Does the ownership always follow the assignment of claims?

On 18 February 2021, the Court of Appeal in Białystok in the case ref. no. I ACa 687/20 addressed the issue of whether in the case of assignment of a claim secured by a so-called assignment by way of security, the transferred claim will be followed by the ownership right to the item securing it.

Assignment by way of security is a specific form of debt security in which the debtor transfers ownership of a specific item to the creditor. The creditor’s claim is thus secured by the ownership right to the item previously owned by the debtor. In most cases, when the debtor pays off the claim, the ownership of the item transferred to the creditor also returns to the debtor.

The question arises, however, whether in the case of sale of a claim secured in this manner, its purchaser also obtains the ownership of the thing securing the claim?

As the Court of Appeals in Białystok pointed out, the right of ownership does not belong to accessory rights and therefore will not „automatically” follow the secured claim. Thus, if a security assignment agreement has been concluded between a creditor and a debtor and the creditor has sold its claim against the debtor, the ownership right to the assigned item will not always be transferred to the buyer. Protection of such a claim will therefore be weaker. In such a situation, the assignor (the creditor transferring its claim to another person) may remain the owner of the item assigned by the debtor despite the assignment of the claim.

Ownership of the thing securing the claim will therefore not be transferred to the buyer of the claim „automatically”.

In practice, therefore, the assessment whether, together with the receivable, the ownership right to the assigned item passes to the purchaser of the receivable depends on the content of the provisions of the assignment agreement itself. The ruling by the Court of Appeals in Białystok should prompt an analysis of the provisions of assignment of receivables agreements. Due to the legal construction of an agreement on assignment by way of security, after the assignment of a receivable secured in this way, it is not so obvious who has the ownership right to the assigned item. Therefore, it is in the interest of the buyer of such a claim to regulate in the assignment agreement also the question of the transfer of ownership of the assigned property.