Veðrétt

Veðrétt is an Icelandic legal term for a real right of pledge that secures a debt or other obligation by giving a creditor a priority claim on the pledged property. The right attaches to the asset, not to the person, and it remains effective for the duration of the secured obligation. Veðrétt can be created on real property such as land or buildings, and it can also cover movable property or other collateral, depending on the agreement between the parties.

A veðrétt is typically established through a contract between the creditor and the debtor and is formalized by registration in public records, such as the land register or a dedicated mortgage register. The registration determines the priority of the veðrétt relative to other claims or encumbrances. In general, earlier-registered veðréttir have precedence over later ones, subject to any specific statutory rules.

When the debtor fails to fulfill the secured obligation, the creditor may seek enforcement through legal proceedings. This often involves realizing the value of the pledged property, frequently through a foreclosure or forced sale, with the proceeds used first to cover enforcement costs, then the secured debt, and any surplus returned to the debtor. The scope of the veðrétt is limited to the value of the pledged asset and to the obligations described in the mortgage agreement.

Veðrétt is discharged when the secured debt is fully paid, or the parties agree to terminate the right. Upon discharge, the registration is canceled. Veðrétt is a common mechanism used by lenders to secure loans, including mortgage loans, and it plays a central role in Icelandic secured credit arrangements.