Transfer of ownership for security


Collateral transfer is a type of protection of contractual receivables occurring in business transactions. It consists in the fact that the debtor transfers ownership to the creditor, at the same time entering into an arrangement with him, where the creditor will be able to satisfy himself from this thing, as long as the claim is not settled. An important aspect is the fact that the debtor still has the right to own and use the item.

How does Polish law regulate the issue of transfer of title for security?

The Polish Civil Code does not regulate this issue, but in other codes or laws we can find references to the method of transferring ownership for security. First of all, when talking about this form of debt recovery, one can refer to Art. 101 paragraph. 1 of the banking law, which informs that the security of receivables may be achieved by transferring to the bank by the debtor the ownership of a movable property or securities until all obligations to the remitter are made.

What are the forms of collateral transfer?

Experience shows that we have two forms of transfer of ownership as security. The first option is based on the transfer of ownership of the thing under the resolving condition, i.e. repayment. When the debtor complies with all obligations, ownership is transferred back to him. This variant may only be used when the subject of the transfer of property is movable and immovable property. The second option of a collateral transfer applies to the buyer who undertakes to transfer ownership again when the payee is satisfied with the secured debt. It should be noted that it is possible to transfer the ownership of movable items, provided that the ownership of immovable items is transferred.

Is the collateral transfer legal?

In Poland, a collateral transfer agreement is allowed on the basis of the principle of freedom to conclude contracts. However, there are opinions which question this method of securing claims. In the first place, oppositionists argue that under Polish law, claims are settled in accordance with the Code of Civil Procedure.