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Prohibition of alienation and encumbrance

What is a prohibition of alienation and encumbrance?

The prohibition of alienation and encumbrance prevents the obligor from encumbering or disposing of an asset (for example, by creating a charge) in relation to the obligee. In principle, such a prohibition applies only in relation to the obligee, but not in relation to third parties. This is not the case, however, if the prohibition is established between spouses, parents and children, adopted children, foster children or stepchildren, or their spouses, and is entered in the land register so that it is visible to everyone. In such cases, it also applies to third parties. In particular, prohibitions on disposal and encumbrance granted free of charge are subject to the risk of being challenged under the Insolvency Code or the Code on the Voidability of Transactions. In insolvency proceedings involving a property owner subject to a prohibition on encumbrance and disposal, this prohibition prevents both the sale by the insolvency administrator in accordance with the Insolvency Act and the sale by private agreement.

 

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