Legal 15 August, 2023

From surety to guarantee, to joint and several liability 

Crowe Peak/ Knowledge Hub/ Legal/

From surety to guarantee, to joint and several liability 

Everything you want to know about security in the Netherlands

If you are in business or involved in the management of an organization, you are familiar with the concept of “securities.” Banks, investors, financiers and sometimes suppliers require security for repayment. This sounds logical, but it can also feel challenging. Because what are you signing for? What are you legally exposing your assets to when you pledge or mortgage them under Dutch law? When does business security also affect your private financial situation? And what exactly is the difference between a guarantee, joint and several liability and surety bond in the Netherlands? In this article, we will guide you through different forms of security under Dutch law and introduce the main concepts involved. Want to know more? Or would you like an experienced lawyer to look at the security provisions in the contracts you conclude? Then contact our specialists. We will get back to you soon. 

What are securities or security rights?

Sureties or security rights (zekerheidsrechten) are rights or guarantees that ensure repayment of a debt or fulfillment of an obligation. Security rights are essential for protecting the interests of creditors. They increase the likelihood of repayment of a debt. Different forms of security rights exist, depending on the nature of the transaction and the legal relationship between the parties. Common forms of (Dutch) security are right of pledge (pandrecht), mortgage (hypotheek), and surety (borgtocht). These forms of security are discussed in more detail here (right of pledge), here (mortgage) and here (surety).  

The Dutch legal system contains detailed rules and procedures for security rights, especially when it comes to their establishment, ranking and execution. These rules are important when assessing the rights and obligations of creditors and debtors. As a non-legal professional, you will not have to deal with these specific regulations much. However, if you hold a financial position, sit on a board or supervisory board, or are an entrepreneur, you will need to know a thing or two about what you are committing to when you agree to establish certain security rights. Therefore, in the following paragraphs we will discuss the differences between different types of security rights that can be established under Dutch law.

Do you think it would be wise for a lawyer to explain a security clause to you? At Crowe Peak we are happy to do so.

Ask your question directly via email or call us to schedule a meeting.

Joachim Eendebak

Joachim Eendebak

Head of Legal

Security on property and personal guarantees

Under Dutch law, there are two groups of security rights:

  1. Security on property (goederenrechtelijke zekerheden), security in rem; and
  2. Personal guarantees (persoonlijke zekerheidsrechten).

The distinction between these two categories is critical for the following reasons.

Security on property (in rem) refers to specific goods or assets (or in other words, things, such as real estate, means of transportation, as well as receivables and shares) that serve as collateral for a debt. Pledges and mortgages, which we will discuss later in this article, are examples of security on property. A characteristic of (Dutch) security on property is that the security is linked to a particular asset, which serves as collateral for repayment of the debt to which it is attached.  

In contrast, personal guarantees are based on the personal obligation of a third party (e.g., the entrepreneur behind a business making an obligation) to guarantee a debt. Examples of personal guarantees include surety (borgtocht) and joint and several liability (hoofdelijke aansprakelijkheid). We discuss these in more detail in this article.  

The main difference between security on property and personal guarantees lies in their nature. Whereas security on property is based on a so-called “right in rem” on the collateral, personal guarantees arise from a personal obligation of a legal person (legal entity) or natural person (often the husband or wife behind the company or a family member of the person taking on the debt in question).

Security on property: an introduction

In the Netherlands, security on property thus refers to legal instruments that protect creditors when they make a loan or deliver goods and are not directly (re)paid for them. More specifically, they are legal constructs that ensure that when a creditor does not receive repayment, they have a legal basis to take possession of or sell certain goods of his debtor. Even if those goods have since been sold to a third party.  

Security on property is essential for the legal protection of creditors but also provides grip and security for debtors in times of insolvency. It is therefore a popular means of professionally structuring financial transactions. The three main advantages of security in rem for creditors are as follows:

  1. Priority: By creating security on property (in rem), a creditor can gain priority over other creditors in the distribution of the debtor’s assets. This therefore increases the likelihood that a creditor will be paid in full in cases of insolvency or default.   
  2. Recourse: Under Dutch law security on property provides creditors with direct recourse to specific property or assets of the debtor. Again, in times when payment, or even contact, is difficult, this increases the likelihood of repayment of the debt. Creditors with property law security enjoy better protection than unsecured creditors. This is because they are the so-called separatists (separatisten), meaning they can extract their collateral outside the bankruptcy process.

