1911 Encyclopædia Britannica/Hypothec

HYPOTHEC (Lat. hypotheca, Gr. ὑποθήκη), in Roman law, the most advanced form of the contract of pledge. A specific thing may be given absolutely to a creditor on the understanding that it is to be given back when the creditor’s debt is paid; or the property in the thing may be assigned to the creditor while the debtor is allowed to remain in possession, the creditor as owner being able to take possession if his debt is not discharged. Here we have the kind of security known as pledge and mortgage respectively. In the hypotheca, the property does not pass to the creditor, nor does he get possession, but he acquires a preferential right to have his debt paid out of the hypothecated property; that is, he can sell it and pay himself out of the proceeds, or in default of a purchaser he can become the owner himself. The name and the principle have passed into the law of Scotland, which distinguishes between conventional hypothecs, as bottomry and respondentia, and tacit hypothecs established by law. Of the latter the most important is the landlord’s hypothec for rent (corresponding to distress in the law of England), which extends over the produce of the land and the cattle and sheep fed on it, and over stock and horses used in husbandry. The law of agricultural hypothec long caused much discontent in Scotland; its operation was restricted by the Hypothec Amendment (Scotland) Act 1867, and finally by the Hypothec Abolition (Scotland) Act 1880 it was enacted that the “landlord’s right of hypothec for the rent of land, including the rent of any buildings thereon, exceeding two acres in extent, let for agriculture or pasture, shall cease and determine.” By the same act and by the Agricultural Holdings (Scotland) Act 1883 other rights and remedies for rent, where the right of hypothec had ceased, were given to the landlord.