensual system ownership cannot pass if generic goods have not yet been appropriated to
the contract and if the goods are still future goods. The parties to the contract are able to stipulate
that ownership will pass only at a later moment (e.g. after payment of purchase price).

Parties in a traditio system are able to let ownership pass before physical delivery by agreeing on a
constitutum possessorium.

All transfer systems have in common that no ownership of future goods and generic goods can pass.
 Principle of specificity.

GERMANY: THE TRANSFER OF PR IN LAND

The transfer of PR in land requires two acts:

1) the real agreement (dingliche Einigung) and 2) the registration of the PR in the land register.

§873 BGB Acquisition by agreement and registration

§875 BGB: Destruction of a right

§925 BGB: Conveyance agreement

§925a BGB: Document of the agreement

§928 BGB: Abandonment of ownership

Registration in the land register (§873(1) BGB), destruction of PR over land (§928 BGB) and the
abandonment of the right of ownership in respect to land (§928 BGB) have constitutive effect.
§875, §928 BGB require only the unilateral declaration of the person entitled that he abandons his
right. If the right is burdened with the right of a third person (e.g. right of pledge / hypothec), the
destruction of the burdened right also requires the approval of the third party (§876 BGB)

The acquisition right of the recipient of a conveyance agreement is transferable, pledgeable and
seizable.

§§873-902 BGB: general rules on rights over land

§§1113-1203 BGB: registration requirements applicable to the right of hypothec and the right of the
land charge (Grundschuld).

ENGLISH LAW- THE TRANSFER OF PR IN LAND

Distinguishes between two systems of transferring titles to land: 1) transfer by deeds (unregistered
system), used for the transfer of titles that are not registered in land register, 2) transfer by way of
registration in the land register (registered system).

Section 2 Law of Property Act 1989: formal requirements for the sale of land and other
dispossessions of any interest in land: 1) must be made in writing, 2) must incorporate all terms
which the parties have expressly agreed, either in one document or, where the contracts are
exchanged, in each and 3) the document incorporating the terms must be signed by or on behalf of
each party to the contract. A contract that does not meet these requirements is void.
A valid contract can be enforced by specific performance and thus gives the acquirer an immediate
equitable interest in the object.

If the transfer of a right is performed by way of registration, it is the act of registration that confers
the right. Registration thus has constitutive effect (‘no right without registration’). With respect to
the parties concerned by the transaction, registration may also have a legal effect on the parties
themselves in that it transfers the right even when the transferee lacks true entitlement.

For registered transactions, English law follows the abstract transfer system.

Registration in the land register has full third party effects. The protection of third parties is only
limited by the priority of overriding interests and the rules on the rectification of the register.

FRENCH LAW – TRANSFER OF PR IN LAND

French law does NOT provide for specific rules for the transfer of PR in land. According to the French
consensual transfer system, ownership passes already with the contractual agreement of the parties
without the need for further acts like transfer of possession or registration. No general rule
providing for formal requirements for the validity of contracts concerning the transfer of land.
Registration in the land register has no constitutive effect, but only a publicity function with regard
to third parties.  Registration in land register is not proof that the registered person is really legally
entitled to the PR. Failure to register has therefore no negative effect as regards validity of the act
between parties and their successors, only with respect to third parties.
CREATION OF LIMITED PR

- CONTENT OF LIMITED PR

GER  There is original acquisition of a contractual claim where the right of the acquirer does not
depend on the right of a predecessor. When a right with this content did not exist at the moment of
acquisition. A contractual claim is acquired by original acquisition from the contract which created
the claim.

Acquisition of a limited PR = derivative

Limited PR: cannot be created by grant if the grantor does not own the land.

Contractual claim comes into being even if the grantor is not the owner of the land. Claim is not
derived from the grantor’s ownership but from the contract which he concluded with the grantee.
As the contract did not exist before, the acquisition of the claim is original.

