SPANISH COURT AUCTIONS
At the time of writing this article we are locked out here in Spain.
My first thought is to wish all readers that they and their families feel in good health or in case they are dealing with COVID-19 they find assistance to go through the illness and recover soon. We send our best wishes
These are bizarre days. I am sure that none of us would ever think that we could find ourselves in this situation. When we were already trying to cope with the hit from the Brexit, already a really bad event for the European economy, we find us all victims of this horrible disease.
It won’t be difficult foresee economic difficulties ahead though, opposite to what happened before back in 2008 and until 2012 finances are available now.
Crisis times are moments when really good investments can be done but also moments when people may face the consequences of defaulting payments on finances.
Several people contacted me in anticipation what possibly may happen a few months ahead, when possibly the enforcement of claims become quite numerous, to ask me how to participate in a judicial auction and how debtors can be protected.
I would start by saying that in these days we have quite an objective process of court auctions. The days when people without any scruples set up some kind of “mob” or “secta” (if I may use those words) around the auction business are over. Today the system is quite objective and in my opinion, corruption free.
The bids are no more done in the corridor of a courthouse but online through the official platform to these purposes (screenshot in the heading of this post):
I will not disclose in this article all about the legal process of mortgage enforcement or the enforcement of goods derived out of regular claims in Civil or Criminal court processes, leaving also aside mortgages before Public Notaries (these are the 2 usual ways) focusing in the auction process for real estate, that is slightly different to the auction process for moveable goods.
The auction will take place on the date agreed by the court and published in the Spanish official gazette called BOE. All the good identification details will be set in the BOE’s announcement, mainly the Land Register details.
It is important to mention that within the court enforcement process, the good or asset is valued.
How to participate
Anyone paying 5% of the valuation price (called “tipo”) could participate. At the auctions website it is possible to search of auctions in the different regions of Spain.
Each and all auctions will have summary of the conditions such as valuation, start and end date (the auctions are usually open for long periods, in the case below form the 3rd of March until the 30th April), minimum bid, link to the official gazette, etc
Those interested in making bids, must first register at the website, setting up payment methods. When a user detects an interesting auction would only need to click in the section to leave the deposit by inserting an IBAN. The amount of the deposit is blocked automatically. In case that our bid is not successful the amount locked will be automatically released. In case our bid is accepted then there will be a period of 20 days to pay the rest by bank transfer, otherwise the deposit will be lost.
How to bid
Since the auction process is open for so long, the reality is that all the bids are done at the very last minutes of the period allowed to make bids. In those moments’ bids are done speedily one after another until reaching the highest one.
Bids are done naturally on the user’s section into the website. Remember that it is required to be registered and logged in to make a bid.
What are the amount for acceptable bids?
The bids must start with a 70% of the value but this not always happen.
Note that the debtor could cancel the mortgages any time before a bid is accepted at the end of the auction period, cashing the amount owed at the courthouse. The reality is that this seldom happens.
So let’s see how the process of auction could end after the bids are done. Naturally there will be several bids done but there will be one higher than the rest.
BIDS ABOVE 70% OF THE VALUATION
The purpose of the law is to prevent adjudications for a very low value.
In case there is a bid covering 70% or more, the asset will be adjudicated to the bidder, as long as the rest of the price from the 5% initially paid is cashed on time, 20 days after the Judge’s acceptance of the bid, in another case the 5% deposited will be lost.
If there are no bids the creditor cannot make any bid but can ask the judge to keep the goods for 70% of the value as long as the debt is higher than 70% of the valuation.
If there are participants, then the creditor can bid same as any other.
ONLY BIDS BELOW 70%
The debtor can offer the more than 70% of the valuation to keep the asset, personally or introducing a third person (who won’t be required to pay the 5%), or an amount that being less than the 70% is enough to cover the debt claimed, plus interests plus the case’s fees.
The creditor can keep the good for the 70% of the valuation of for a lower amount that, being below the 70% is enough to cover the debt claimed, plus interests plus the cases fees as long as there are no bids above the amount owed for the debt, interest and fees and the debt is above at least 60% of the valuation.
BIDS BELOW 50% OF THE VALUATION, NOT COVERING THE 50% OF THE DEBTS CLAIMED
With the purpose to avoid adjudications with unreasonably low bids the Court Secretary will receive debtor and creditor and listen to any objection. Upon the allegations it will be decided the adjudication or cancellation of the auction. The offeror of the highest bid won’t participate in this meeting.
The debtor could appeal the Secretary’s decision
AUCTION WITH NO BIDS
In this case the creditor can demand the adjudication of the good as payment of the debt.
In case the auctioned good it not the debtor’s permanent residence the creditor can keep the good for a value equivalent to 50% of the valuation or for the amount that is owed.
If it is the debtor’s permanent residence, the adjudication could only be done to the creditor if covers the 70% of the auctioned good valuation.
If the amount owed to the creditor is less than 70% of the valuation, then will be able to keep it if it reaches at least the 60% of the value.
In both cases before, of the amount for the adjudication does not cover the total debt, then the creditor could claim the rest in other court claims.
If the creditor does not keep the asset under above premises the embargo could be cleared.
Jose Francisco Criado Sanchez
Abogado – Lawyer – Advocaat