Explained: Procedures for Auctioning Real Estate Within Compulsory Enforcement

Compulsory enforcement against real estate is one of the legal avenues that allows a creditor to recover a debt established by a final court judgment or an enforceable instrument, by dispossessing the debtor of the property and selling it at a public auction under the supervision of the competent enforcement department. 

A previous article outlined the general framework of these procedures. This article offers a detailed examination of the subsequent stage of compulsory enforcement, namely the procedures for selling the property at public auction, including the mechanisms of announcement, participation requirements, the conduct of bidding sessions, assignment decisions, and the resulting legal effects on ownership and the rights of creditors and debtors.

The scheduling of the sale session falls within the subsequent stage of the compulsory enforcement process, after the completion of enforcement seizure procedures, the placement of a seizure notation on the Land Registry record, the preparation of the list of sale conditions, and the adjudication of any objections submitted thereto by a final decision of the Head of Enforcement. Once the list of sale conditions is confirmed, the enforcement file moves from the seizure and preparation stage to the public auction stage, which constitutes the decisive phase in transferring ownership or satisfying the debt.

The next step requires the enforcing creditor to request scheduling a sale session. The court enforcement officer then announces the sale of the property within 15 days to one month before the scheduled sale session. The announcement is made by means of a notice that includes the name and address of the seizing creditor, the name and address of the debtor, information relating to the property as stated in the list of sale conditions and its estimated value, as well as the place, date, and time of the sale.

In practice, however, sale announcements do not include the property’s address; instead, they merely mention the record number and the cadastral area, which renders the information incomplete and leads to hesitation in participating in the sale session. According to the Code of Civil Procedure, the sale announcement must be affixed to the door of the property and at the office of the mukhtar within whose jurisdiction the seized property lies, as well as on the court’s notice board. The announcement must also be published in a daily newspaper within 15 to 30 days prior to the sale session.

Anyone wishing to participate in the auction must submit an application beforehand, specifying the price at which they wish to begin bidding, provided that it is not less than the estimated value of the property announced in the list of sale conditions. They must also pay a security deposit to the enforcement department’s fund of no less than 50 per cent of the estimated value of the property. The security deposit is returned to the bidder if the auction is not awarded to them. It is only forfeited if the bidder wins the auction and then fails to pay the remaining balance within the legal deadline.

The bidding session begins at the time specified in the announcement by calling out the estimated value in the presence of the bidders, and the submitted offers are recorded in the bidding list.

When a bid is submitted by one of the bidders, it may be increased by no less than 10 per cent. For example, if a bidder submits an offer of SYP 1 million, the new offer must be at least SYP 1.1 million, while the third offer would be SYP 1.21 million.

If no one attends the first bidding session, the sale session is postponed for 15 days in order to set a second sale session, following the same procedures applied in calling for the first session in terms of publication and newspaper announcements. If no one attends the second sale session either, the enforcing creditor is entitled to request that the property be assigned to them at the estimated value.

If the auction is awarded in the second sale session at a price lower than the estimated value, the enforcing creditor may, in this case, request that the property be assigned to them at the estimated value.

If the price of the property in the second sale session does not reach the estimated value and the creditor does not request assignment of the property in their name, the Head of Enforcement issues a decision assigning the property to the bidder at the offered price, provided that it is not less than the value at which a final assignment decision was issued in the previous session, if there was a first sale session and a higher price had been offered therein.

If the auction is awarded at a price higher than the estimated value to one of the bidders, the property is assigned pursuant to a final assignment decision issued by the Head of Enforcement, whether this occurs in the first or second sale session.

If no one attends either the first or second sale session and the creditor does not request assignment of the property in their name, the Head of Enforcement sets a new sale session.

In general, the person to whom the auction is awarded must pay the remaining balance of the price on the day following the final assignment decision, failing which they are deemed to be in default or a “reckless bidder,” which results in the confiscation of the security deposit paid by them in favour of the creditor in the enforcement file.

The final assignment decision is issued by the Head of Enforcement and provides for the assignment of the property in the name of the assignee upon the auction being awarded to them and before full payment of the price. However, a copy of the final assignment decision is not delivered until the remaining balance has been deposited.

The assignee may register the final assignment decision in the Land Registry, thereby becoming the registered owner of the property. Such registration results in the cleansing of the property from all notations recorded on its register.

Should a defect be discovered in the property sold by public auction, the assignee may not object to this or claim compensation, in order to preserve the credibility of such sales.

If the person against whom enforcement is carried out (the debtor) refuses to hand over the property to the assignee, the latter may submit a request to the Head of Enforcement, who grants the debtor a period of eight days to deliver the property at the specified time and place.

It is evident from these procedures that they ensure the creditor obtains their right either by allowing them to transfer ownership of the property to their name or by selling the property to one of the bidders and receiving the price.

The law has also safeguarded the rights of holders of registered notations indicating the existence of rights in their favour over the property, as they may intervene in the enforcement file and recover their rights after the sale of the property through the distribution of the price in proportion to each debt held by the rights holders whose claims are established.