Law on Pledges and Pledge Register in practice

On 1 January 2018, the new Law on Movable Securities of 11 July 2013 (hereinafter referred to as the "Law on Pledges") entered into force. In the meantime it has been thoroughly amended by the Law of 25 December 2016.

In previous articles on our website, we already informed you extensively about this legislation which entails a strong modernization of security law.

The entry into force of the Law on Pledges was, however, delayed because the concrete elaboration of an essential element of it, namely the National Pledge Register, took much more time than expected.

We had to wait for the Royal Decree of 14 September 2017 to find out that the Law on Pledges would enter into effect on 1 January 2018 at the latest, and also how the Pledge Register may be used.

1. Brief description of the new Law on Pledges and the National Pledge Register

The Law on Pledges introduces a non-possessory pledge on movable property, so that it is finally possible to pledge a property without a dispossession being required. In concrete terms, this means that from now on you can give something in pledge without having to hand it over to the credit provider. It was precisely for this reason that it was necessary to introduce a Pledge Register, namely to make the pledge enforceable against third parties.

The laws on pledges on a business and an agricultural privilege are abolished, and a legal embedding of the retention of title arrangement and the right of retention, which gives rise to the pledgee's preferential right, is introduced.

The purpose of the Pledge register is to make pledges enforceable against third parties

The purpose of the National Pledge Register is to register pledges and retention of title arrangements.

From now on, every pledgee will be obliged to secure his pledge by means of its simple registration, because from that moment onwards it will be enforceable against third parties.

On the other hand, the registration of the retention of title arrangement in the pledge register is optional and therefore not mandatory. In some cases, however, registration is recommended, especially if for example movable property is sold on to a third-party professional or when sold movable property becomes immovable through incorporation.

As stated earlier, the purpose of the Pledge Register is to inform third parties in an objective manner about the existence of a pledge, and resolve rank conflicts; first come, first ranked.

This enforceability against third parties is extremely important, both for credit providers and for companies and families that are dependent on external financing. This is also important if you want to buy a movable property, such as a car, because you can check from now on whether there is a pledge on it. Professionals buying movable property will no longer be able to invoke the principle of Section 2279 of the Civil Code, namely that in connection with movable property, "possession as title" applies. From now on they will have to consult the Pledge Register in order to be sure.

The National Pledge Register falls under the management of the General Administration of Patrimony Documentation of the FPS of Finance, which issued a circular on 23 November 2017 explaining the pledge legislation.

The Pledge Register is a web application which relies on a database and functions fully autonomously. This means that the pledgee (whether or not represented) or the seller himself can register his pledge or retention of title arrangement directly and without the intervention of any person in the pledge register, and manage his registration autonomously.

As a result, there is no intervention by the registrar in the event of a discussion about the correctness of the data entered, nor is there any supervision of the capacity of the mandatory (see below).

Below you will find an explanation about the registration in the Pledge Register.

2. Who can register in the Pledge Register? 

Access to the Pledge Register is in principle open to everyone.

On the other hand, the possibility of registering data is subject to certain conditions, namely:

a) for a pledge agreement, only the pledgee, his representative or a mandatory of the pledgee or representative can register data in the Pledge Register;

b) for a retention of title arrangement, only the seller or his mandatory can register data in the Pledge Register.

Because access to the Pledge Register is only possible by means of an identity card and its code, foreign pledgees or holders of a retention of title must appeal to a Belgian intermediary, a mandatory, for registration in the Pledge Register.  The mandatory then acts for them and will log on to the computerized system by means of his own identity card. In this respect, it is extremely important that good agreements are made about what must happen with the key to the Pledge Register after the mandate.

Only the pledgee (or his representative) and the seller, holder of the title retention, are liable for the registration of incorrect data in the Pledge Register. The pledgee is obliged to delete the registration as soon as the pledge ends.

