A right of retention is the statutory authority of a creditor to retain possession of a debtor’s property until all outstanding claims are satisfied, as regulated in Article 3:290 of the Dutch Civil Code.
This security right protects creditors against payment risks by granting them actual control over goods. For instance, a garage owner retains a repaired vehicle until the invoice of €2,500 is paid. This legal construction prevents you from delivering services without payment security.
Under Dutch law, the right of retention arises without separate agreement. Once you have an enforceable claim and hold goods of your debtor in your possession, you can exercise this right. Therefore, contractors in the Netherlands frequently use this instrument in construction projects where invoices of €50,000 or higher remain outstanding.
What conditions apply for right of retention under Dutch law?
For valid right of retention under Dutch law, you must satisfy three cumulative requirements: an enforceable claim, actual control over the property, and sufficient connection between claim and property according to Article 3:290 of the Dutch Civil Code.
Within 6 weeks of invoice issuance, approximately 40% of business debtors fail to pay, making these requirements critical.
Enforceability of your claim means the payment deadline has expired. When your invoice specifies a 30-day payment term and this period has passed, enforceability arises automatically. In absence of an agreed term, your claim becomes immediately enforceable after invoicing.
Actual control means you exercise physical possession over the property. A contractor maintains actual control through presence at the construction site and controlling access via fencing. This control must be visible to third parties; consequently, companies often place clear signs stating “Right of retention exercised”.
Sufficient connection exists when property and claim are directly linked. The invoice for car repair has direct connection with that specific vehicle. However, you cannot simply retain other possessions of the same debtor for an unrelated debt.
The District Court of Amsterdam has emphasized in multiple rulings that all three conditions must be present simultaneously. If one element is missing, your right of retention lapses entirely.
How do you correctly exercise right of retention in the Netherlands?
Begin by preserving all relevant documentation: invoices, proof of delivery, correspondence regarding payment requests. Subsequently, notify the debtor in writing that you exercise the right of retention until payment occurs. This notification must specifically state which claim you mean and which property you retain.
Make the right of retention known by placing physical signage. In construction, this means fencing around the construction site with clearly readable signs. For smaller items, such as a watch at a watchmaker, written notification to the debtor suffices.
Never lose actual control. If your debtor unlawfully gains access to his possessions—for example, with a spare key to his car in your garage—your right of retention revives. You can reclaim the property through court proceedings, but this requires legal procedures costing an average of €3,500 in legal fees.
Document everything carefully: date of exercising right of retention, outstanding amount, location of property, any communication with debtor. This administration becomes crucial when the debtor goes to court or becomes bankrupt.
Moreover, maintain detailed records of all costs incurred during retention. Courts require this documentation to determine whether your actions remain proportional to the outstanding debt.
What happens during bankruptcy of the debtor under Dutch law?
Right of retention continues during bankruptcy, whereby the trustee must choose between payment of your claim or demanding and selling the property with priority for you on the proceeds.
Furthermore, you receive a preferential position compared to other creditors. Namely, when the trustee demands the property for sale, you receive priority on the sale proceeds above concurrent creditors. This priority rule is regulated in Article 60 of the Dutch Bankruptcy Act.
The trustee has two options within a reasonable period, generally 14 days after your request:
- Payment of your complete claim – The trustee satisfies all outstanding invoices after which you immediately surrender the property
- Demanding for sale – The trustee sells the property and you receive priority on the proceeds after deduction of bankruptcy costs
Note: bankruptcy costs such as bailiff fees and auction expenses are deducted first. Consequently, you may not receive the full amount despite your priority position. For a vehicle with assessed value of €8,000 and bankruptcy costs of €2,000, €6,000 remains for your claim.
Set the trustee a concrete deadline for his choice. If the trustee does not respond within this period, you may sell the property yourself under strict statutory conditions. This sale must occur via public auction or, with court permission, privately at market-conform price.
Statistics show that in 65% of bankruptcy cases involving retention rights, creditors recover between 70-90% of their outstanding claims through this preferential position.
How do you collect your money through right of retention in Dutch law?
Most debtors pay eventually because they want their possessions back quickly. Nevertheless, approximately 25% of debtors refuse payment, making legal steps necessary.
Execution requires an executory title according to Article 430 of the Dutch Code of Civil Procedure. This means you first need a court judgment. Subsequently, a bailiff attaches the property, costing on average €750 excluding VAT for standard procedures.