For debtors, establishing security on property is unavoidable in some cases. Many lenders have standard pledge and mortgage provisions in their loan documentation. However, it is still wise not to sign up for these blindly. The creation of security in rem implies more than just a possibility for recourse on paper. Before we discuss the specific forms of security in rem, “pledge” and “mortgage,” a few points to consider for parties planning to provide security in rem:

  1. Restriction of power of disposition: The establishment of security in rem restricts the debtor’s freedom to dispose of (sell) or encumber the property in question. This can affect business operations and asset management:  
  2. Liability: An important consideration for issuers of security interests is that they remain liable for the original debt even when the collateralized property is sold. If the proceeds from the foreclosure of these assets are not sufficient to repay the entire debt, the debtor may still be required to make up the shortfall.  
  3. Impact on creditworthiness: Be aware that other potential creditors may be reluctant to lend if (many of) your assets are encumbered with collateral.  

Types of property law security under Dutch law

As mentioned, under Dutch law, there are several forms of property law security. The main forms are:

  • Right of pledge (pandrecht) (more on this below);  
  • Mortgage right (hypotheekrecht) (discussed in more detail below);  
  • Privilege (voorrecht): a privilege is a special form of security that gives certain creditors priority over other creditors. Examples include the tax lien (fiscaal voorrecht), which gives the Dutch Tax Authorities priority with the collection of tax debts, and the lien whereby a creditor has the right to retain goods belonging to a debtor until the debt is paid.

In addition to the above rights, there is also the right of retention of title (retentierecht). This gives a creditor the right to retain property until a debt is paid off. Do you want to agree to this in a contract? If so, it is advisable to seek specialized legal advice.

Security of goods: right of pledge

A pledge (pandrecht) means that a creditor (the pledgee) has the right to “pledge” certain goods as collateral for the claim he has against his debtor (the pledgor). This pledge gives the pledgee a so-called “preferential position” over other creditors in any distribution of proceeds from the sale of the collateral. In other words, if a bank has a right of pledge on an inventory and the inventory must be sold due to the owner’s insolvency, the bank will first be paid from the proceeds of the sale of the inventory in question. Once the bank’s entire debt is repaid, other creditors can also be repaid from the remaining money.  

Pledges can be established on many different types of property. Consider vehicles, machinery, inventory, but also non-tangible items such as shares in companies, receivables, and intellectual property rights. It is important that the collateral is clearly described in the deed of pledge. In the Netherlands, some pledges must also be registered with the Chamber of Commerce or the tax authorities.  

Enforcement/execution of a right of pledge can take place when the pledgor (the debtor) defaults on payment of the claim for which the relevant pledge was established. When the pledgee proceeds to enforcement, they can sell the collateral and use the proceeds to satisfy their claim. Before doing so, however, they must first give the debtor notice of default and a reasonable period to pay (yet). Having trouble drafting a notice of default yourself? Our lawyers can help. Click here.  

When enforcing a right of pledge, it is important to note that the pledgee has a duty to try to maximize the proceeds. In that regard, he must – as far as he can – make the sale carefully and publicly.

Undisclosed pledge versus disclosed pledge

Finally, a very legal but relevant distinction in the world of (Dutch) pledges is that between undisclosed rights of pledge (stil pandrecht) and disclosed rights of pledge (openbaar pandrecht). If you are looking for legal advice on this distinction, it is always a clever idea to consult professionals about it. Schedule a conversation with experts. In general, it is useful to know the following about this:  

  • Undisclosed pledge: the undisclosed pledge is a form of pledge that is created without being disclosed to the rest of the world (“third parties”). In other words, the debtor (pledgor) can continue to use the collateral and sell the items subject to the pledge without potential buyers knowing about it. In this regard, it is also important that an undisclosed pledge is put in writing (by deed) and registered.  
  • Disclosed pledge: unlike an undisclosed pledge, a disclosed pledge (what’s in a name) is made public. That is, third parties are informed of its existence. This is done through a registration in a public register, such as the Land Registry or the Commercial Register. The purpose of making the pledge public is to alert potential buyers of the collateral that it is subject to a lien.  

In general, you can say that a disclosed pledge provides a stronger position of the pledgee (creditor) than an undisclosed pledge. In case of conflict with other creditors or in case of bankruptcy of the debtor, the pledgee with a disclosed right of pledge has priority over other creditors. 

