What is a security transfer and when to use it

A security transfer is a contract where the debtor temporarily transfers ownership or another right to the creditor to secure a debt.
It is not a sale – if the debt is repaid, the right returns to the debtor.

Common use cases:

• temporarily transferring a car or asset to secure a loan

• creditor holding legal title to a property until loan is repaid

• B2B security for unpaid goods or financing

Legal framework

Governed by Sections 2040–2044 of the Czech Civil Code.
This is an unnamed contract used to secure performance of an obligation.

If the debtor defaults, the creditor may retain or sell the asset.
If the debt is repaid, the right must be returned.

Key elements of a security transfer agreement

• Parties (debtor and creditor)

• Description of the debt

• Description of the transferred right (asset, property)

• Explicit clause that this is only a security, not a sale

• Procedure for returning the right

• Terms of enforcement in case of default

• Written form; for real estate, registration in land registry

Common mistakes

• Missing declaration of security nature → treated as sale

• No clause for return of rights

• No registration (for real estate or vehicles)

• No real debt secured – invalid transfer

• Abuse: creditor denies return of the right after payment

Recommendations

Debtor:

• Always include written clause that it is a security transfer

• Demand confirmation of return upon full repayment

Creditor:

• Use this method for strong protection

• Avoid reselling or using the asset before default

Practice tip

A security transfer gives stronger legal power than a pledge, but comes with more responsibility.
Both parties should document everything clearly and keep communication transparent.

Security transfer contract template – available for a symbolic fee

I offer a Czech-English template for a security transfer of rights (movables, vehicles, goods) for a symbolic fee.

For complex cases (real estate, international transfers, multiple parties), I can prepare a tailored version.

Contact me via e-mail or form – quick and clear cooperation.

FINAL THOUGHTS – WHAT NOW?

A contract for a security transfer of rights isn’t just a formality – it’s a legal shield, if drafted properly. And a trap, if not.

Do you want to be sure your contract will hold up even in a crisis? Get in touch and let’s schedule a meeting. I am a specialist on contract law – more information here.