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The Enforcement of Title-Based Securities

The remedies available to the holder of a title-based security are even more divergent. It is no surprise, as jurisdictions vary in whether the functional approach shall be adopted to treat a title-based security as equivalent to a mortgage. On the one hand, there are jurisdictions in which the form of title is emphasised and the creditor is given a status of the owner, with a larger power than a mortgagee. England is typically such a formalist jurisdiction, where the owner under a title-retention agreement (such as seller reserving the title or lessor under a lease) may reclaim the full ownership upon the occurrence of the repudiatory breach of the agreement. The remedy is available with or without the court procedure and the owner is under no obligation to account for the balance of the value of the object and the secured claim.[1] The right of the conditional sellers and lessors in Italy is the same.[2]

On the other side of the continuum stands the jurisdiction that is “functionalist.” The UCC Article 9 of the United States adopts this approach, treating the conditional seller as a chargee and applies the same rules.[3] Similarly in Poland, the law requires the payment for the balance between the value of the object and the remaining amount of claims when the creditor of a security or title-based security repossesses the object.[4] Such a duty to pay for the balance can be waived by the agreement in case of a lease and conditional sale, but not in case of a registered pledge. Then, the hybrid solution is taken by France, where the owner repossessing the object is required to pay the balance in the case of a reservation of title, but not under a finance lease.[5]

  • [1] See Chap. 4.
  • [2] See Chap. 16.
  • [3] See Chap. 11. However, even in the United States, the right of a lessor is governed by Article 2Aof the UCC, not Article 9. See Sect. 2.2.2.
  • [4] See Chap. 18.
  • [5] See Chap. 13.
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