Livestock placed at rented premises was encompassed by Section 37 of The Registration of Property Act

Date 7 jul. 2010

The Western High Court has upheld a decision made by The Court Bailiff, in which The Court Bailiff determined that a livestock of pigs which was placed at rented premises still was encompassed by The Registration of Property Act, Section 37. The ruling was printed in TfL 2010.112.

 

Operational ties

The Registration of Property Act, Section 37, entails that if a mortgage is registered on a property, which has been established with a specific business purpose, the mortgage also includes operating equipment and fixtures (including machines and installations of all kinds, and in farmhouses, also the livestock, fertilizer, crops and other products, to the extent that they are eliminated according to regular operation.

 

Therefore, it is a floating charge of accessories, in which assets are included in the mortgage of the real estate property, from the moment the asset achieves operational ties to the property.

 

The reason why it is a floating charge is that mortgage includes the assets when they achieve operational ties to the property, but also because the assets may be eliminated according to regular operation.

 

Transferring assets to rented premises

In the case in which the High Court ruled, the mortgager had regularly transferred piglets for fattening on the rented premises.

 

Therefore, the question was, if the part of the livestock that had been transferred from the mortgaged property onto the separate rented premises still was included in the mortgaged in the real estate, cf. Section 37 of The Registration of Property Act.

 

The High Court decided that the part of the livestock which had been transferred still was included by the mortgage, cf. Section 37 of The Registration of Property Act in the real estate owned by the mortgager even though the livestock now physically was placed at the rented promises.

 

The reason for maintaining the mortgage, cf. Section 37 of The Registration of Property Act was, among other reasons, that even though the production had been transferred from the mortgaged real estate to the rented premises, the livestock still had sufficient operational ties to the mortgaged real estate and, therefore, was not eliminated according to regular operation.

 

Furthermore, The High Court upheld The Court Bailiff’s reasons for its ruling in which, among other things, The Court Bailiff had emphasised that the administrator of the farm at the rented premises was remunerated from the common overdrafts, and also that there was only one joint accounting for the entire business operation which was operated using only one CVR-number.

 

Consequences of the ruling

Based on the ruling, the transfer of assets to rented premises does not necessarily imply that the assets cease to be included in the charge of accessories of a real estate property, cf. Section 37 of The Registration of Property Act.

 

Even though the assets are no longer situated on the mortgaged real estate, an evaluation of whether the assets still have sufficient operational ties to the mortgaged real estate, or if they are to be considered eliminated according to regular operation, must be carried out.

 

 

If you have questions regarding the above or require additional information on elimination according to regular operation or operational ties, please contact attorney Thomas Weitemeyer (twe@mwblaw.dk) or trainee Tim Rosenkrantz Buur (tbu@mwblaw.dk).

 

The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis of decisions or considerations.