In Vietnam, the law stipulates nine measures for securing obligations. Among them, a prevalent measure employed by parties to ensure the performance of obligations is the Pledge of property. To ensure that this measure is applied correctly according to legal regulations and protects the rights and interests of all parties involved, this article will present the fundamental information about the Pledge of property that all parties should be aware of.
1. What is Pledge of property?
Pledge of property means the delivery by one party (hereinafter referred to as the pledgor) of property under its ownership to another party (hereinafter referred to as the pledgee) as security for the performance of an obligation.
2. Effectiveness of Pledge of property
• Agreement on pledge of property shall take effect from the time of concluding unless otherwise agreed or prescribed by law.
• Pledge of property shall take effect against a third party from the time at which the pledgee keeps the pledged property.
• In the case of real estate being the subject of the pledge, the pledge of real estate becomes effective against third parties from the moment of registration, as stipulated by the law.
3. Obligations of the pledgor
• Transfer the pledged property to the pledgee in accordance with the agreement. The pledgor may deliver the pledged property to the pledgee or a third party for safekeeping, depending on the agreement between the parties. The pledgee may keep the pledged property at the location of the property or a location of their choosing.
• Inform the pledgee of any rights of third parties regarding the pledged property, if any; failure to do so gives the pledgee the right to terminate the pledge of property contract and seek compensation for damages or uphold the contract and accept the rights of third parties regarding the pledged property.
• Pay the pledgee reasonable expenses for preserving the pledged property, unless otherwise agreed upon.
4. Rights of the pledgor
• Request the pledgee to cease the use of the pledged property if the pledgee is leasing, lending, or utilizing the pledged property in a manner that could reduce their value.
• Request the pledgee to return the pledged property and related documents, if any, when the obligation secured by the pledge is terminated.
• Request compensation for any damages incurred regarding the pledged property.
• Sell, replace, exchange, or give the pledged property with the consent of the pledgee or as provided by the law.
5. Obligations of the Pledgee
• Take care of and preserve the pledged property; if the pledgee loses or damages the pledged property, the pledgee must compensate the pledgor for the damage.
• Do not sell, exchange, give or use the pledged property as security for the performance of another obligation.
• Do not lease, lend, or exploit the yield or income derived from, the pledged property, unless otherwise agreed.
• Return the pledged property and related documents upon fulfilment of the secured obligation or where the pledge is substituted with another security.
6. Rights of the Pledgee
• Demand that any party unlawfully possessing or using the pledged property return them.
• Manage the pledged property according to the agreed-upon method or as stipulated by the law.
• Lease, lend, utilize, derive benefits, or profit from the pledged property if agreed upon.
• Receive reasonable expenses for preserving the pledged property when returning it to the pledgor.
7. Termination of Pledge of Property
The pledge of property terminates in the following cases:
• When the obligation is secured by terminating the pledge of property.
• When the pledge of property is cancelled or replaced by other security measures.
• When the pledged property has been disposed of.
• By agreement of the parties.
8. Return of Pledged Property
When the pledge of property terminates due to the aforementioned reasons: termination of the secured obligation, cancellation of the pledge of property, replacement by other security measures, or by agreement of the parties, the pledged property and documents evidencing the ownership rights concerning the property shall be returned to the pledgor. Any yield and income derived from the pledged property shall also be returned to the pledgor unless otherwise agreed.
The above information covers the basic aspects that all parties should be familiar with when implementing the measure of the Pledge of property. If you have any issues or questions, please contact TNTP for timely assistance.