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Fiduciary Transfers: Relic of the Past or Financial Necessity?

Rooted in Roman law, fiduciary transfers were incorporated into Montenegro’s legal system through the "Law on Fiduciary Transfer of Rights"(1996) and later governed by the "Law on Property Relations" (2009).

In the analysis of fiduciary transfers, this text critically examines whether this legal mechanism remains a viable financial tool or an outdated relic.

These arrangements grant creditors formal ownership of movable or immovable property as collateral, while debtors retain economic rights to use and possess the assets. Though enforceable under Montenegrin law, the process demands written agreements, notarization for real estate, and cadastral registration, creating bureaucratic complexities.

The authors, Alma Karadjuzović, Partner, and Dajana Drljević, Associate from JPM’s Podgorica office, highlight practical challenges, including prolonged enforcement procedures, high costs, and debtor tactics delaying repossession. Courts often require separate eviction lawsuits, further inflating expenses. A rare advantage arises in bankruptcy cases, where fiduciaries allow creditors to bypass the debtor’s estate and liquidate assets immediately.

However, the authors contrast this with mortgages, which offer faster, cheaper, and more straightforward security. They argue that fiduciary transfers, burdened by inefficiencies and costs, struggle to compete in modern finance. Ultimately, their analysis questions whether this mechanism retains relevance or if alternatives like mortgages render it obsolete.

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JPM Law Office
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