pur­su­ant to §§ 1204 — 1208 BGB mova­ble pro­per­ty (Lom­bard tran­sac­tions)

Public auc­tions due to con­trac­tu­al pled­ges of rights pur­su­ant to Sec­tions 1204 — 1208 BGB mova­ble pro­per­ty (Lom­bard tran­sac­tions)

§ Sec­tion 1204 Legal con­tent of the pledge of rights to mova­ble pro­per­ty

(1) A mova­ble pro­per­ty may be encum­be­red to secu­re a cla­im in such a way that the cre­di­tor is entit­led to seek satis­fac­tion from the pro­per­ty (pledge of rights).
(2) The pledge of rights may also be crea­ted for a future or con­di­tio­nal cla­im.

§ Sec­tion 1205 Crea­ti­on
(1) In order to crea­te a pledge, the owner must hand over the object to the cre­di­tor and both par­ties must agree that the cre­di­tor is to be entit­led to the pledge of rights. If the cre­di­tor is in pos­ses­si­on of the object, agree­ment on the crea­ti­on of the pledge of rights is suf­fi­ci­ent.

(2) The trans­fer of an item in the indi­rect pos­ses­si­on of the owner may be repla­ced by the owner trans­fer­ring the indi­rect pos­ses­si­on to the pled­gee and noti­fy­ing the owner of the pledge.

§ Sec­tion 1206 Sub­sti­tu­ti­on of sur­ren­der by gran­ting joint pos­ses­si­on
Ins­tead of the sur­ren­der of the object, the gran­ting of joint pos­ses­si­on is suf­fi­ci­ent if the object is under the joint con­trol of the cre­di­tor or, if it is in the pos­ses­si­on of a third par­ty, the sur­ren­der can only be made joint­ly to the owner and the cre­di­tor.

§ Sec­tion 1207 Pled­ging by a non-entit­led par­ty
If the object does not belong to the pled­ger, the pro­vi­si­ons of sec­tions 932, 934 and 935 appli­ca­ble to the acqui­si­ti­on of owner­ship shall app­ly muta­tis mut­an­dis to the pledge.

§ Sec­tion 1208 Acqui­si­ti­on of prio­ri­ty in good faith
If the item is encum­be­red with the right of a third par­ty, the pledge of rights shall take pre­ce­dence over the right, unless the pled­gee is not in good faith with regard to the right at the time of acqui­ring the pledge. The pro­vi­si­ons of sec­tion 932 (1) sen­tence 2, sec­tion 935 and sec­tion 936 (3) shall app­ly accor­din­gly.

Auc­tion of mova­ble pro­per­ty pled­ged as secu­ri­ty
The requi­re­ments for the effec­ti­ve crea­ti­on of a con­trac­tu­al pledge of rights are regu­la­ted in Sec­tions 1204 to 1208 of the Ger­man Civil Code (BGB) . This is important for lom­bard tran­sac­tions of cre­dit insti­tu­ti­ons and other len­ders and for com­mer­cial len­ders.

Short-term loans are gran­ted against mova­ble, fun­gi­ble assets (e.g. secu­ri­ties, bills of exch­an­ge, receiv­a­bles, goods and pre­cious metals) as col­la­te­ral. The amount of the Lom­bard loans ran­ges from 50% to 90% of the pled­ged assets and rights.

In the event of default under the loan agree­ment, this col­la­te­ral can be sold by the publicly appoin­ted, sworn auc­tion­eer by way of auc­tion or pri­va­te sale.