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The legal system of the Republic of Serbia does not regulate the institute of fiduciary ownership transfer and court practice has mainly held that this type of securing claims is prohibited and null and void. For example, the Appellate Court in Kragujevac took such a view in its judgement GZ 228/2010 of 2 February 2010. The court inter alia noted that “fiduciary legal transaction concluded for the purpose of acquiring the ownership right or the right of use on immovable property securing a loan agreement, is not permitted at the moment, so such an agreement, due to a prohibited cause, is considered null and void”.

Unlike the domestic legal system and jurisprudence, the legislation of most other former Yugoslav republics (primarily Montenegro, Croatia and Slovenia) regulate, as a special means of securing claims, a fiduciary transfer of ownership rights (on movable and immovable property alike).

This article will provide a detailed analysis of the institute of fiduciary transfer of ownership right as a means of securing claims in the legal system of Montenegro (“MNE”).

In 1996, MNE introduced the institute of fiduciary transfer of ownership right in its legal system, by adopting the Law on Fiduciary Transfer of Ownership Right[1]. In the meantime, this law was replaced by the provisions of the Law on Property Relations of MNE (the “Law”)[2].


The Law defines fiduciary ownership as a conditionally acquired ownership on either movable or immovable property for securing the collection of a claim (existing, as well as future and conditional), by which a creditor is authorised to collect his receivables before any other creditor, regardless of a person being in possession of the property. In case of a settlement of his claim, the beneficiary (i.e. a creditor) must enable the fiduciary debtor to exercise his ownership right without interruption.


An agreement on fiduciary transfer of ownership right must be concluded in a written form. If the subject of a fiduciary transfer is immovable property, such agreement must be notarised by the notary public as well and then registered with the real estate cadastre. Regardless of whether the subject of this right is movable or immovable property, the parties (jointly) are obliged to register every agreement on fiduciary transfer of ownership with the Real Estate Directorate within 8 (eight) days from the date of its conclusion. Otherwise, such an agreement (unregistered) will be considered null and void.


The subject of fiduciary ownership transfer right is both movable and immovable property, whereby the Law explicitly prescribes special rules when such security is established on a stock. In this case (a fiduciary transfer of ownership on a stock of finished products such as machinery, cars and other stock), a stock must have determined value, must be marked (which is executed by the Real Estate Directorate) as well as placed in a separate place. A fiduciary debtor may exchange the encumbranced goods in a stock with other goods of the same value only with prior consent of a beneficiary.

Relation Fiduciary Debtor – Beneficiary

The beneficiary becomes a formal legal owner of the encumbered property, but with limited powers: at the moment of the establishment of a fiduciary relationship, the beneficiary has only the right to dispose the encumbered property (after his due receivables remain unsettled by a debtor), while the fiduciary debtor is considered as an economic owner of the encumbranced property, i.e. keeps the right of holding, using and collecting on the encumbered property. However, this restriction is conditional, considering that parties are authorised to agree differently upon the expiration of a period of eight days from the date of the arising of the secured receivables.

A fiduciary transfer of ownership is a form of non-possessional security of a creditor’s claim, given that the property burdened in this manner remains at the possession of fiduciary debtor, who must hand it over to the beneficiary in case of failing to settle the debt within the provided deadline. Also, the Law provides the possibility to the parties to hand-over the object of the fiduciary to the third party for the purpose of safekeeping. For the entire period while burdened property is in its possession fiduciary debtor is obliged to keep that property with a due care of a prudent businessman or a good host. Therefore, the Law establishes a specific standard of care by which the fiduciary debtor is obliged to keep the encumbranced property. This was also confirmed by the Supreme Court of MNE in its judgement Rev 551/2016, in which, inter alia, is stated:

Hence, if due to his negligence the property, on which the ownership is transferred to the creditor, is damaged, the debtor cannot rely on a circumstance that he kept his other property with the same care as encumbranced property on which he transferred the fiduciary ownership to the creditor.”

The fiduciary debtor is obliged to inform the beneficiary on any change which occurs on the encumbered property. Otherwise, he is liable for the damage caused to the beneficiary. Also, the fiduciary debtor is not entitled to hand over the encumbered property to a third party for use without approval of the beneficiary. Otherwise, he will be liable to a beneficiary for the accidental ruin or damage of encumbranced property.

Unlike the legal system of the Republic of Serbia where the lex commissoria [3] clause is considered null and void, the legal regime in MNE did not take such a strict stand. Specifically, Article 358 of the Law prescribes nullity of the respective clause in case it is agreed in the moment of conclusion of agreement on fiduciary transfer of ownership. However, Paragraph 2 of the said Article 358 of the Law allows such a clause after the expiration of eight days from the moment when the claim arises.

Settling of Beneficiary

If a fiduciary debtor fails to timely fulfil his obligation to the beneficiary, the beneficiary thereafter acquires the right to sell the property burdened with the fiduciary transfer of ownership, at the price determined through an expert assessment (after the expiration of eight days from the date when the beneficiary delivered an adequate notice to the debtor and the fiduciary debtor) or keep it for itself at the same price. From the price obtained by selling the property, the beneficiary settles its claims towards the fiduciary debtor – the main claim as well as the accrued interest and the costs of collection.

The beneficiary must return to the fiduciary debtor any price difference which may remain after settling his own claim. If the price at which the encumbered property is sold is insufficient to cover the beneficiary’s claim, the beneficiary may settle the remaining amount from the assets of the fiduciary debtor as an ordinary creditor.

Bearing in mind that an agreement on fiduciary transfer of ownership notarized by a notary public is considered as an enforceable document in the sense of Article 18 of the Law on Enforcement and Security, the beneficiary may use this document to initiate the enforcement procedure. This was also confirmed by the High Court in Bijelo Polje in its decision no. Gz 281/2018 in which it, inter alia, stated:

Considering that in this particular case the claimant’s receivables are secured by an Agreement on Fiduciary Transfer of Ownership and Notary record of Annex to the Agreement on Fiduciary Transfer of Ownership, according to the opinion of this court there is no legal interest for filing this claim. This is since the claimant may, on the basis of the Agreement on Fiduciary Transfer of Ownership, immediately request enforcement. Therefore, it is not clear what is the legal interest of the claimant to initiate a litigation procedure and to acquire a new enforceable document in order to again collect its receivables based on the rules of the Law on Enforcement and Security.

One of the disadvantages of this means of security is that in the event that a fiduciary debtor refuses to hand over the property to the beneficiary when all preconditions are fulfilled, the beneficiary cannot seize the property from the fiduciary debtor, but is obligated to file a lawsuit demanding the handover of the encumbered property.

[1] “Official Gazette of RMNE“ no. 23/1996

[2] “Official Gazette of MNE“ no. 19/2009

[3] Lex Commissoria – a provision by which if a debt has not been totally repaid, then a pledged property is automatically transferred to ownership of a pledgee or a third party under undetermined price or price determined in advance.


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