3. Identification and authentication of the pledgee or seller

Every user of the Pledge Register must authenticate himself by means of his identity card and code.

Authentication is the process whereby the identity of a person is verified to obtain the assurance that a person is who he claims to be.

Large users of the Pledge Register may conclude an agreement with the General Administration of Patrimony Documentation (FPS of Finance) as a "registered user". In such agreement, the use of the Pledge Register, the authentication and role management of the personnel (authorized by the registered user to use the Pledge Register for him) are provided for. This possibility is reserved for, inter alia, law firms and large financial institutions.

For each operation  in the Pledge Register, a new identification number is generated and delivered. This new identification number is required in order to be able to perform a subsequent operation  with regard to the same registered pledge or retention of title arrangement.

4. Which data should be included in the Pledge Register?

4.1 For the registration of a new pledge

1° the identity of the pledgee or his representative;
2° the identity of the pledger;
3° if applicable, the identity of the mandatory of the pledgee or his representative;
4° the description of the encumbered property;
5° the description of the guaranteed claims;
6° the maximum amount the claims are guaranteed for and for which the registration takes place;
7° the statement of the pledgee, his representative or their mandatory that the pledgee or representative is liable for all damage resulting from the recording of incorrect data.

The encumbered property for which registration takes place must be sufficiently "identifiable" because, in addition to the pledger’s identity, it is part of the search terms when the Pledge Register is consulted. In a free text field of the web form a more or less precise indication of the encumbered property can be mentioned: the pledgee copies the precise indication of the encumbered property in the pledge agreement in an abbreviated form or in full. In order to exclude any doubt, even an extract from the agreement can be added as a PDF file. The Pledge Register also provides for the possibility of copying a text part of the agreement on the web form for the guaranteed claim(s) described in the Pledge Register.

4.2 For the registration of a new retention of title arrangement

This corresponds to the data to be entered for a pledge agreement.

In addition, for the registration of a retention of title arrangement, only the sold property and the unpaid purchase price must be mentioned, and the seller or his mandatory must sign a statement of liability similar the one made by the pledgee, his representative or their mandatory, before the registration can be completed.

5. Payment of a fee to complete and confirm the registration

After confirming the entered data, the user (pledgee, seller under retention of title arrangement, representative, mandatory) is referred to a screen where the payment of the fee (see point 8) is settled. The fee must therefore be paid in advance.

Non-registered users make ordinary online payments via the secure electronic WordLine payment module.

On the other hand, registered users pay through their provision accounts (whereby before carrying out a transaction, the system checks whether the account is sufficiently provisioned).

After payment has been made, the user receives a unique identification number with which he can modify, renew, remove, transfer the registration or (only in the event of a pledge) he can make a cession of rank. A digital (PDF) document is also delivered to him for confirmation purposes with all the data of the registration and the integrity of which is guaranteed by an electronic signature. It can be downloaded and printed.

6. Other operations 

The registered pledge or retention of title arrangement may also be renewed, modified, removed, transferred in the pledge register, or a cession of rank of a pledge is also possible.

• Only a  pledgee (c.q. representative), seller or mandatory may modify, renew, remove a registration.
• Only a pledgee (c.q. representative) or mandatory may introduce a cession of rank or transfer of a pledge.
• Only a seller (c.q. representative) or mandatory may introduce a retention of title arrangement.

All transactions that take place in the Pledge Register are kept in chronological order.

The registration of a pledge and a retention of title arrangement lapses after 10 years, but this period may be renewed repeatedly for a new 10-year term. This renewal of the registration has to take place before the expiry of the 10-year period, if not the registration will lapse and as a result of which a new registration has to be made involving all costs resulting from it and with loss of rank.

