The 2015 Civil Code stipulates title retention as a measure to ensure the fulfilment of obligations. The formation and application of this security measure depend on the agreement between the two parties in the property sale contract and is not formed through legal acts or the unilateral will of one party. In this article, we will present essential information about the security measure for fulfilling obligations: title retention.
1. Concept of Title Retention
Title retention is a measure to secure the fulfilment of obligations, where parties in a property sale contract agree that the seller (the securing party) retains ownership rights over the property until the buyer (the secured party) fulfils their payment obligations in the concluded property sale contract.
2. Formulation and Opposability
Article 331(2) of the 2015 Civil Code (“CC”) specifies the form of title retention, stating that it must be documented separately or included in the sale contract. Therefore, title retention becomes a security measure only if the parties agree to establish it, and this establishment is recorded in written form.
Simultaneously, this security measure is only effective against third parties from the registration date. In cases where the parties have established a deferred payment sale contract without an agreement on title retention, title retention is considered the default right according to the seller’s provisions in that deferred payment sale contract, as stipulated in Article 453(1) of the CC.
3. Rights and Obligations of the Property Buyer
The property buyer has the following rights and obligations:
• In the event the buyer fails to fulfil the payment obligation to the seller as agreed, the seller has the right to reclaim the property. The seller refunds the amount paid by the buyer after deducting the depreciation value of the property due to usage. If the buyer damages or destroys the property, the seller has the right to claim compensation for the loss;
• Use the property and enjoy its benefits and profits during the effective period of title retention;
• Bear the risks associated with the property during the title retention period, except in cases of other agreements.
4. Rights and Obligations Related to the Purchased Property
• If the buyer has to return the purchased property to the seller due to a payment obligation violation, and at the time of return, the value of the property is higher than the initial value due to the buyer’s or a third party’s investment that increased the property value, the seller must reimburse the difference to the investing party.
Investing in the purchased property must comply with the regulations in Article 20(5) of Decree No. 21/2021/ND-CP, which guides the implementation of the Civil Code on securing the fulfilment of obligations.
• The buyer is not responsible for the natural depreciation of the property subject to title retention.
5. Transfer of Rights and Obligations Regarding Title Retention
• If the seller transfers the right to demand payment from the buyer, the right of title retention is also transferred to the party receiving the transfer of the right to demand payment.
• If the buyer sells or transfers other rights regarding the purchased property after title retention has been registered, the new buyer or recipient of the transfer of rights regarding the purchased property must inherit the obligation regarding title retention.
6. Termination of Title Retention
Title retention terminates under the following circumstances:
• Fulfillment of the payment obligation to the seller;
• The seller reclaims the property subject to title retention;
• According to the agreement of the parties.
The above is the article “Title retention – Basic content you need to know” that we present to our readers. In case of any issues requiring discussion, please contact us for timely assistance.
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