The most common form of security in the financing of real estate is a right of mortgage (hypotheekrecht) over the real estate. Mortgages are established by way of a notarial deed, which must be registered at the Dutch Land Registry (a public register, which provides notice and information to third parties of the registered deed). Mortgages secure a specific amount of money (usually the principal amount of the loan plus a surcharge of 40% for interest and costs) and can be divided into two categories: credit mortgages (krediethypotheek) and bank mortgages (bankhypotheek).
Credit mortgages only serve as security for obligations of the obligors under or in connection with a specific loan agreement, while bank mortgages secure all amounts owed by the borrower to the lender including, but not limited to, a specific loan agreement and can therefore cover various loans granted (or to be granted) by the same lender or even claims of the lender towards the borrower arising from other grounds.
In addition to a right of mortgage, borrowers usually create security over the following assets: rent receivables, insurance receivables, bank account receivables, receivables under management contracts, receivables under sales contracts or property development contracts and, if applicable, receivables under hedging agreements, moveable assets located on the property or shares in the borrower.
Receivables can be pledged on either a disclosed or undisclosed basis. A disclosed right of pledge (openbaar pandrecht) is notified to the relevant debtor. While a disclosed right of pledge entitles the pledgee to collect the relevant receivables immediately after the creation of the pledge, it is common practice that the pledgor continues to collect the receivables until the pledgee notifies the relevant debtor to the contrary. Such notification usually takes place if an event of default has occurred under the finance agreement.
An undisclosed right of pledge (stil pandrecht) will not be notified to the debtors of the pledgor and is perfected by registering it with to the competent tax authorities. To cover receivables against new debtors, supplemental deeds of pledge need to be registered on a regular basis. An undisclosed right of pledge will only be notified to the relevant debtor upon the occurrence of an event of default. After notification, the relevant debtor will need to pay the relevant receivable to the pledgee directly. A right of pledge can be created by means of a separate deed of pledge or included in the mortgage deed.
Last modified 13 Mar 2025
Real estate includes the land, buildings erected on it, and fixtures which form part of those buildings. An indication that a fixture is part of a building could be that the fixture and the building are specially fitted to each other.
If fixtures are not part of the building, it is also possible to take security over fittings, furniture and moveable objects by creating a right of pledge. A right of pledge can only be created in relation to transferable non-registered property (ie property which does not need to be registered in order to complete the transfer of that property).
Title to land can either be freehold or leasehold (erfpachtrecht). Note that for the purposes of Dutch law, a 'lease' needs to be distinguished from a 'leasehold'. A lease is only a contract; a leasehold interest is a 'real right' or 'right in rem' and can only be created by means of a notarial deed.
Other real rights, apart from leasehold, include apartment rights, common ownership (mandeligheid), and right of superficies (opstalrecht).
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In general, the concept of a trust is unknown under Dutch law, although Dutch law recognizes trusts which are validly established according to the laws of a foreign state. However, the concept of economic ownership is recognized under Dutch law. The key characteristic of economic ownership is that it allows legal ownership and beneficial interest to be separated. The legal owner is the owner of the property as far as third parties are concerned; the real property is therefore registered at the Land Registry in the name of the legal owner. By way of a contractual arrangement, the economic ownership may be separated from the legal ownership by granting the economic owner (or beneficiary) various economic rights regarding the property. For example: the right to receive the profits related to the property. Detailed contractual arrangements can be made between the legal owner and the economic owner dealing with all of the rights and obligations relating to the property, including insurance and rental income.
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A single debt is not commonly traded between lenders. Securitization is however a common concept in the Netherlands.
A debt secured by a mortgage right can be assigned to a third party by way of a deed of assignment. The debtor does not need to co-sign the deed of assignment. However, the debtor must, be informed that such a deed of assignment has been signed and to whom the debtor must make its payments to discharge it from its obligations in order for the assignment to be perfected. Another way to effect transfer is to transfer all or part of the lender's rights and obligations under the relevant loan agreements to a transferee by way of transfer of contract (contractsoverneming). The debtor needs to provide co-operation thereto, either explicitly or implicitly. Usually, the relevant loan agreements contain provisions where the debtor provides its irrevocable co-operation to such transfer in advance.
If a debt is secured by a bank mortgage, the parties must take into account that the bank mortgage will partly remain with the transferring security holder, unless the transferring security holder:
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There are no general restrictions on granting security over real estate to foreign lenders. However, along with national lenders, foreign lenders also need to comply with the Money Laundering and Terrorist Financing Prevention Act (Wet ter voorkoming van witwassen en financieren van terrorisme). According to this act, a financial institution needs to perform a thorough Client Due Diligence (CDD) and report any transaction that could involve money laundering or financing terrorism to the FIU-Nederland (Financial Intelligence Unit-Nederland).