FRENCH LAW

The creation of limited PR is made by contract. A property agreement or real agreement is not
necessary. A contract of lease also gives rise to the creation of a right of superficies. In order for third
party effect, especially in case of immovables, registration is usually needed. The PR, however, is
already created between the parties in the same way as the right of ownership can be transferred
between them but will only have effect against third parties after registration.

DUTCH LAW

Art. 3:98 BW

Art. 3:83 BW: lays down which things are transferable

Art. 3:84 BW: for a valid transfer (i) the transferor should have the right to dispose of the object in
question, that (ii) the transfer should be based on a valid legal ground and that (iii) a valid act of
transfer should take place. The causal transfer system, which applies to the transfer of property, also
applies to the creation of limited PR.

GERMAN LAW

Transfer system is applicable to the creation of limited PR. §1032 BGB: creation of a right of usufruct
on movables, §1274 BGB creation of a right of pledge.
The grantor should have the right to dispose and the creation is subject to the abstract transfer
system, which entails that no valid legal ground is needed.

COMPARATIVE OVERVIEW

TRANSFER OF PR IN LAND

GER + ENG:

§311b(1) BGB: the contract for the transfer or acquisition of ownership to land needs notarial
recordation
Section 2 of the Law of Property Act 1989 contracts for the sale of land or other dispositions of any
interest in land must be made in writing and signed by each party. A contract that does not meet
these requirements is in both countries void.

FR: does not provide for specific formalities for the conclusion of the contract as such. The contract
must fulfil certain requirements for the registration in the land register.

GER: abstract transfer system also applies to the transfer of PR in land, required in addition to the
contractual agreement the conclusion of the real agreement, which, together with the registration
of the registration of the right in the land register, constitutes the Verfügungsgeschäft.
For the acquisition and loss of ownership to land, including co-ownership and apartment right, the
real agreement is called Auflassung and must fulfil specific formalities stipulated in §925BGB in order
to be legally effective.
Tradition system  The acquisition or cancellation of a PR in in land by legal transaction makes the
registration of the right in the land register a prerequisite. Before registration the acquirer only has
a claim against the transferor. Registration of the PR has constitutive effect. This only applies when
the right is transferred by legal transaction and not if a PR is acquired directly by the law itself or by
judicial or administrative act

ENG: transfer by way of registration in the land register (registered system) – constitutive effect.

FR: no specific formal rules for the transfer of PR in land and does not rely on registration for the
transfer procedure. Consensual transfer system, also applies to transfer of PR in land; ownership
passes already with the contractual agreement of the parties. Registration in land register has no
constitutive effect, only publicity function with regard to third parties.
CHAPTER NINE – DESTRUCTION

- COMPARATIVE REMARKS

‘Destruction of a right’:

Pye v United Kingdom – PR can be destroyed in several instances

Rules regarding bona fide purchase in ENG law are rules of third-party protection in civil law
systems.

DESTRUCTION OF SUBJECT MATTER

A PR in respect to an object will be destroyed when the object ceases to exist. Through: -
consumption, - accession, - mixture or – specificatio.

TECHNIQUES OF DESTRUCTION

3 ways in which PR can be destroyed: 1) when a new PR is created, 2) PR can be lost and destroyed
by a forced / involuntary transfer to another party (NOT in common law), 3) lost completely without
creation of new PR

PRESCRIPTION AND LIMITATION

Civil law: after certain lapse of time, actions may become statute barred – extinctive prescription
Where a non-owner has been in possession of the object for a long time civil law systems may give
ownership to this person after certain lapse of time. (Prescription has ‘strong’ effect, destroying the
former owner’s PR  ‘acquisitive prescription’)

Common law: Limitation; where only the right of action is statute barred: ‘weak force of
prescription’: the PR does not lapse, only the action protecting the right. Limitation may have both
the weak and strong effect, save that it never transfer rights.

THIRD PARTY PROTECTION AND BONA FIDE PURCHASERS

Civil law: The third party acquires property from a party that was not capable / authorised to
transfer a PR / who acquired from someone in a situation where another person had a better right.
Requirement of good faith.

