1. Mortgage (in Danish: Pant)
May be established in different ways, this being: during a transfer/transaction (contractual pledge), a legal action (legal pledge), or authorized by law (statutory pledge).
A distinction is made between movable or immovable mortgages.
- Mortgage on movable assets (in Danish: Løsørepant)
Mortgage/pledge on movable assets can be secured either by registration or – for movable assets specifically – by taking possession of the asset.
- Taking possession (in Danish: Håndpant)
The creditor will be best secured by the pledge (håndpant) which, however, has the disadvantage that the debtor is deprived of the object while pledged just as the creditor must also arrange for storage of the object.
In practice pledges were the pledgor takes possession of the asset do not play a major role but it may be used in certain business relations – for example in connection with warehouse inventories etc.
- Chattel Mortgagde (in Danish: Underpant og ejendomsforbehold)
In the case of a mortgage on movable assets the act of perfection is registration. Thus, the mortgage has – as mentioned above – the advantage that the debtor can still make use of the mortgaged.
The registration takes place by entering the document (written agreement or unilateral declaration of intent) into the personal register or the car register in case the mortgaged asset is a motorized vehicle.
Besides mortgaging there is the option of making a conditional sale i.e., retention of property/title. This allows the buyer to obtain the purchased without paying the full purchase price. In exchange the creditor (seller) obtains a protected right to withdraw/take back the purchased if the remaining purchase price is not paid in accordance with the initial agreement.
Purchases with retention of title must comply with the following rules:
- The retention of title must be stated in a written agreement between the seller and the buyer. The agreement must clearly specify the object the retention of title. (The latter regarding item specification is particularly important in business purchases).
- The agreement on retention of title must be entered into no later than at the time of handing over the sold item to the buyer.
- The purchase price of the item must exceed DKK 2,000/EUR 270.
- The installment plan must be fixed in the agreement. (Does not apply to business purchases).
- The buyer must pay a minimum of 20% of the total purchase price upon delivery of the goods. (Does not apply to business purchases).
- Pant – fast ejendom
Mortgages on Real Estate are very common in connection with for example house purchase and can be established by various types of mortgage deeds of which the ordinary mortgage deed is the most frequently used.
Such mortgage deed gives the creditor security for his claim against the debtor and thus constitutes an asset.
A mortgage on Real Estate must be registered on the property and the fee connected with such registration consists of a fixed fee of DKK 1.730 (from 2023 DKK 1,830) plus 1.45% of the amount of the mortgage deed (the latter being rounded up to the nearest whole DKK 100).
- Guarantee (In Danish: Kaution)
Guarantee is another form of security where another natural or legal person guarantee the debtor’s payment, to the effect that if the debtor himself does not fulfill his obligation to pay the creditor – the guarantor pays instead.
The most common in Denmark is an “ordinary guarantee” / “joint and several”. With a guarantee the guarantor will not have to pay until it is known that the debtor is unable to pay. As to joint and several the creditor can demand payment from the guarantor as soon as the debtor fails to fulfill the payment obligations.
If one has a mortgage and thereby an asset as security for a claim it is possible by agreement to transfer this claim with the associated mortgage – it can be transferred for either ownership or still “act” as a security for the acquirer. This is referred to as transport.
The transfer takes place from the mortgagee to a contractual acquirer, who, in order to secure his legal position must take the security right necessary to protect his right against the mortgagee’s other contractual acquirers and creditors.
The legal consequences of transport are different depending on whether the transport is carried out for the purpose of ownership or security.
If transport is carried out for ownership a change of creditor takes place and the contractual acquirer thus enters as the new mortgagee with the same rights as the transferor. This applies to both the claim as well as the associated mortgage security.
If, on the other hand, the transport is made for security, the contractual acquirer obtains a security in the claim against the mortgagor as security for the mortgagor’s payment of his own debt to the acquirer.
Written by Mads Kjeldgaard Leth, Virtus Advokater ApS