REALWorld Law

Real estate finance

Trading of debt

Is secured debt traded between lenders? If so, how is a transfer of the debt to another lender effected?



A single debt is not commonly traded between lenders. Securitization is however a common concept in the Netherlands.

A debt that is 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. The debtor must, however, 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 (either explicitly or implicitly) provide co-operation thereto. Usually, the relevant loan agreements contain provisions wherein 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:

  • partially cancels its relevant security right immediately after the transfer of the loan(s) to the extent that such security rights secure obligations other than the claim against the debtor(s) in connection with the loan(s) which (is/are) being transferred; or
  • explicitly terminates all legal relationships with the relevant debtor.