German Movable Property Law

Book 3 of the BGB and the Principles of Movable Property Law

Book 3 of the Bürgerliches Gesetzbuch (BGB, §§ 854–1296) governs property law (Sachenrecht) and divides property into immovables (land and buildings) and movables (bewegliche Sachen, all other corporeal objects). The principles underlying German movable property law are the same foundational civil law doctrines that govern immovables: the numerus clausus of property rights (parties cannot create novel forms of property rights by agreement), the principle of separation (Trennungsprinzip — the obligatory contract and the real agreement are distinct juridical acts), the principle of abstraction (Abstraktionsprinzip — the validity of the transfer of ownership is independent of the validity of the underlying obligation), and the principle of publicity (Publizitätsprinzip — possession serves as the external sign of rights in movables). For movables, possession (Besitz) performs the function of publicity that the Grundbuch (land register) serves for land. These principles create a system of remarkable conceptual rigour, but German legal practice has developed functionally equivalent security instruments — particularly Eigentumsvorbehalt (retention of title) and Sicherungsübereignung (security transfer of ownership) — that operate outside the formal property law framework of the BGB to meet commercial needs.

Transfer of Ownership: Section 929 BGB

The transfer of ownership in movables under § 929 BGB requires both the real agreement (dingliche Einigung) — the mutual declaration of transferor and transferee that ownership shall pass — and the delivery (Übergabe) of the thing to the transferee. The dingliche Einigung is an abstract real contract that is effective regardless of the validity of the underlying sale or gift; this is the Abstraktionsprinzip in operation. Delivery requires the transfer of actual physical control. The BGB, however, permits several substitutes for physical delivery in commercial practice. Delivery by brevi manu traditio under § 929 s. 2 occurs where the transferee already holds the thing, for example as a bailee or lessee — in such cases, the parties need only agree that ownership passes. Besitzkonstitut under § 930 allows the parties to agree that the transferor shall continue to possess the thing under a bailment relationship (e.g., a loan for use, lease, or custody). This substitute is the foundation of the Sicherungsübereignung (security transfer). Assignment of the claim for delivery under § 931 permits the transferor to assign the claim for delivery against a third-party possessor in lieu of physical delivery. The BGH has recognised that even an attenuated custodianship agreement suffices under § 930, provided the parties intend a genuine bailment relationship and the thing remains identifiable by type and location.

Good Faith Acquisition (Gutgläubiger Erwerb)

The principle of good faith acquisition (gutgläubiger Erwerb) under §§ 932–936 BGB protects the security and efficiency of commercial transactions by enabling the transferee to acquire ownership from a non-owner, provided the transferee is in good faith. Section 932(1) provides that the transferee becomes owner even if the thing does not belong to the transferor, unless the transferee knew or was grossly negligent in not knowing that the transferor was not the owner. Good faith is tested at the time of the dingliche Einigung and delivery; subsequent discovery of the true owner’s rights does not destroy the acquisition. The transferee’s good faith is presumed, and the burden of proving lack of good faith lies on the true owner. The crucial exception under § 935 BGB is that good faith acquisition is excluded if the thing has been stolen, lost, or otherwise involuntarily deprived (abhanden gekommen) from the true owner. This principle — “Hand wahre Hand” — protects the owner against involuntary loss of possession. The exception does not apply to money, bearer instruments, and goods sold at public auction, which remain susceptible to good faith acquisition even if stolen. Where goods are transferred under retention of title and the buyer on-sells them before full payment, the buyer can pass good title to the sub-purchaser under § 932, provided the sub-purchaser is in good faith.

Retention of Title (Eigentumsvorbehalt)

The Eigentumsvorbehalt under § 449 BGB is the most widely used security device in German commercial sales. The seller and buyer agree that ownership remains with the seller until the full purchase price is paid, even though possession — and therefore use — passes to the buyer immediately. Section 449 provides that where the seller has reserved ownership, the transfer is conditional upon full payment of the purchase price. The Eigentumsvorbehalt is created by agreement and need not be registered to be effective against third parties. A mere simple retention of title (einfacher Eigentumsvorbehalt) allows the seller to vindicate the goods under § 985 BGB if the buyer defaults on payment. The extended retention of title (verlängerter Eigentumsvorbehalt) covers the situation where the buyer on-sells the goods before full payment: the seller receives an assignment of the buyer’s claim against the sub-purchaser. The expanded retention of title (erweiterter Eigentumsvorbehalt) secures all claims of the seller against the buyer, including claims from other transactions, rather than only the purchase price of the specific goods. The Kontokorrentvorbehalt secures the entire current account balance between the parties. The sale of goods subject to retention of title in the buyer’s ordinary course of business is permitted under § 933 BGB only if the buyer maintains the right to sell the goods — which is typically agreed in standard terms.

Security Transfer (Sicherungsübereignung)

The Sicherungsübereignung (security transfer of ownership) is the most important non-possessory security device in German law. Unlike the pledge (Pfandrecht, §§ 1204–1296 BGB), which requires transfer of possession to the pledgee, the Sicherungsübereignung uses the Besitzkonstitut under § 930 BGB to allow the debtor to retain possession and use of the asset while ownership is transferred to the creditor as security. The creditor acquires full legal title (Vollrecht) on the basis of the real agreement, but the parties enter into a security agreement (Sicherungsabrede, an obligatory contract) that restricts the creditor’s rights: the creditor may realise the security only upon default, must sell the asset in a commercially reasonable manner, and must return surplus proceeds to the debtor. The Sicherungsübereignung is widely used to secure inventory, machinery, vehicles, and receivables. In practice, banks and other lenders prefer it to the pledge because the debtor can continue operating the business with the secured assets. The BGH has developed extensive case law on its validity, requiring that the assets be sufficiently individualised (Bestimmbarkeit) and that the Sicherungsabrede not be unconscionable (Sittenwidrigkeit, § 138 BGB). The Sicherungsübereignung is also used in structured finance transactions and asset-based lending, and the Federal Court of Justice has consistently upheld its validity despite the absence of publicity — a criticism that has led to calls for a register of security interests in movables. The Gesetz zur Reform des Mobiliarsicherungsrechts, currently under discussion, would introduce a register of non-possessory security interests and partly codify the BGH case law.