Chronological and factual sequence of the foreclosure proceedings
When the application for forced sale reaches the registry of the competent court, the judicial officer first checks whether the debtor named by the creditor is actually the owner of the property to be auctioned and whether the creditor's debt instrument has the necessary enforcement clause and has been duly served.
The court then issues an order. This is an order in favour of the creditor's application with regard to the forced sale.
It is issued without an oral hearing, is served on the creditor and debtor and notified to the land registry for the entry of the auction note.
The order can be contested by means of a reminder pursuant to § 766 ZPO; otherwise by means of an immediate appeal pursuant to § 95 ZVG, § 793 ZPO.
If there is a prospect that the temporary suspension of the forced sale will prevent it, the auction can be suspended for a period of 6 months in accordance with § 30a ZVG if a corresponding application is made within 2 weeks.
If this period has expired or the application for temporary suspension is rejected, an expert is appointed to assess the market value of the property.
The expert's report is sent to all parties involved in the forced sale for comments. After the deadline for comments has expired, the decision on the determination of the market value is issued. This can be challenged again by means of an immediate appeal in accordance with Sections 95, 96 ZVG in conjunction with Sections 567, 569 ZPO within 2 weeks of service of the decision.
If the deadline expires without result, an auction date is set. The date can be roughly divided into three parts:
- Calling the matter
- Bidding hour
- Hearing of the parties involved on the award
1) Calling the matter
The judicial officer first establishes whether all parties are present. The names of the creditors, the auction conditions and the lowest bid are then determined.
Particular care must be taken when determining the lowest bid, as this includes all claims of senior creditors, existing public charges and the costs of the proceedings.
If, for example, there are two land charges in section III of the land register, the bidder must pay attention to which land charge the forced sale is being conducted from. This is because rights that precede the rights of the best-ranking creditor remain in force and must be taken over or redeemed by the highest bidder.
The following example illustrates this once again:
1. land charge 100,000
2. land charge 50,000
3. existing public charges 2,000
4. costs of the proceedings 1,500
If the enforcing creditor conducts the auction from the land charge under 1. (100,000), the lowest bid will be 3,500 (existing public charges + costs of the proceedings).
If the auction is conducted from the land charge under 2. (50,000), the land charge with the higher ranking remains in place, so that the lowest bid will be 103,500.
2) Bidding hour
After the item has been called, the bidding hour follows. The bidding time must last at least 30 minutes and is therefore strictly recorded.
If no bids are submitted, the proceedings will be suspended for the time being.
In fact, in most foreclosure auctions, an actual bidding contest only begins shortly before the end of the bidding period.
If a bid is submitted, the judicial officer asks the creditor whether the bidder must provide the security in the amount of in the amount of 10% of the market value.
The decision on the knockdown is announced by the court at the end. An appeal against the knockdown is admissible (§§ 95-104 ZVG).
In the event of a knockdown being awarded, every party involved as well as the successful bidder and the third party declared liable to pay, and in the event of a refusal, the creditor, in both cases also the bidder whose bid has not lapsed, as well as the party who is to take the place of the bidder pursuant to § 81 ZVG, shall be entitled to appeal against the knockdown.
Bids by the bidder lapse in accordance with Section 72 ZVG if no immediate objection has been made. Case law recognises the following, for example, as grounds for an immediate objection to the award by the bidder:
- a court clock that goes wrong and prevents a party from submitting a bid.
- an incomplete publication of dates in the Official Journal.
- non-compliance with the minimum bidding period.
Of course, the purchaser of the foreclosed property also has the right to lodge an appeal against the bid acceptance decision. However, this can only be based on a violation of Sections 81, 83 to 85a ZVG. There is no liability for defects in a forced sale.
However, if the court expert has intentionally or grossly negligently provided an incorrect expert opinion, he or she is obliged to compensate the damage incurred by a party to the proceedings as a result of the court decision (award decision) based on this expert opinion in accordance with Section 839a BGB. A purchaser could therefore take recourse against the expert if the requirements are met.
3) Consultation of the parties involved
When hearing the parties involved, the 5/10 or 7/10 limit should be mentioned in particular. These limits apply at the first hearing, whereby the 5/10 limit serves to protect the debtor and the 7/10 limit serves to protect the creditor.
If the highest bid determined at the first hearing is only half of the market value, the court is obliged to refuse the bid ex officio.
If the highest bid determined on the first date is again more than half but less than 7/10 of the market value, the knockdown can be refused by a creditor concerned.
These limits no longer apply at the second date, so that in theory the bid can also be accepted for the minimum bid determined by the judicial officer.
The extraordinary right of cancellation when buying a rented flat at auction
If a rented flat is purchased at auction, the purchaser has an extraordinary right of termination in accordance with Section 57 a ZVG. Accordingly, the purchaser may terminate the tenancy in accordance with the statutory notice period.
The ordinary notice period is at least 3 months, but can be extended up to 9 months depending on the duration of the tenancy. It should be noted that the purchaser must nevertheless have a justified interest in the cancellation.
Such a legitimate interest also includes, for example, personal use. The purchaser must also note that they must give notice to terminate the lease at the earliest possible date.
Important Note: The content of this article has been prepared to the best of our knowledge and belief. However, due to the complexity and constant evolution of the subject matter, we must exclude liability and warranty. Important Notice: The content of this article has been created to the best of our knowledge and understanding. However, due to the complexity and constant changes in the subject matter, we must exclude any liability and warranty.
If you need legal advice, feel free to call us at 0221 – 80187670 or email us at info@mth-partner.de.