Mortgages on Immovables in Dutch Law in Comparison to the German Mortgage and Land Charge

Abstract:     
The Dutch mortgage (hypotheek) is a limited real right which gives the creditor a very high rank in the debtor's insolvency and which gives its holder a quick and very practical means of organising a forced sale of the burdened property. The mortgage is in principle accessory to, that is, linked to the secured claim. To give two examples, when the secured claim lapses as a result of payment the mortgage lapses also and when the secured claim is assigned, the mortgage automatically passes to the assignee. This is called the principle of accessoriness. This principle primarily aims at protecting the mortgagor. In order to enhance the mortgagor's protection the assignee of the secured claim cannot rely on the public land register for the existence or amount of the secured claim. If the secured claim had already been repaid before the assignment, but the claim and mortgage are still registered in the land register, the assignee receives neither a claim nor a mortgage. This Dutch system is contrasted with German law which takes a different approach for the Verkehrshypothek. Here German law favours the bona fide assignee over the debtor by enabling the assignee to rely on the public land register. In the past this applied equally to the more common German Grundschuld (land charge), which was always described as non-accessory. As the non-accessory character has recently given rise to misuse by assignees, the German legislator has changed the law (in the so-called Risikobegrenzungsgesetz) to enable the chargor to set up against the assignee any defences which he had against the assignor, for example the defence that the debt had already been redeemed (partly). This change in the rules on the Grundschuld entered into force on the 19th August 2008. The effect is that at the moment of enforcement the Grundschuld is accessory, like the Dutch mortgage. The changes did not affect the German Hypothek so that the Verkehrshypothek is now much less accessory than the German Grundschuld, notably at the time of enforcement. This is a very remarkable change because the German Grundschuld has always been the archetype of a non-accessory mortgage. It no longer is.

Number of Pages in PDF File: 16

Keywords: Dutch law, German law, mortgage, Accessoriness, accessory, hypotheek, hypothec, Grundschuld, Risikobegrenzungsgesetz

JEL Classification: K11

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