There are no restrictions on payments made to foreign lenders under a security document or loan agreement.
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A right of mortgage is created by means of a notarial deed. A certified copy of the notarial deed must be registered at the Land Registry. A legal charge of approximately EUR 250 must be paid for registration and mandatory searches at the Land Registry. Notarial fees are not fixed and depend on the work carried out by the relevant Dutch notary.
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The Civil Code stipulates that if there is a conflict of interest (tegenstrijdig belang) between a limited liability company or a private limited liability company and one or more of its managing or supervisory director(s), the conflicted (supervisory) director(s) are not allowed to participate in the deliberations and the adoption of the relevant resolution.
If, as a result, no managing board resolution can be adopted because of a conflict of interest, the relevant resolution must be adopted by the supervisory board of the company or, if no supervisory board has been established, the general meeting of shareholders is allowed to adopt the relevant resolution, unless specified differently in the articles of association.
Similarly, if due to a conflict of interest no supervisory board resolution can be adopted, the relevant resolution will be adopted by the general meeting of shareholders, unless specified differently in the articles of association.
Although managing board resolutions taken contrary to the decision-making rules above are subject to nullification by any party having a reasonable interest in observance of such rules, a transaction with a third party will not be affected by these void resolutions if the third party was not or should not have been aware of the conflict of interest.
Pursuant to Article 2:7 Civil Code, any legal person incorporated under Dutch law or, as is most frequently the case, its trustee in bankruptcy (faillissementscurator), may annul a legal act entered into by the legal person, if the act exceeded its objects (as set out in the objects clause in a company's articles of association) and its counterparty knew or (without investigation) should have known that the legal person's objects were exceeded.
Legal acts which are expressly permitted by a company's objects clause, or which may generally be assumed to be conducive to furthering the company's express objects, are a good indication that the legal act does not violate Article 2:7 Civil Code. However, according to the case law of the Supreme Court, all relevant circumstances of a case at hand, including the question as to whether the performance of the legal act is in the company's corporate interest, should be taken into account in order to determine whether a legal act exceeds a company's objects clause and consequently violates Article 2:7 Civil Code. Examples of relevant factors include, but are not limited to, whether:
The Civil Code stipulates that neither a public limited company (naamloze vennootschap) nor any of its subsidiaries (dochtermaatschappijen) – including, most likely, foreign subsidiaries – may, with a view to (met het oog op) the taking or acquisition by third parties of shares in its capital, create security, grant a guarantee or otherwise accept liability (including providing loans which exceed statutory thresholds). Any acts in contravention with the aforesaid prohibition will violate Dutch law and most likely be void.
The equivalent financial assistance prohibition for private limited liability companies (besloten vennootschappen met beperkte aansprakelijkheid (BVs)) was repealed on 1 October 2012, and therefore no longer applies. However, the articles of association of BVs incorporated before 1 October 2012 may need to be amended to delete provisions which are a remnant of the previous financial assistance prohibition.
Security rights may be affected and limited by the general defences available to obligors under Dutch law in respect of the validity and enforceability of contractual obligations. Without purporting to be comprehensive, we note that the security documents may be voided if they were made through undue influence (misbruik van omstandigheden), fraud (bedrog), threat (bedreiging) or error (dwaling) of any of the parties thereto and any claims under the security documents may be, or become, subject to set-off, counterclaim or suspension (opschorting). The rights and obligations of the parties to the security documents are subject to the principle of good faith/reasonableness and fairness (redelijkheid en billijkheid), that under Dutch law governs the relationship between the parties to a contract and which, in certain circumstances, may limit or preclude the reliance on, or enforcement of, contractual terms and rules relating to force majeure.
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There are no restrictions on payments made to foreign lenders under a security document or loan agreement.
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Creditors generally rank pari passu in the Netherlands. On this basis they have recourse to all of the debtor’s assets. A creditor can agree to subordinate its claims towards the claims of a specific creditor or towards all creditors of a debtor. A subordination agreement will regulate the subordination of the debt and usually includes arrangements as to the rights of enforcement of security, turnover of proceeds by the subordinated creditors or the filing of claims during insolvency proceedings.