Want to know more about, for example, the registration requirements of diverse types of rights of pledge? Our lawyers will help you further.  

Security on property: right of mortgage

It is the most well-known security right in the Netherlands: the right of mortgage (recht van hypotheek). Almost everyone with a house has established a right of mortgage for the benefit of the bank from which he/she borrowed the money to buy the property (the house). In short, a mortgage is thus a right of pledge on real estate/registered property (registergoederen).

The right of mortgage is thus a form of security that allows its holder (the creditor) to sell the mortgaged property and use the proceeds to repay the debt if the debtor to whom it has made money available defaults on repayment. Thus, the right of mortgage gives the mortgagee (the creditor) a strong position to secure its claim. Important to know about mortgages is that they can be established on all so-called “registered property.” These are primarily real estate assets such as business premises or houses. But aircraft and ships are also examples of registered property in the Netherlands on which the right of mortgage can be established.

Public security right

Because mortgages are established on registered property, they are also public security rights. This is because the mortgage is registered in the public registers. This allows third parties interested in the property encumbered with a mortgage to consult the register and thus become familiar with the right of mortgage. This enables them to assess whether a particular registered property is free of mortgage to (i) evaluate the owner’s financial position and (ii) assess the purchase potential and any risk involved with a purchase.   

When a debt is not repaid, the mortgagee can enforce the right of mortgage. This is usually done through a foreclosure sale, where the property is sold publicly. The proceeds of the sale are used to repay the debt. If the proceeds do not fully cover the debt, the mortgagee can still claim the remaining amount.  

There are several aspects to consider when establishing a right of mortgage. First, the right of mortgage must be recorded in a notarial deed and entered in the public register to be valid against third parties. In addition, it is important to determine the exact amount of the mortgage, including principal, interest, and any expenses. Furthermore, the loan agreement and notarized mortgage deed must clearly state the rights and obligations of both the mortgagor and mortgagee, as well as any conditions for exercising the right of mortgage. The loan agreement and the notarized mortgage deed should also be well matched. This prevents confusion and legal uncertainty.  

Personal securities

An important feature of the above-mentioned securities on property (in rem) is therefore that they have effect towards “third parties,” people/entities outside the legal relationship for which the security right is established. In other words, the holder of the security interest (the creditor) can also assert his rights over the property in question towards, for example, subsequent buyers of that property who knew nothing of the security right.

Personal security rights (persoonlijke zekerheden) usually do not have the “third party effect” mentioned above. They are purely contractual in nature and thus only apply between the creditor and the debtor. In other words, personal security interests offer no protection to other parties involved with the debtor, such as other creditors or contracting parties.

However, in some cases it is still possible for personal security rights to indirectly affect third parties, depending on the specific circumstances and content of the agreements, for example, in cases of bankruptcy. Because a contract gives a creditor a special position and certain strong claims, such as in a shareholders’ agreement, the other major creditors such as lenders could well miss out. Therefore, it is always wise to seek legal advice when entering or dealing with personal securities. Every context can change the legal reality a bit. Crowe Peak employs lawyers with broad knowledge of security rights. Contact them here.


As mentioned above, a guarantee (persoonlijke garantie) is a form of personal security. It is used in the Netherlands to guarantee a certain degree of security for repayment in transactions. In short, a guarantee means that one party (the guarantor) assumes the obligation to guarantee the performance of an obligation by another party (the debtor) should the latter default on his creditor. The purpose of a guarantee is thus to protect the creditor and ensure that he can still recover his claim if the debtor fails to fulfill his obligations.


The legal difference between a guarantee and joint and several liability (hoofdelijke aansprakelijkheid) (see below) is that in a guarantee, the guarantor (the third party) guarantees the debtor’s obligation without being a direct party to the contract himself. This will be explained in more detail below. A guarantee also differs from a surety bond (borgtocht). A surety is an agreement in which a third party (the guarantor) undertakes to pay the debt in question when the original debtor defaults. The main difference between this and a guarantee is that the guarantor does not have to act until the debtor defaults, where the guarantor can be sued directly for default. One could thus say that a guarantee really counts as a creditor’s last resort. This is further explained in the section “surety”.  

Need advice on a guarantee provision? Please contact us.

