- Commercial Law
- Leo Peeters - Ann Vranken
- Retention of title , Terms and Conditions , Pledge Register , optional right
Sellers and suppliers of movable assets can deal with problems caused by poorly-paying customers through a retention of title clause. This clause makes it contractually possible to stipulate that ownership of a certain good does not transfer until the third party acquirer has paid the full price.
It is interesting to note that the new Law on Pledges has created a better legal framework for the retention of title clause, putting any creditor - assuming a retention of title clause has been included - in a stronger position.
Retention of title is a security right by which it is contractually stipulated that ownership
does not transfer until the third party acquirer has paid the agreed upon sum in full.
In other words, the buyer will only acquire the good following a payment in full.
However, the Law on Pledges does not define retention of title, but rather describes it.
Retention of title was included in Article 101 of the Bankruptcy Law, stipulating that a
retention of title clause for movable goods was enforceable in the event of the buyer's
bankruptcy.
The following conditions had to be met:
• The clause had to be drawn up in writing at least at the time of
delivery of the goods;
• The goods had to be in possession of the buyer, in kind. They were not allowed to be of an
immovable nature through incorporation nor could they be mixed with an other good.
The Law on Pledges, which came into force on 1 January 2018, provides a legal basis in the
Belgian Civil Code for the retention of title clause and abolishes Article 101 of the Bankruptcy
law.
In Article 69 of the Law on Pledges it is stated that the seller who has stipulated a retention of
title clause, has the right to recover their goods if the buyer fails to pay the price in full.
Furthermore, retention of title will apply regardless of the legal nature of the agreement in
which it was included. This means that it no longer only applies to a sale agreement but also to
other agreements.
For example, a retention of title can be stipulated by a contractor who, in addition to providing
his services, also provides the building materials. Previously, this might have lead to
discussions.
As a result, the retention of title no longer only applies to sales agreements but also to other
agreements such as exchanges, donations, etc. Furthermore, retention of title can now be invoked in
any form of concurrence of creditors, and no longer only in the event of bankruptcy. Retention of
title can now also be invoked in the event of collective debt settlement or seizure.
The only condition is that the retention of title clause was stipulated in writing no later than at
the time of delivery of the goods, for example in a quotation, in an order form or in a delivery
note. It is advisable to include this clause in the General Sales Conditions found in these
documents.
Note! The rules have become even more stringent for cases in which the buyer is a consumer. In that
case, the buyer's consent must be evidenced by the document itself. The retention of title will
only apply if the consumer has explicitly signed his consent to the clause.
Goods are no longer required to be present in kind, as they were previously required to be by
Article 101 of the Bankruptcy Law.
Registration of a retention of title in the Pledge Register is an optional right.
If it is possible for the encumbered goods to become immovable through incorporation, the title
retention must be registered in the Pledge Register.
After a retention of title on a certain good has been registered in the Pledge Register, it comes
with priority over a mortgage creditor. The parliamentary documents show that this priority will
even apply if the registration took place after the mortgage registration, provided that the
registration takes place before the incorporation itself.
Needless to clarify that the registration of a title retention clause in the Pledge Register
provides additional protection.
The registration however is not free of charge after which it must be renewed. Depending on the
value of the goods to which the retention of title applies, the fee amounts from € 20 up to €
500.
The retention of title has finally received a legal framework following the introduction of the
Law on Pledges, allowing more frequent and efficient use thereof.
In any case, it is advisable to include a retention of title clause in the General Sales Conditions
of all your sales documents, such as quotations, order forms, building contracts, etc. ... and
having this signed by the buyer if the latter is a consumer.
The retention of title provides addition protection provided it has been registered in the pledge
register, but this registration is not mandatory and remains an optional right.
There is one exception to this rule: when an encumbered good can become immovable through
incorporation. In that case, the retention of title must be registered in the Pledge Register. It
would not be the first time a supplier of building materials is left with a non collectible debt
claim after a contractor went bankrupt.
Do not forget that registration of the retention of title must be entirely or partially removed
when the price of the goods has been paid, either in full or partially respectively.
It goes without saying that we would be happy to assist you in drawing up your General Sales
Conditions.