Secured creditors will have priority over non-secured creditors. If several security interests have been created over the same assets, the ranking of security rights is determined by the time of establishment. The time of establishment is the moment when all statutory requirements necessary for a valid and enforceable right of pledge or mortgage are fulfilled. Rights of pledge and mortgage (in most cases) precede specific and general statutory privileged rights (algemene en bijzondere voorrechten) over property.
Secured creditors can agree to change the ranking of the right of mortgage or the relevant right of pledge (provided that all secured creditors agree). With respect to a right of mortgage, such change of ranking must be registered at the Land Registry. Alternatively, an intercreditor agreement containing arrangements in respect of the application of enforcement proceeds will be sufficient to effectuate a de facto change of priority.
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All mortgages on Dutch property are governed by Dutch law. Pledges on moveable assets that are situated in the Netherlands, must be governed by Dutch law. Pledges on Dutch receivables can be established under the law of the agreement which obligates to create the right of pledge.
As such, provided the obligation to create the right of pledge is included in the relevant deed of pledge, the right governing such deed of pledge can in principle be any (foreign) law. In practice, Dutch law deeds of pledge will be used to pledge Dutch law governed receivables as foreclosure on such receivables will be subject to Dutch law.
Generally speaking, a choice of law in a contract will, in most cases, be recognized by the Dutch courts. However, such recognition is subject to the following conditions (i) the chosen law may be rejected to the extent that it is manifestly incompatible with the public policy of the Netherlands, and (ii) the Dutch courts must give effect to mandatory rules of Dutch law if such rules must be applied regardless of the chosen law. Additionally, when applying the chosen law of the relevant contract, the Dutch courts might give effect to mandatory rules of law of another country with which the situation concerned has a close connection. If – and insofar as – under the law of that country such rules must be applied regardless of the chosen law, regard will be had to the law of the jurisdiction in which performance takes place concerning the manner of performance and the steps to be taken in the event of defective performance.
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One requirement for the creation of a mortgage right is that a true copy of the notarial deed establishing the mortgage right is registered with the Land Registry.
If the security has not been perfected, because of lack of registration at the Land Registry, this cannot be rectified after the borrower has been declared bankrupt. In such cases the creditor is treated as an ordinary, ie unsecured, creditor. The same applies if a right of pledge has not been perfected prior to the borrower's bankruptcy being declared.
Additionally, if a right of pledge has been established a year before bankruptcy the receiver in bankruptcy proceedings (faillissementscurator) is, under certain conditions, allowed to nullify the right of pledge if it is prejudicial to the interests of the other creditors of the pledgor.
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A mortgagee is generally not liable for environmental damage, provided that it does not itself cause or knowingly permit damage to the environment (or influence the acts of the landowner/mortgagor to do so). However, environmental issues need to be assessed if a mortgagee takes over the management of a property or even buys the property itself in connection with the enforcement of a right of mortgage.
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Upon the occurrence of an event of default, as defined in the notarial deed of mortgage or a deed of pledge, the mortgagee/pledgee may exercise its right of mortgage/pledge in accordance with a summary foreclosure procedure. This means that the mortgagee/pledgee may procure the forced sale of the mortgaged property or pledged moveable assets, as the case may be, and may apply the net forced sale proceeds towards repayment of the outstanding claims in accordance with the ranking of its security right. Parties can agree in the pledge deed that the default of the pledgor must be determined by the court in advance.
The forced sale of mortgaged property takes place by way of a public auction (openbare verkoop) and can be initiated by a civil law notary (at the instruction of the mortgagee). Moreover, a private – non-public – sale may also be effected by an application made to the relevant district court (at the request of the mortgagee or mortgagor). In such a case, the district court must approve the relevant sale and purchase agreement in which case the public auction will be cancelled.
As alternative to the abovementioned enforcement rights, in order to optimise the profits from a sale of the property, the mortgagee and the mortgagor could also agree on a consensual sale of the property by the mortgagor subject to the mortgagee releasing its right of mortgage provided that certain legal safeguards need to be applied to protect the mortgagee (eg that the mortgagee will directly receive the net sale proceeds (either via a notary account or by pledging the purchase price)).
The forced sale of pledged moveable assets usually takes place by way of a public auction (openbare verkoop). To prevent a public auction, the forced sale can also be initiated by means of an application made to the relevant district court in interlocutory proceedings (voorzieningenrechter) at the request of the pledge or the pledgor, unless otherwise agreed in the pledge deed. The district court in interlocutory proceedings can, at the request of the pledgee, rule that the pledged asset will be sold to the pledgee, in which case the court determines the purchase price.