Joint and several liability  

Unlike a guarantee, joint and several liability (hoofdelijke aansprakelijkheid) is not a form of security provided by an outside party. Joint and several liability is a legal figure that effectively places liability for a particular obligation on multiple parties. A joint and several liability agreement means that each party to the agreement is separately and fully liable for the performance of an obligation. In other words, the creditor can choose to sue each party individually and can demand full repayment of the debt from each party. An example: if two partners take out a loan together to buy a house, and they declare themselves jointly and severally liable then the bank can sue partner A for full repayment of the debt. Partner A cannot claim that they are only 50% liable for the debt. Partner A will have to repay the bank 100%. If they believe that they should have actually paid only 50%, partner A will have to ask partner B for the remaining 50%. This way, the bank will not become a “victim” of a discussion about the division of the debt between partner A and B.

Thus, the main feature of joint and several liability is that each party has the same obligation to the creditor.

Joint and several liability


A third generic form of personal security is surety (borgtocht). As mentioned above, a surety bond is like a guarantee in that in both scenarios, a party who is unrelated to the agreement between creditor and debtor undertakes to repay the debt in question. With a surety bond though, the creditor still has a little more control.  

Here is the thing. With a surety bond, a third party, the surety, undertakes to pay the debt of the principal debtor to the creditor when the debtor is unable to meet its obligations. Surety thus creates secondary liability for the surety.  

It differs from a guarantee in that the creditor in question is not bound to continue to sue the debtor in the event of default. When a surety is established, the creditor can directly and immediately sue the surety. The difference with joint and several liability is that the surety guarantor can only be sued if the debtor defaults, whereas with joint and several liability each party can be sued separately for the entire amount of the debt anyway. In other words, with joint and several liability, the creditor may always choose whom to sue; with a surety, he may only choose to sue the surety guarantor when the original debtor fails to pay.  

Issuing a personal guarantee or even a surety bond is a major financial decision. It is therefore important to fully understand the consequences before signing for it. The advice of a lawyer is highly recommended in such situations. Want to know more? Go to our service page and learn more about what we can do.

Personal guarantees and your partner and/or company 

Because providing personal security is no small matter, it is also a crucial point to be aware of when entering into agreements in the context of your own business. These often include provisions about personal collateral from you personally or even from your partner. Whether you are taking out a loan, entering into an agreement with a supplier or signing any other type of contract, it is crucial to be aware of the implications for you and your life partner.  

On top of this, it is good to realize that in many cases, personal collateral continues even after divorce or the death of one of the partners. In this context, a business contract may mean you will also have to adjust your personal documentation, such as your prenuptial agreement. Crowe Peak’s lawyers have a lot of experience in advising family businesses and the people behind them. We are therefore happy to help you in this area of law too.  

Collateral in bankruptcy: this is what you need to know

Finally, a crucial point of interest is the role of collateral in a debtor’s bankruptcy. This is because some of the above-mentioned securities give the creditor a privileged position over other creditors, while others do not. The property law securities “pledge” and “mortgage” create a so-called “separatist position” in the debtor’s bankruptcy. This means that as a creditor you may exercise your security interest as if there was no bankruptcy. In other words, you may recover your debt directly through the sale of the property on which you have secured security.  

In principle, the personal security interests guarantee, joint and several liability and surety do not give you a special position in the event of bankruptcy of the principal debtor. However, the advantage you do have as a personal security holder in the event of the creditor’s bankruptcy is that in many cases you will have someone else turn to too. If the creditor is in bankruptcy, you may choose to recover from the guarantor, surety or a jointly and severally liable co-creditor as an alternative.  

In this regard, if you are going to make loans or otherwise extend credit to your business associates, we always recommend including collateral in the contracts. Are you looking for a party who can draft these contract provisions for you? We are happy to do so. Describe your situation here and we will contact you.  

Security rights in the Netherlands: seek advice  

As can be seen from the above, under Dutch law, security rights are heavily regulated. This is for good reason. However, this does mean that security provisions in contracts and deeds are often difficult to read for those without a legal background. Do you have questions about a form of Dutch security you are about to sign for? Or would you like general advice from a lawyer on, for example, the ranking of collateral or the differences between diverse types of personal guarantees? At Crowe Peak, we are ready. Get in touch. Want to stay up to date on the latest developments in financial legal matters? Sign up for our newsletter by scrolling down and fill in the form in the footer.

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