How does the compulsory auction of a property actually proceed?
- A bailiff serves the enforceable judgment or title on you. In addition, the local court (Amtsgericht) must grant the creditor’s application for compulsory auction.
- A court-appointed expert proposes a date for the inspection of your property. You may object to that date only on proper grounds — a medical appointment or a holiday already booked, for example.
- At the site inspection the expert examines your property and records both value-enhancing and value-reducing features. The creditors also attend that appointment.
- You receive the valuation report containing the expert’s assessment. Study it carefully to satisfy yourself that your property has genuinely been valued fairly and that no value-enhancing aspects have been overlooked. The court will ordinarily allow you up to three weeks to submit proposed amendments to the report.
- The local court determines the market value of your property, generally relying on the expert’s report.
- The auction date is fixed — usually three to six months after the decision on market value — and you are notified of it in writing.
- The first auction hearing takes place, although it is rare for the property to change hands on that day.
- Further auction hearings follow (seldom more than three) until your property is finally sold.
Every crisis holds within it something of a fresh start. The remark “A crisis is a productive state. One need only rid it of its aftertaste of catastrophe” is attributed to Max Frisch. Where a crisis arises, we take the time to examine the position critically and thoroughly, and then work with you to develop a solution that is legally sound and commercially sensible. In out-of-court matters in particular, and above all in commercial mediation, we draw on more than twenty years’ experience to arrive at workable proposals.
Where assets are realised in order to be converted into cash, enforcement is closely bound up with the law of loans and the law of security interests.
In enforcement proceedings the owner has important remedies available, and they should be used.
Where we are instructed on the side of the owner of the charged asset or property, the task is to build a strong and effective defence. The objective must be to avert realisation permanently. That defence must be in place in good time and within the applicable time limits, before realisation can occur. Anyone who waits until realisation has begun, and only then seeks to salvage what can be salvaged, risks having already forfeited significant opportunities to pursue remedies.
Realisation of a property also arises on death, whether voluntarily or sometimes involuntarily. Here the firm FF FinanzRecht® — including in its role as executor — serves as a protective shield for the heirs, so far as this also accords with the wishes of the deceased.
Where a pledged share portfolio, a property given as security or other collateral is subject to compulsory realisation, we act on instruction to resist and avert it, drawing among others on the following remedies:
- Where the security holder seeks to realise a share portfolio or other tangible security, an interim injunction and an action for an order restraining realisation may be considered as immediate protective measures, where a sale is imminent or an irreversible loss of ownership is threatened.
- Interim protection from enforcement under section 769 of the Code of Civil Procedure (ZPO).
- Objection to enforcement measures under section 766 ZPO.
- Once real property is at stake, further remedies are advisable: an application to stay the compulsory auction under section 30a of the Compulsory Auction Act (ZVG).
- At certain procedural stages, an application for recusal on grounds of bias under section 42 ZPO.
- An application for protection from enforcement under section 765a ZPO.
- An action opposing enforcement (Vollstreckungsabwehrklage, also known as Vollstreckungsgegenklage) under section 767 ZPO.
Above all, it is important to know which measures and remedies a provider of security may deploy during compulsory auction proceedings, and at what point each of them is worth pursuing. To that end we work out a strategic contingency plan in close consultation with the provider of security and implement it by way of an effective remedy. It is incumbent on counsel to identify procedural defects in the enforcement proceedings, to file the necessary applications within time, and thereby to help avert the compulsory auction where that remains possible.
