The right of summary execution is a right held by the pledgee or mortgagee. The pledgee or mortgagee can then, subject to conditions and without an enforcement order—an enforceable judgment from the court—sell the pledged or mortgaged property. Formal attachment is not required for this. The pledgee or mortgagee can subsequently collect the outstanding debt with the proceeds of the sale. An execution auction is organized for this purpose to ensure that a fair price is paid. Whoever makes the highest bid during the execution auction becomes the rightful owner of the property. Any remaining proceeds must be transferred to the debtor.
Conditions for the valid exercise of the right of summary execution
To carry out summary execution, a number of conditions apply. Firstly, for example, there must be a valid pledge or mortgage. To this end, you have a pledge agreement drawn up. It is important that the correct person signs the pledge agreement. Secondly, the debtor must be in default and therefore have failed to fulfill his obligations. Finally, the right of summary execution can only be exercised on assets encumbered by the pledge or mortgage right, and not on other assets.
Points of attention when exercising the right of summary execution
The right of summary execution demonstrates that a pledge is very strong. It is a powerful tool to protect oneself against the risk of non-payment by customers. Nevertheless, it is important to handle this with great caution. The judge does not conduct any prior checks, but this also entails risks.
Thus, it may turn out afterwards that there was no default, meaning the creditor could not actually have exercised the right of summary execution. This causes all kinds of problems if the property has already been sold. The Civil Code then offers protection to the execution buyer who acted in good faith. After all, the execution buyer is entitled to rely on the execution seller's power of disposal.
Furthermore, the creditor may not abuse the right of execution. This is the case, for example, if it becomes apparent that the debtor is placed in a state of distress as a result of the exercise of the right of execution.
According to an earlier ruling by the Supreme Court (ECLI:NL:HR:2011:BP6163), the debtor also has the right to remedy the default and prevent execution as long as the execution has not yet been completed. The creditor may not simply disregard that right either. A holder of a pledge or mortgage right who does not exercise this right correctly may be ordered to pay damages.
Information about pledge agreements and summary execution
The right of summary execution is an important exception to the principle that a creditor may only proceed with enforcement measures after obtaining an enforceable title. The right of pledge is therefore a very strong right that is established by means of a pledge agreement. Nevertheless, there are also points to consider. Would you like to have a pledge agreement drawn up, or would you like to know more about this? Then please contact one of our legal experts.