ENG law: a person with an inferior title may pass his title to the goods to a third party, but any party
with a better title will not lose his right to the goods. Generally, persons with better rights are
protected. (the non-owner may transfer possession of the goods to a third party but NOT ownership)
 the party originally holding the right of ownership/the better title to the goods loses it.
Requirement that the purchaser is a bona fide purchaser for value without notice of the better title.

ABANDONMENT

The holder of a PR is generally allowed to do with his right as he pleases within the limits of the law.
Part of this power concerns his right to abandon his right (the voluntary destruction of a PR). General
distinction between immovable objects / land and movable objects / goods:

Civil law systems generally recognise the right to abandon PR in respect to movables whereas
common law does NOT.
In ENG law the abandonment of a PR in land is NOT permitted.

In civil law systems, when abandonment is accepted, the state will hold a PR in respect to the
immovable object. PR on behalf of the state is either created by a new right or by transfer of the
existing right to the State.

NL: most restrictive approach; rejecting the third-party effect of an abandonment of PR.

CHAPTER TEN: UNIFORM OR HARMONISED PROPERTY LAW

- HARMONISATION OF PL

Lex situs rule / Lex rei sitae; PR- since they affect the position of third parties – need to have a
relatively high level of certainty and predictability. Applies to corporeal movable objects.

- Property law has traditionally been national law: national property law systems are very
closed: for a large part mandatory law with little room for party autonomy as it involves
interests of third parties.
- In international law the applicable law is determined by the jurisdiction where the object is
situated: Lex rei sitae

Article 1 First Protocol of the European Convention of Human Rights (ECHR)  protects PR
(possessions) against expropriation (fundamental rights to property)

Right to a fair procedure: Art. 6 ECHR, the right to housing: Art. 8 ECHR

Private property law needs to be in conformity with the constitutional norms of the ECHR; Art. 8
ECHR protects the right to housing and the right to a fair procedure, protects the eviction of
possessors of housing without a previous option of a court procedure.

The EU has competence to harmonise private property laws. Harmonisation may be driven by the
application of the free movement of goods, persons, services or capital (negative harmonisation) or
following from specific (harmonising) Regulations and Directives (positive harmonisation).

Directive 2011/7/EU  combatting late payment in business transactions, the proposed

Euromortgage and Regulation 1346/2000/EC on Insolvency Proceedings.

FR – Art 3 Cciv

GER –§ 43(1) BGB

NL – Art. 10:127 Art. 2, 10:128 Art. 3 BW – conflict-of-law rule – parties can chose a foreign PR,
allows parties exporting to another country. An otherwise forbidded (security) transaction but
authorised under foreign law, can be executed in NL

EU – Rome I Regulation. Voluntary assignment or contractual subrogation: Art. 14: if object of PR is

transferred to another legal system than the one in which the security right has been created, it is
possible that the foreign security right is not known the numerus clausus of the PL of the host legal
system. In case of a conflict a court will have to decide on the possibility of enforcing the foreign
security right. Court will have to assess whether there exists an equivalent right resembling the
foreign PR in the national legal order.
HARMONISATION AT THE LEVEL OF THE EU

Positive integration / harmonisation: when legislation is made by the EU legislature

Negative harmonisation: in the internal market there is freedom of movement, TFEU Treaty
contains series of prohibitions on restrictions of that freedom of movement. Limited harmonising
effect from these provisions because it means that MS are no longer allowed to protect their
national legal order in a certain way.

HARMONISATION BY ENACTMENT OF EU LEGISLATION

- LEGISLATIVE INSTRUMENTS

Art. 288 TFEU – Regulations have direct application in the legal order of the MS, these acts of EU law
create rights and duties for individuals. Van Gend & Loos

A Directive is directed at MS and must therefore be transformed into national law to create rights
and duties for individuals.

LEGAL BASIS OF UNIFICATION / HARMONISATION

Art. 1-4 TFEU: EU has exclusive competence: MS should no longer act in this area

Property law: most competences are shared

Art. 5 TEU- whenever the EU wants to legislate in a certain area, it must keep with the principle of
subsidiarity (principle ensuring that the EU does not claim competence it does not have on the basis
of the treaty) and with the principle of proportionality (in legislating keep within the objectives set
out in the Treaties and not go beyond these.