Thereafter follows sale via public auction. The bailiff organizes this auction within 4-6 weeks after attachment. At auctions, an average of 70% of the assessed value is achieved. For example, a machine assessed at €10,000 typically yields €7,000.
Private sale often offers higher proceeds but requires court permission. You file a petition with the court explaining why private sale offers advantages. This procedure takes approximately 3 weeks and costs €289 in court fees.
After sale, you receive your claim from the proceeds. If money remains, this goes to the debtor. If debt remains, you can continue claiming this residual claim through normal collection procedures.
Are you considering exercising right of retention? Our specialized lawyers analyze your situation and advise on the legally strongest strategy to secure your claim.
What are the risks of wrongful right of retention according to Dutch legislation?
Wrongfully exercising right of retention leads to liability toward the debtor, whereby you must compensate all damages suffered including lost profits and legal costs.
Research indicates that wrongful retention cases result in average damage awards of €15,000 to €45,000 in the Netherlands, depending on business impact.
Lost profits often constitute the largest damage item. A contractor who wrongfully fails to deliver a residence while the buyer has already paid causes expenses for temporary housing. This damage quickly accumulates to €2,000 per month or more in Amsterdam.
Moreover, penalties may arise when the debtor cannot fulfill contractual obligations due to your wrongful retention. A transport company unable to use its truck suffers daily revenue loss of approximately €500.
Reputational damage remains difficult to quantify but is increasingly awarded by judges. Especially in business relationships, rumors about wrongful retention can hinder your operations for years.
Subsequently, you can expect legal costs. The debtor will incur attorney fees, typically between €3,000 and €8,000, which you must compensate upon loss. Additionally, you risk bailiff costs for forced surrender.
Therefore always verify thoroughly whether all three requirements are fulfilled before invoking right of retention. When in doubt, have your legal position analyzed by a specialized attorney. This investment of several hundred euros prevents potentially tens of thousands of euros in damages.
When does the right of retention end in Dutch law?
Right of retention ends automatically once the debtor pays completely. Partial payment does not terminate the right unless you explicitly agree. For instance, with an outstanding claim of €10,000, right of retention continues after payment of €6,000.
Loss of actual control also terminates the right of retention. This occurs when the property returns to the debtor’s control. However, with unlawful retrieval—such as theft of the property—your right revives and you can reclaim the property.
Destruction or loss of the property makes right of retention impossible. For example, when fire destroys your warehouse containing the vehicle on which you exercised right of retention, this right lapses definitively.
Court rulings can terminate right of retention when it appears you exercise it wrongfully. The judge then orders immediate surrender under penalty of periodic penalty payments, often €1,000 per day with a maximum of €50,000.
Finally, right of retention ends through sale of the property after execution. Once the bailiff has sold the property and you receive your claim from the proceeds, no right of retention exists anymore.
Legal statistics show that 80% of retention rights end through voluntary payment within 30 days of exercise, demonstrating the instrument’s practical effectiveness.
Which practical examples illustrate right of retention under Netherlands law?
An Amsterdam contractor constructed an office building with contract value of €850,000. The principal refused to pay the final installment of €175,000 due to alleged defects. Therefore, the contractor placed fencing around the site with clear signs about right of retention. After 3 weeks, the principal paid after all because he needed the building for rental purposes.
An accountant retained the complete administration of a trading company at his office. The client failed to pay his invoice of €4,500 and demanded his documents back for a tax audit. The accountant exercised right of retention, after which the client paid within 5 business days to avoid penalties from the Tax Authority.
Moreover, a case from the transport sector illustrates the boundaries of right of retention. A logistics company retained a container with goods for an unpaid invoice of €12,000. However, the goods in the container were property of a third party, not of the debtor. The court ruled that insufficient connection existed, whereby the right of retention was wrongfully exercised. The logistics company had to pay €25,000 damages.
A garage owner repaired a company vehicle for €3,200. The client did not pay but retrieved the car at night with a spare key. Subsequently, the garage owner initiated summary proceedings and recovered the car because the right of retention revived. Furthermore, the client had to pay the legal costs of €2,800 plus the original invoice.
This case demonstrates the practical power of retention rights: even after wrongful retrieval, creditors maintain strong legal protection under Article 3:291 of the Dutch Civil Code governing revival of retention rights.
Do you face unpaid invoices and want to know whether right of retention offers a suitable solution? Contact our law firm in Amsterdam for analysis of your specific situation and concrete legal strategy to protect your business interests.
