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Retention right: a powerful tool, but not always

The right of retention is a strong pressure tool for creditors. The classic example of the right of retention is the garage that does not...

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The right of retention is a strong pressure tool for creditors. The classic example of the right of retention is the garage that does not release the repaired car until the owner of the car has paid the repair bill. A contractor can also exercise the right of retention on a project he has completed for his client. From here on, we will assume the situation where the contractor is not paid by the client and subsequently exercises the right of retention.

In a previous post on this website, we already explained that three conditions must be met to exercise the right of retention:

  • The contractor must have a claimable demand on the client: there is an outstanding invoice.
  • The contractor must have actual power over the (construction) work and – in order to invoke the right against acquirers of the property, such as buyers – this must also be apparent to third parties. The contractor must therefore be the only one to have the key to the construction fence and let it be known through a sign on the fence that he is exercising the right of retention.
  • There must be sufficient coherence between the claimable demand and the obligation to return or deliver the (construction) work or the item. The contractor cannot just exercise the right of retention on a construction project if the client does not pay invoices for another project.

The client is not always the same person as the owner of the construction site. In addition, a mortgage right may have been established on the construction site before the construction contract was given. In certain cases, the right of retention can also be invoked against such third parties, with an older right to the property. This requires that the client was authorized to conclude the construction contract even though he was not the owner. If that authority was lacking, the contractor is still protected if he had no reason to doubt the debtor’s authority.

What if these last requirements are not met? The conclusion is then that the contractor can only invoke the right of retention against the debtor, but not also against the third party with an older right (for example, the owner-not client or the holder of an older mortgage right).

It sometimes happens that the third party with an older right sells the building on which the right of retention is exercised to someone else. Let’s assume that the contractor could not invoke the right of retention against the original owner. For example, because the contractor knew that the client was not authorized to enter into the construction contract. What happens after the transfer of the building? Can the contractor then invoke that right against the new owner? That would be nice for the contractor, of course. He can not only invoke his right of retention against the client, but also against the new owner of the building.

The Supreme Court recently ruled that this is not the case. The Supreme Court says: if a contractor cannot invoke his claim against a third party with an older right, then the contractor cannot do so if that third party transfers his right. According to the Supreme Court, there is no reason to put the contractor in a better position after the transfer than before.

This conclusion is surprising because the text of the law seems to suggest something different. However, the Supreme Court looks more at the intention of the law and the explanation that the legislator prepared at the time, than at the text of the law. This has been happening more often lately and that is only to be applauded.