There is no EU competence to unify or harmonise law on the mere basis of disparity in national laws

CULTURAL OBJECTS

- EU Directive 93/7/EEC: return of stolen objects

Directive 2011/7/EU – late payments in commercial transactions: obliges MS to regulate more

stringently the interest rates and the recovery procedures, also includes a rule on retention of title
or reservation of ownership device

INSOLVENCY PROCEEDINGS

- Regulation 694/2006/EC: set of rules with regard to insolvency proceedings with an

international dimension.

Art. 5(3) of Regulation: ‘right in rem’  any right entered in a public register and enforceable against
third parties as a PR.

Creation, validity and scope of PR are determined by the lex rei sitae at the relevant time. Cannot be
affected by the opening of insolvency proceedings; although the law of MS of the opening stipulates
that all objects are part of the patrimony, the holder of a PR retains all his rights in respect of the
objects in question. No restriction contained in a national insolvency rule can be opposed to a
foreign security creditor. Only when subject-matter of the PR is situated in another MS than the MS
in which the insolvency proceedings are opened.
Regulation 1346/2000/EC Art. 7 – Retention of title: not affected by the opening of an insolvency
proceeding in another MS than the one in which the object sold under title retention is situated.
Insolvency of seller under title retention: if the purchaser continues to make the payments agreed
upon in the sales agreement, he shall acquire the ownership of the object once the condition for
transfer of ownership (full payment of all secured claims) has been fulfilled. Only applies if the object
subject to retention of title is situated in another MS than the MS in which the insolvency
proceedings were opened.

FINANCIAL COLLATERAL AGREEMENTS

=financial transactions between bank and other large financial institutions. Banks lend money to
each other in exchange for security. Objects= intangibles in the form of money, derivatives, or other
financial instruments. Can take two forms: 1) transfer for security purposes, 2) special right of
pledge.

Art. 5 Directive 2002/47/EC  principle of lex commissoria; prohibition for the secured creditor to
keep the object under security for himself has disappeared.

EMISSION RIGHTS

Directive 2003/87/EC

Emission rights to emit carbon dioxide into the air

Law on the Management of the Environment introduces an abstract system of transfer, the invalidity
of the underlying agreement will no longer affect the validity of the transfer.

FREE MOVEMENT OF GOODS AND PROPERTY LAW

 Negative harmonisation: Art. 34 TFEU – prohibiting import restrictions (unless a MS is

able to justify its measures in the light of the principle of proportionality).
 Distinction between quantitative restrictions (QRs) – restrictions on the number of
products that can be imported into a MS and measures having the effect equivalent to a
quantitative restriction (MEQR) – any measure that have the same effect.

FREE MOVEMENT OF CAPITAL AND PROPERTY LAW

- Mostly concerns the acquisition of ownership of land in another MS / financing that

acquisition: Art. 63 TFEU
- Art. 345 TFEU: although MS are still free to regulate their property law system, they must do
so within the boundaries set by the law of the internal market.

HARMONISATION AT THE LEVEL OF THE COUNCIL OF EUROPE: ART. 1 FIRST PROTOCOL OF THE
EUROPEAN CONVENTION ON HUMAN RIGHTS

(I) Whether there is possession

(II) Whether there is an infringement on this possession: should be justified (a) should be
lawful, (b) pursue a legitimate aim in the public interest, (c) should be proportional,
striking a fair balance between the general public interest and the private interest in the
protection of the individual’s possession.
3 rules:

1. Principle of peaceful enjoyment of possessions

2. Deprivation of possessions
3. States are entitled to control the use of property in accordance with the general interest, by
enforcing such laws as they deem necessary for the purpose.

CONCLUDING REMARKS

Although MS maintain a fragmented system of PR at a national level, internationally they also

participate in uniform systems. – E.g. decrease in importance of the national property security rights