A right of retention (retentierecht) provides creditors the authority to suspend their obligation to handover a property until the debtor has satisfied their claim. With respect to real estate, this right can be exercised by a contractor. This means that a contractor to whom not all the contract terms have yet been paid can suspend the handover until the debtor has paid him in full. The contractor can invoke this right not only against the debtor (often the property owner), but under conditions also against third parties, such as a mortgagee with a mortgage right on the property. As a result, the contractor also is not obliged to handover the real estate, for example, to a buyer in the event of a sale under execution (auction) of the real estate by the mortgage lender: the contractor can simply continue to exercise his rights as long as his claim is not satisfied, which severely frustrates the enforcement of the security right of the lender in question. Whether and to what extent a contractor can exercise the retention right is therefore an important consideration when assessing the financeability of a real estate (re)development.

The law specifies the conditions under which the contractor can exercise his rights against third parties, such as a mortgagee or an auction buyer. Here the law distinguishes between third parties with a right that arose after the contractor’s claim and third parties with a right that arose before the contractor’s claim. Concerning third parties with a right that arose after the contractor’s claim, the contractor can simply invoke his right as if he had, as the law stipulates, the real estate “in his power” before the third parties’ right existed. “In his power” means that the contractor has possession of the property, the debtor and others do not have access, and the contractor does not provide them access either. For a mortgagee, this means that if the mortgage is registered after the contractor has obtained a claim against the debtor and the contractor has the property in his control, the contractor can also exercise his rights against the mortgagee and the auction buyer.

Against a mortgagee who already has a right registered before the contractor’s claim (and who therefore has an earlier right), the contractor can also invoke his right of retention if  (1) the contractor’s claim arose from an agreement that the debtor was entitled to enter into (entitled here refers to his relationship with the mortgagee) or (2) there was no need for the contractor to doubt the debtor’s authority to enter into that agreement. This may be the case, for example, if the mortgage right was established as security for a loan that the debtor took out for a (re)development of the property. The question whether there is an agreement which the debtor was entitled to enter into, or if there was no need for the contractor to doubt whether the debtor was entitled to enter into, must always be answered based on the circumstances of the case. Here, for example, the interpretation of the agreement between the mortgage lender and the debtor is important.

In the light of the above and moreover to safeguard the financeability of (re)development projects and real estate, in more extensive (re)development projects it is therefore common practice to agree that the contractor waives the right of retention in advance, whether or not in the form of a clause in the (turn-key) contracting/realization/design and build agreement to be concluded between the debtor (as principal) and the contractor and/or in a multi-party agreement to be concluded between the parties and the mortgage lender, in addition to the step-in clauses commonly stipulated in the latter agreement. In that case, the retention right cannot be invoked against the debtor and/or the mortgagee either, and the mortgagee can initiate a mortgage enforcement procedure of the property as an ultimum remedium free of the right of retention.

There are many examples in case law on the central question whether or not the contractor has waived the right of retention in a particular case. Often the answer to that question comes down to the interpretation of the contractual framework existing in that context. In December 2024, for example, the District Court of Amsterdam had to decide in a summary proceeding on the possible waiver by the contractor of his right of retention during the construction of the Galaxy Tower on the Jaarbeursplein in Utrecht. The judge provisionally interpreted the contract in this instance in such a way that the retention right had not been unconditionally waived in advance. Therefore, the contractor could continue to exercise this right of retention.

This demonstrates that the wording of such a clause in contracts is delicate and that, in addition to the debtor during the contracting process with the contractor, a mortgage lender must also be aware of a possible exercise of a right of retention by a contractor in a mortgage enforcement procedure. As explained above, under certain circumstances this right can also be exercised during the enforcement procedure: the contractor then does not have to handover the property to the auction buyer, effectively barring the buyer from accessing  the property after purchase. If you have any questions about the right of retention (whether or not in relation to a (re)development, financing and/or foreclosure process), please feel free to contact one of our colleagues.