• When a registration is changed, both the original registration and the changed registration are saved.
• Removal is only possible by the pledgee, seller or their representative or mandatory.
  Partial removal is possible (by reducing the registered maximum amount to the amount the claims are guaranteed for, or by removing a part of the property the pledge applies to and such registration was taken for).
• When transferring a pledge, the transferor must take care of its registration.
• A cession of rank of a pledge is registered by the person who cedes his rank.
• The pledgee is obliged to carry out a complete removal in the event of payment of the guaranteed debt, as well as for the seller, who has a retention of title arrangement registered, if the buyer has paid the full price of the purchased property. In that case, this registration can no longer be consulted but it will be saved in the database and can be retrieved by the registrar of the Pledge Register in the event of any subsequent disputes.

7. Consultation of the Pledge Register

In order to be able to consult the Pledge Register, the identity details of the pledger or the buyer must be entered under retention of title arrangement.

Only the pledgee (or his representative) and the seller, holder of the title retention, are liable for the registration of incorrect data in the Pledge Register

If there is no result, the registry will issue a document stating 'no search results', the time of consultation and the search data.
If there are multiple results, the user can focus his search on the property for which he asks for a certificate, by indicating the encumbered property.
If there is a search result, a document will be delivered with the identity of the pledgee (or his representative or mandatory) and the pledger and all information that can be consulted in the Pledge Register about the pledge and the claim.

7.1 Who can consult the Register?

Everyone can consult the Pledge Register under the conditions set.

However, a number of thresholds have been built in to limit the unlimited consultation of the Pledge Register, namely

• each consultation requires the prior payment of a fee;
• the identity of any person doing a search is recorded in the system so that every search is traceable.

These thresholds are not only intended to prevent misuse of the Pledge Register but also to have the protection of privacy in mind, namely:

• The identification of the persons consulting the Pledge Register must also allow the pledger and the buyer under retention of title arrangement to check on the basis of the consultation history which persons have consulted their data over the past six months;
  
• Explicit liability is introduced for improper and commercial use of data obtained from the Pledge Register, which is a violation of  the privacy legislation and holds the user liable for any damage;
• Consultation is possible on the basis of well-defined criteria. A consultation based on free text is not possible. This means that a search at random is made impossible, which results in an additional threshold against violations of privacy.

The pledger and seller receive a warning if there is "improper and commercial" use.

The pledger and buyer under retention of title arrangement are given the opportunity to check on the basis of the consultation history which persons have consulted their data over the past six months. This consultation is free of charge.

8. Fee amount

The fees payable vary depending on the amount of the guaranteed claims or the sales price of the movable property sold under retention of title.

These fees amount to:

• from  EUR 20 to EUR 500 for the registration of a pledge or a retention of title arrangement or its renewal in the Pledge Register;
• from  EUR 12 to EUR 300  for the modification of the registration of a pledge or a retention of title arrangement in the Pledge Register;
• from  EUR 8 tot EUR 200 for the complete removal of the registration of a pledge or a retention of title arrangement in the Pledge Register.

The fee charged for consulting the Pledge Register amounts to EUR 5 per consultation. 

This fee is payable per search. It includes the delivery of an electronically signed document in which either a negative search result or one pledge or retention of title arrangement is documented.

For a cession of rank or  transfer of a pledge or retention of title arrangement, a fixed fee of EUR 10 is due.

9. Transitional provision

9.1  the existing pledging of a business and agricultural privileges (Law on Pledges Section 107) must transfer the existing registration to the National Pledge Register within a transitional period of 1 year;

• during that year, the cancellation of registrations will remain possible;
• the data and references of the existing registration must be stated;
• the transfer in the Pledge Register is only valid for the remaining period of 10 years;
• this transfer is free of charge;
• preservation of rights for creditors.

The mortgage registrar or collector of registry fees and stamp duties will deliver copies and certificates until 31 December 2018.  Therefore, until 31 December 2018, cancellations may still be made at the mortgage registry or registration office.

The official website of the Pledge Register is https://pangafin.belgium.be and the Pledge Register can be reached at the following email address pangafin@minfin.fed.be.