At the same time as exercising the right of pledge, the pledgor and pledgee can, without approval of the district court in interlocutory proceedings, voluntarily agree on a sale which does not comply with a public auction procedure.
A right of pledge over receivables can simply be enforced by collecting the pledged receivables. When enforcing an undisclosed right of pledge (stil pandrecht), the debtor of the pledged receivable should be notified first of the existence of the pledge.
The mortgagor can seek a court order in summary proceedings to stop enforcement if it is of the opinion that enforcement is not justified. If successful, these summary proceedings will frustrate enforcement by the mortgagee.
The validity and enforceability of a security right might also be subject to challenge on the basis that the underlying secured obligations are unenforceable under their governing law (if this is not Dutch law).
Enforceability may also be restricted by general principles of Dutch law, such as the principle of reasonableness and fairness (redelijkheid en billijkheid) as provided for in the Civil Code, and may be subject to rescission in cases of imperfect agreement (wilsgebreken), which are undue influence (misbruik van omstandigheden), fraud (bedrog), threat (bedreiging) or error (dwaling).
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The WHOA (Wet homologatie onderhands akkoord), which came into effect on 1 January 2021, is a Dutch pre-insolvency proceeding inspired by the English Scheme of Arrangement and Chapter 11 of the US Bankruptcy Code. The WHOA provides businesses with a structured and flexible process to negotiate debt agreements and restructure their financial obligations. The end goal of the WHOA is to create a new viable capital structure (debt and equity) that allows financially distressed companies to continue to operate, preventing a bankruptcy (faillissement).
The proceeding allows the debtor to impose a restructuring plan on dissenting (classes of) creditors and shareholders. The procedure is designed such that court involvement is in principle minimal and can be completed in a relatively short timeframe.
The WHOA grants companies significant freedom in determining the content of the WHOA plan. In addition to allowing creditors to be compelled to waive part of their claims, the WHOA, through Article 373 of the Bankruptcy Act (Faillissementswet), also provides the possibility to restructure burdensome contracts (such as rental or lease agreements). The relevant company can propose to modify (or terminate) such a burdensome agreement. If the contractual counterparty does not agree, the debtor has the right to unilaterally terminate the agreement, provided the Dutch court grants permission. A counterparty’s claim for damages resulting from such termination can be included in the WHOA restructuring plan as concurrent debt.
On 25 October 2024, the Dutch Supreme Court issued a landmark ruling regarding the WHOA. The Dutch Supreme Court determined that a WHOA plan cannot force financiers to provide entirely new funding or funding under previously committed credit facilities against amended terms. The Dutch Supreme Court further clarified that a WHOA plan can change the order of priority among creditors, provided the WHOA sanctioning criteria are observed.
Furthermore, with respect to mortgage rights in particular, if a debtor is having financial difficulties, a mortgagee, who is also the pledgee with respect to the rental income arising from the mortgaged property, can make its right of pledge public, as a result of which the tenants must pay the rent directly to the mortgagee/pledgee (and not to the pledgor).
The mortgagee is also entitled to:
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Generally, a borrower's insolvency does not affect the security rights of secured creditors. Mortgagees and pledgees are referred to as ‘separatists’ under Dutch law, which means that if insolvency proceedings are commenced in respect of a debtor, the secured creditors may still enforce their security rights without regard to these insolvency proceedings.
However, a trustee in bankruptcy (faillissementscurator) can try to annul the security rights on the basis of the so-called actio pauliana or fraudulent conveyance if:
For the purposes of annulment of the relevant legal act, it suffices for the trustee in bankruptcy to declare the annulment. In practice, however, the trustee in bankruptcy will petition the court to order the beneficiary of the annulled legal act to undo the performance or benefit it received as a consequence of the legal act.
Additionally, please refer above, which sets out several conflicts under general Dutch law that might affect the validity of security rights and which can be evoked by the trustee in bankruptcy.
Finally, the rights of a pledgee or mortgagee to claim or seek recourse against an asset (goed) which belongs to an insolvent estate and in respect of which such pledgee or mortgagee has a security right may be suspended by any competent court in insolvency proceedings for a period of not more than four months. During this period, the pledgee or mortgagee of such asset may not without the court's consent exercise such rights.
If a pledgee or mortgagee of an asset belonging to the bankrupt estate fails to sell an asset after having been given a reasonable period by the trustee in bankruptcy to exercise its rights, such trustee may, after expiration of such period, claim such asset and sell it, without prejudice to the pledgee's or mortgagee's entitlement to the proceeds after deduction of bankruptcy costs and taking into account its rank.
