ARTICLES and NOTES - Notarius International

242 O. Soergel/O. Stöcker, EU Enlargement and Property Law Notarius International 3-4/2002
of the security has given to the taker of the security in order
to secure the debt is generally called the “Sicherungsgrundschuld“
(land charge serving as collateral).
It is also possible however to have cases of non-accessory
security interests where there is no security purpose.
In the case of the German Grundschuld such a case is referred
to as an isolierte (isolated) Grundschuld. The holder
of an isolated land charge has not received it as security
for a debt but rather as another asset. Thus, he has only
an isolated claim for payment out of the real estate encumbered
As there is no debt to be secured there is also
no security purpose and therefore no security contract either
by which the security purpose would be governed.
The term “isolated” should not lead to the assumption
that the isolated land charge has no causa. Just as the land
charge serving as collateral (Sicherungsgrundschuld) has
its causa in the loan contract, the isolated land charge also
has its causa in an underlying obligation, for example
in a purchase contract.
In the past purchase contracts concerning land charges
were to be found in German banking practice, for example
in the context of the financing of property leasing
transactions. In such cases the company owning the
leased asset (Objektgesellschaft) granting the lease sold
the bank a land charge for the benefit of the owner (or
short: owner charge) (Eigentümergrundschuld) over the
asset being leased; the purchase price was equivalent to
the total of all future instalments payable under the leasing
contract for the forfeiting amount. The performance
arising out of the purchase contract consisted on the one
hand of the assignment of the land charge to the bank and
on the other hand of the payment of the purchase price to
the company owning the leased asset (Objektgesellschaft).
The bank therefore did not record the payment of
the purchase price in its books as a loan, but instead recorded
the land charge as an asset.
The intention behind this arrangement was to avoid
loosing of the business tax exemption on the earnings
from the leasing transaction in the Objektgesellschaft, if
the lessee become partner in the Objektgesellschaft – as
often practised in the case of sale-and-lease-back transactions.
Even though the tax idea did not ultimately succeed
15 , there was no doubt about the efficacy of this contractual
arrangement under civil law.
3.2. Problem of the land charge in “causality countries”
As shown with the example of the land charge serving
as collateral versus the isolated land charge (Sicherungsgrundschuld
– isolierte Grundschuld) the concepts of security
purpose (Sicherungszweck) and causa must be
clearly separated. Otherwise unnecessary problems arise
again and again in countries that adopt the principle of
causality (causality or causation countries) as a result of
the mixing of the two conceptual categories.
However much in practice the isolated land charge is
the exception and the land charge serving as collateral is
the rule, dogmatically the so-called isolated land
charge is the “pure” form of Grundschuld 16 . This pure
form is diluted by the contractual coupling of the land
charge with a security purpose, that is agreed by the contract
parties in the security contract 17 . At the same time it
opens up the possibility of an inadmissible mixing of the
two concepts of causa and security purpose, particularly
when the causa for the creation of the security is seen in
the security contract 18 . The conclusion drawn from this
in causation countries is that the land charge in its dogmatically
pure form of the isolated land charge is a land
charge without a causa, with the further consequence – if
one follows the doctrine of causality– that in these countries
a land charge cannot be effectively created at all.
These conclusions are as wrong as the assumptions on
which they are based.
- The isolated land charge too has its causa, just as the
land charge serving as collateral (Sicherungsgrundschuld)
and the mortgage (Hypothek) do. Like the
land charge serving as collateral and the mortgage, it
too is based on an obligation which obliges the provider
of the land charge to create it and forms the
ground that justifies the acquisition of the land charge
by the creditor.
- This contractual relationship which underlies the acquisition
of the land charge and is the justification for
it can be a purchase contract – as in the example set
out above of the purchase of the land charge, or for
example it can be a contract of gift or a partnership
agreement. In the case of loan-related security interests
(Hypothek, Sicherungsgrundschuld), the underlying
contractual relationship which justifies the acquisition
of the security – in the relationship between the
parties to the loan contract – is normally the loan
contract, in which the borrower undertakes to the lender
to create the Hypothek or Sicherungsgrundschuld
in the latter’s favour as security for the loan. Essentially
the security contract governs only the security
purpose, the prerequisites of the security and how to
realise the security, apply the proceeds of the security
and return the security.
The “problem” of causality in this context is in reality
therefore not a problem at all, or at least not a problem
that is special to the land charge. A causa is required in
the case of both the land charge and the mortgage and can
generally be found.
15 Cf Federal Tax Court, judgment of 5.5.1999 – XI R 6/98, DStR 1999,
1310 onwards
16 Cf Staudinger/Wolfsteiner (Footnote 7), Preliminary statement 10 on
§§ 1191 onwards which calls the isolierte Grundschuld (“Primär-
Grundschuld“) the historic example and legislative model for the
Grundschuld.
17 Staudinger/Wolfsteiner (Footnote 7), Comment 4 on §§ 1191 onwards
talks in this context of the “ongoing attempt to reduce the Grundschuld
... to the ancient legal form of the Hypothek “.
18 The Federal Supreme Court in its judgment of 8.12.1988 – III ZR
107/87, ZIP 1989, 157 f = NJW 1989, 1732, 1733, and with it EWiR
1989, 157 (Clemente) under uncritical reference to MünchKomm-
Eickmann, BGB, 2nd Edition 1986, § 1191 note 13.