The property pledge remains the forgotten property security. Unlike mortgages, which dominate the legal landscape, property pledges - formerly known as antichrèse - suffer from a marked lack of interest in practice.
Definition and specific features
A pledge of real estate is defined as "the allocation of real estate as security for an obligation, with dispossession of the person who created it" (article 2379 of the French Civil Code). This security allows a creditor to hold the property until the debt has been repaid in full.
What is its main feature? The physical dispossession of the debtor, who loses the use of his property to the creditor. This distinguishes it radically from a mortgage.
From antichresis to modern property pledges
Antichrèse already existed in the 1804 Civil Code. The Act of 12 May 2009 replaced it with the term "pledge of immovable property", creating confusion with the term "pledge of movable property".
This amendment was criticised by many legal experts. The Order of 23 March 2006 had in fact reserved the term "pledge" for security interests in tangible movable property.
Practical operation
Dispossession: an essential element
The pledgee takes possession of the property. This dispossession is not a mere legal formality, but implies a real transfer of physical possession of the property.
The creditor has a right of retention over the property until full payment has been made. This right of retention is enforceable against third parties, including creditors with other security interests.
Fruit management and allocation
The creditor must operate, maintain and preserve the property. He receives the fruits (rents, harvests) which he must charge :
- firstly on interest on the debt
- then on the outstanding capital
Article 2381 of the Civil Code states: "The creditor shall receive the fruits of the immovable on condition that they are deducted from the interest, if any, and subsidiarily from the principal of the debt".
Safety implementation
If the debtor defaults, the creditor has several options:
- seize the property to sell it
- apply for judicial allocation
- implement a commissory agreement (if provided for in the contract)
These procedures were modernised by the Order of 15 September 2021.
Why is it so out of date?
Restrictive safety
The main weakness of pledges on immovable property lies in the creditor's obligation to manage the property. This obligation implies:
- property management skills
- dedicated human resources
- complex administrative follow-up
Few financial institutions wish to take on the role of property manager.
An economic contradiction
The debtor is deprived of the use and income from his property, precisely that which could enable him to repay his debt. This paradox largely explains the lack of interest in this type of security.
A legal expert from CRIDON in Paris noted: "The property pledge is often a remedy worse than the evil it is supposed to prevent".
An unattractive alternative
A pledge of immovable property may seem brutal compared with a mortgage, which maintains the debtor's rights while offering similar protection to the creditor.
Residual relevance
The debtor's lease: a hybrid solution
Article 2382 of the Civil Code allows the creditor to lease the property, including to the debtor himself. This clever arrangement allows the owner to retain physical possession of the property.
This solution has been validated by the Court of Cassation (Cass. 3e civ., 18 Dec. 2002), but is rarely applied.
Specific applications
Pledging your property may be appropriate in certain situations:
- short-term loans with property guarantee
- family relationships where dispossession is symbolic
- guarantees between companies in the same group
A Belgian bank operating in France recently rediscovered this security for cross-border loans.
Safety for the future?
Despite its disadvantages, the property pledge could be enjoying a revival:
- it offers a very effective right of retention
- the possibility of a commissory agreement makes it more flexible
- certain economic situations may justify its use
But this renaissance remains hypothetical in a market dominated by mortgages and security trusts.
Sources
- Civil Code, articles 2379 to 2384
- Simler, P. and Delebecque, P. (2023). Droit des sûretés, La publicité foncière. Dalloz, 8th edition.
- Cass. 3rd civ. 18 December 2002, no. 01-12.143
- Piette, G. (2006). La nature de l'antichrèse après l'ordonnance n° 2006-346 du 23 mars 2006. Dalloz, 2006.
- Order no. 2021-1192 of 15 September 2021 reforming the law on securities
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