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THE RETENTION OF TITLE

Who might be interested in retention of title?


In principle, it can be of interest to sellers of both real estate and movable goods, provided that the buyer pays the purchase price over a longer period of time. In case of real estate, other legal solutions may also be suitable to protect the seller's interest (e.g. suspension of the land registry procedure), but in case of movable property, retention of title is one of the best legal solutions to secure the seller's interest.


What is retention of title?


In practice, this means that the buyer does not become the owner until the purchase price has been paid. The seller can retain title until the purchase price has been paid at the latest, and this must be agreed in writing between the parties, typically in the contract of sale.



What is needed in addition to the agreement?


For real estate:

The seller must register the retention of title with the land registry (indicating the fact of retention of title and the identity of the buyer).


For movable goods:

In this case, it is also the seller's responsibility to register the reservation of title in the registry of collaterals (indicating the retention of title and the identity of the buyer).


What is the registry of collaterals?


The registry for collaterals is an electronic database where you can search and view, for example, registered pledges and retentions of title by entering the name of the pledgor (buyer, debtor, lessee). The system is accessible to anyone, free of charge and operated by the Hungarian National Chamber of Notaries (MOKK).


What happens if the seller fails to register the retention of title in the registry for collaterals?


According to the Civil Code, this has two important consequences:

  • first, the buyer can sell the movable goods to another bona fide buyer and the new buyer obtains title to the goods,

  • the second is that the buyer can pledge the movable goods.


As a seller, both of the above consequences are clearly disadvantageous for us and can easily be prevented by registering our retention of title in the registry for collaterals in good time.


What happens if the buyer becomes insolvent?


Under the Insolvency Act, assets sold with retention of title do not belong to the debtor's estate (with some exceptions, such as incorporation, processing or conversion). So if the buyer goes into liquidation, for example, we as the seller can start from a comfortable (ownership) position and can request the return of the asset, rather than waiting together with other creditors for the distribution of the debtor's assets, which might only cover a fraction of our claim.


Dr. Hizsák Tamás

lawyer


The above article is not intended to be complete, it was created for information purposes, so it does not constitute legal advice. If you have any questions or comments, please contact us using one of our contact details (e-mail: info@dunalegal.com, phone: +36 1 622 0436).


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