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As a general rule, creditors rank equally and, on this basis, have recourse to all of the debtor’s assets. However, the distribution of a debtor’s property in bankruptcy deviates from this general principle of law. Ordinary claims may be, and often are, subordinated in practice if other claims have the benefit of a preferred ranking (voorrang).
A creditor’s preferred ranking may be based only on:
Of these four categories, only a mortgage right and a right of pledge are referred to as security rights. A privilege is a right that is created by statute and cannot be created by contract.
Among creditors with a right of pledge over the same assets, the second right of pledge will rank behind the first right of pledge. However, exceptions to this rule may apply, depending on the circumstances of the particular case and the nature of the pledges.
The tax authorities are usually important creditors and hold a general privilege that ranks behind a possessory pledge over moveable assets and a mortgage. However, the beneficiary of a non-possessory pledge over moveable assets can see its rights frustrated by a seizure by the tax authorities of pledged assets located on the premises of the debtor (bodemzaken). Moreover, Dutch tax law stipulates that the pledgee must first inform the Dutch tax authorities before seeking to exercise its right of pledge on the assets located at the premises of the debtor. In this case, the Dutch tax authorities will probably seize the pledged assets, thus frustrating the rights of the pledgee. The Dutch tax authorities have a term of seven days to do this. If this period expires without action, the pledgee can enforce its rights.Among creditors holding a privilege, those who have a privilege over specific property are preferred over creditors holding a general privilege (over all property of the debtor). Where several creditors have a specific privilege in respect of the same asset, their ranking is equal.
An example of a preferred position based on ‘other grounds provided by law’ is the right of retention. A right of retention can be exercised by a creditor, for example a building contractor, with respect to immovable property as well as movable property.
The priority of security interests is determined by a complex set of rules stipulating that the order of priorities is based on the date of creation of the relevant security right. However, a distinction must be made between mortgage rights and pre-judgment executory attachments (beslag) and their interrelationship. A pre-judgment executory attachment involves a district court order which gives the attaching party the right to sell the property by means of an auction.
Whereas an older mortgage right always has priority over more recently created mortgage rights (unless a change of ranking order has been agreed on between all parties), this does not fully apply to attachments. Outside of insolvency, the first attaching party is entitled to sell the property but must share the net proceeds with the other attaching parties because the principle of equality of creditors applies in the case of attachment. This means that all attaching parties have equal rights. However, this rule is set aside if a mortgage right is created between the dates on which attachments are levied. In that case, the parties that first levied attachments will have priority over a mortgage right created later and attachments levied later, in terms of the order of payment, All attachments on the borrower's property are automatically cancelled upon the borrower's insolvency.If the first mortgagee forecloses on the real estate and there are several creditors, the first mortgagee can petition the court in preliminary relief proceedings to grant it first recourse to the net proceeds from the auction. This request must be approved before the purchase price and the related costs are paid by the new owner of the real estate. If such a request is not filed or is not granted, a proposal regarding the payment of the net proceeds will be made to all creditors. If the parties do not agree on this proposal, the district court will be asked to list the creditors in order of priority, and the net proceeds will be transferred to the creditors accordingly.
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Will a clause in a security document making a foreign law apply be recognized and applied by the local courts? Does local law always apply in certain circumstances?
All mortgages on Dutch property are governed by Dutch law. Pledges on moveable assets that are situated in the Netherlands, must be governed by Dutch law. Pledges on Dutch receivables can be established under the law of the agreement which obligates to create the right of pledge.
As such, provided the obligation to create the right of pledge is included in the relevant deed of pledge, the right governing such deed of pledge can in principle be any (foreign) law. In practice, Dutch law deeds of pledge will be used to pledge Dutch law governed receivables as foreclosure on such receivables will be subject to Dutch law.
Generally speaking, a choice of law in a contract will, in most cases, be recognized by the Dutch courts. However, such recognition is subject to the following conditions (i) the chosen law may be rejected to the extent that it is manifestly incompatible with the public policy of the Netherlands, and (ii) the Dutch courts must give effect to mandatory rules of Dutch law if such rules must be applied regardless of the chosen law. Additionally, when applying the chosen law of the relevant contract, the Dutch courts might give effect to mandatory rules of law of another country with which the situation concerned has a close connection. If – and insofar as – under the law of that country such rules must be applied regardless of the chosen law, regard will be had to the law of the jurisdiction in which performance takes place concerning the manner of performance and the steps to be taken in the event of defective performance.
Last modified 13 Mar 2025