Pledge agreement

In a pledge agreement the pledgor transfers the pledged property (e.g. an object or a right) to secure a claim (e.g. from a loan) to the possession of a pledgee. In the event of the pledgor failing to pay the claim, the pledge agreement entitles the pledgee to realise the pledged property and obtain payment from the proceedings.

The law subdivides pledges into liens on immovable property according to Art. 793 ff of the Swiss Civil Code (ZGB) and liens on personal property according to Art. 884 ff ZGB. The pledged property in the case of liens on immovable property is real property and in the case of liens on personal property movable property (e.g. personal effects, but also claims and other rights).

Liens can be of statutory or contractual origin. An important statutory lien is for example the workmen and contractors’ lien according to Art. 837 (2) section 3 ZGB, which secures the wage claims of the workmen and contractors on the real property on which they have worked.

Depending on the object or right transferred as lien, the law provides for the pledge agreement being valid without formal requirements (e.g. lien on jewellery), concluded in writing (e.g. lien on a brand) or in addition publicly authenticated (e.g. lien on real property). If the pledged property is real property, it must in addition be entered in the land register.