Legal Definitions - vivum vadium

Vivum Vadium

Vivum vadium, a Latin term meaning "living pledge," refers to a historical type of security arrangement, somewhat similar to a mortgage, where a borrower pledges property to a lender. The defining characteristic of a vivum vadium is that the income, profits, or rents generated directly by the pledged property are used to reduce the principal amount of the debt. The property is considered "living" because its ongoing productivity or revenue stream actively pays down the loan.

Unlike some other forms of pledges where the income might only cover interest, or where the property could be forfeited if the debt isn't paid by other means, a vivum vadium ensures that the property itself works to extinguish the debt. Once the entire debt, including the principal, is fully repaid through the property's earnings, the property automatically reverts to the original owner, making it a self-liquidating security.

Here are some examples illustrating how a vivum vadium might apply:

• Agricultural Land Pledge: Imagine a farmer who needs a substantial loan to invest in new farming equipment but has limited immediate cash flow. Instead of making regular cash payments, the farmer enters into a vivum vadium agreement, pledging a productive plot of farmland. The lender takes temporary possession of the land, cultivates it, harvests the crops, and sells them. The profits generated from these sales are then directly applied to reduce the principal balance of the farmer's loan. Once the accumulated profits fully repay the loan, the farmland is returned to the farmer. This demonstrates the "living" aspect as the land's own productivity is actively paying off the debt.
• Rental Property as Security: Consider a small business owner who needs a bridge loan for an expansion project and offers a multi-unit rental property as security. Under a vivum vadium arrangement, the lender would take control of managing the property, collecting rents from the tenants. After deducting necessary operating expenses like maintenance and property taxes, the remaining net rental income is systematically applied to reduce the principal amount of the business owner's loan. The property is a "living pledge" because its continuous stream of rental income is directly responsible for liquidating the debt, ensuring that the property will eventually revert to the business owner once the loan is fully satisfied.