Real security rights created by law (Ch. 19)

Question 1

Define the tacit hypothec of the lessor

Answer 1

The landlord’s tacit hypothec is a real security right created by operation of law (and perfected by a court order, followed by attachment) to secure the landlord’s claim against the lessee for rent in arrears. The hypothec applies to movables of the lessee on the premises.

Question 2

Define a ‘judicial pledge’

Answer 2

A judicial pledge us a real security right which secures a creditor’s claim against a debtor, and is established by obtaining a writ of execution against the debtor and attaching the property.

Question 3

Name & discuss the categories of statutory security rights (4)

Answer 3

1. A statutory mortgage is created when a real security right over movables or immovables is established without the normal requirements for such right.
2. A statutory fictitious pledge is created when a right of pledge over movables is created in the absence of real delivery or control of the property subjected to the pledge.
3. A statutory lien is a special kind of lien, over movable or immovable property. FNB v SARS the CC held that such a statutory lien could be unconstitutional and invalid for constituting an arbitrary deprivation of property, if it allowed attachment and sale of property not belonging to the debtor.
4. Preferent rights are security rights which do not amount to real security, but which nevertheless provide a preferent claim to the property.

Question 4

Define a ‘lien’

Answer 4

A lien or right of retention allows the holder of movable or immovable property to refuse to return the property to the owner unless the owner pays an existing principal debt, which arose from expenditure by the holder with regard to the property.
- It is a right to withhold property from the owner to enforce payment of a principal debt, and as such depends on the actual existence of such debt.

Question 5

How does a lien work?

Answer 5

In certain circumstances, the controller is allowed by law to refuse to return the property to the owner unless the owner pays the outstanding debt.

Question 6

What are the 2 main categories of liens?

Answer 6

1. Enrichment liens

2. Debit-creditor liens

Question 7

Define a ‘debtor-creditor lien’

Answer 7

A debtor-creditor lien is a lien which secures payment of a debt incurred ito a CONTRACT, and is therefore based upon personal obligation that can be enforced against the contractual debtor only.

• Thus, if the principal debt arose from contract, it is this lien
• The basis of the lien is the contract, and the amount for which it is valid is the amount due ito the contract

Question 8

Can a debtor-creditor lien be enforced against anybody?

Answer 8

No, it can only be enforced by or against a party to the contract from which the principal debt arose.

Question 9

Define an ‘enrichment lien’

Answer 9

An enrichment lien is a lien which secures payment of a debt incurred by way of unjustified enrichment, and which is therefore a real burden upon the property that can be enforced again any person who happens to be the owner of the property.

• This lien arises from unjustified enrichment
• The amount is the amount of enrichment

Question 10

Which case is applicable enrichment liens?

Answer 10

Singh v Santam Insurance

Question 11

What are the categories of expense or improvement of property applicable to liens? (3)

Answer 11

1. Necessary expenses
2. Useful epenses
3. Luxurious expenses

Question 12

hat are the 2 categories of enrichment liens?

Answer 12

1. Salvage liens - secure payment of enrichment debts arising from NECESSARY expenses or improvements
2. Improvement liens - secure payment of enrichment debts arising from USEFUL expenses or improvements

Question 13

What are the 3 main categories of liens?

Answer 13

1. Debtor-creditor liens
2. Salvage liens
3. Imrpovement liens

Question 14

How are liens established and enforced?

Answer 14

Through control of the property.
Without control there can be no lien; which means that the lien holder must have acquired control of the property at some stage, and that the lien holder must retain control for the lien to have any effect.

Question 15

What does the physical control requirement mean wrt liens?

Answer 15

That the lien holder would have to exercise and retain really effective control. The mental element of control must be to withhold control until the debt is paid.

• As soon as the lien holder voluntarily loses physical control the lien is terminated, and it cannot be revived by subsequent recovery of the property.
• If the lien is lost involuntarily, it will revive upon recovery.

Question 16

In which ways are a lien terminated? (3)

Answer 16

1. Voluntarily losing physical control of the lien
2. Extinguishing by payment of the debt
3. By provision of another form of security for the debt

Question 17

Can liens be used as a cause of action?

Answer 17

No, liens are defence mechanisms.

- They can be used defensively when the owner claims property with the rei vindicatio

Question 18

What kind of remedy if a lien?

Answer 18

A discretionary remedy - the court always has a discretion in allowing it or not.

Question 19

What are the requirements for a lien? (5)

Answer 19

1. The owner of property must be claiming it back from the defendant
2. The defendant must be in control of the property
3. The defendant must retain the property in order to secure payment of a principal debt owed to the holder by the owner
4. This principal debt can arise from either contract or unjustified enrichment resulting from improvements to or costs incurred in relation to the owner’s property while it was in the defendant’s control
5. The court must be convinced that, in the circumstances, it would be justified to exercise its discretion and recognise the lien. The courts also have the discretion to allow, upon application, that the lien be substituted by security.