I. What is the forced sale and where is it regulated?
With the conclusion of the court proceedings, it is clear which party has won the case. Nevertheless, it may happen that the losing party does not comply with the claim confirmed by the court, for example the payment of a certain sum of money. In order to nevertheless give the winning party the opportunity to enforce the claim awarded to it, there is the compulsory enforcement procedure. In compulsory enforcement, the claims of private individuals are enforced with the help of state coercion. The holder of the claim is then referred to as the enforcement creditor, and the claimant as the enforcement debtor. The compulsory auction procedure is a special form of enforcement. It always relates to real estate that is auctioned off in order to be able to satisfy claims from the proceeds. As a logical consequence, the compulsory auction procedure always follows court proceedings. The forced sale of real estate in Spain is governed by Art. 655 et seq. of the Spanish Property Act. Ley de Enjuiciamiento Civil, Law 1/2000 of January 7, in short LEC. This law is comparable to the German Code of Civil Procedure. The provisions on the forced sale of movable property (Art. 643 et seq. LEC) apply mutatis mutandis to the forced sale of real estate, unless otherwise regulated, Art. 655 (2) LEC.
II. How is the foreclosure procedure initiated in Spain and what is examined?
Art. 656 LEC states that the auction court requests a certificate of ownership and encumbrance of the auctioned object, the property, from the competent land registry office when initiating the proceedings. This certificate shows who the current owner is and which encumbrances, such as a mortgage or land charge, are registered on the Plot . The registrar makes a note in the land register that the property is the subject of forced sale proceedings in order to make this visible and recognizable to third parties. At the same time, he informs the creditors entered in the land register of the initiation of the foreclosure proceedings in order to give them the opportunity to state whether the claims entered in the land register still exist, Art. 657 LEC. Furthermore, he can demand that the judgment debtor submit the title deed (usually the notarized deed of sale), Art. 663 Para. 1 LEC.
III. What happens if the judgment debtor is not the owner of the property?
If the verification of ownership reveals that a person other than the judgment debtor is registered as the owner of the real estate, the execution court shall revoke the seizure of the real estate, Art. 658 LEC. For this reason, it is immensely important to conduct the foreclosure proceedings immediately following the judicial proceedings, so as not to give the judgment debtor the opportunity to have the property transferred to a third person, such as the wife, husband or children.
IV. What happens when the property is occupied?
If the property is occupied, the occupants will also be notified of the foreclosure proceedings and will be requested by the court to provide proof of their right of possession (usually the lease agreement) within ten days, Art. 661(1) LEC.
The execution creditor has the option of having the court determine, even before the auction, whether the occupants have a right to remain in the property or whether they must vacate it, Art. 661(2) LEC. If the latter is the case, the court shall, after the auction, at the request of the execution creditor, set a ten-day eviction period for the occupants, Art. 675(3) LEC.
V. What is the auction value?
The auction value of the real estate shall be determined by the value of the real estate itself, from which the registered encumbrances and charges shall still be deducted. If the real estate is encumbered with a mortgage, the value of the real estate results from the value determined by the parties in the mortgage deed, Art. 682 Para. 2 No. 1 LEC in conjunction with Art. 129 Ley Hipotecaria (Mortgage Law). Art. 129 Ley Hipotecaria (Mortgage Law). If this valuation shows that the burdens and encumbrances exceed the value of the property, the court shall suspend execution against the property, Art. 666 LEC.
VI. How is the auction date announced?
Pursuant to Art. 667 para. 1 in connection with Art. 645 LEC. Art. 645 LEC, the auction of real estate is announced electronically on the portal of the judicial administration (Official Gazette), the so-called "Boletín Oficial Estado".
The parties involved in the proceedings are not notified separately. However, if it concerns the auction of a property encumbered by a mortgage, the auction date must be announced at least 20 days before the auction, Art. 691 LEC. The judgment debtor is informed of the place, date and time of the auction. The announcement must contain all information necessary to bring about the success of the auction, Art. 668, 646 LEC. In particular, reference must also be made to the legal consequences of bidding and bidding at auction, including the fact that a bidder enters into direct legal succession with regard to the encumbrances upon acceptance of the bid, Art. 668 Para. 2 LEC.
VII. How do I participate in the auction?
In order to participate as a bidder in an auction, 5% of the auction value must first be deposited with the court cashier. This can be done either in cash or by means of a bank guarantee, Art. 669 Para. 1, 647 Para. 1 No. 3 LEC. In addition, one must be able to sufficiently identify oneself and declare that one is aware of the auction conditions, Art. 655, para. 1, 647, para. 1, no. 2 LEC. If these conditions are met, bids may be submitted in a closed envelope even before the actual date of the auction, i.e. as of the announcement of the auction, art. 655 par. 1, 648 LEC. The envelope is then opened by the clerk of the court during the auction and evaluated as a normal bid. Since the forced sale procedure is now conducted electronically, the provisions on the electronic procedure are applied accordingly.
VIII. How do I get the award?
The exact method of acceptance of a bid varies. Depending on the amount of the highest bid, the award is made in a different way.
If the highest bid is at least 70% of the determined auction value of the property, the highest bidder is awarded the property by court order on the same or the following day, Art. 670 (1) LEC. Within a period of 40 days, the successful bidder of the real estate must deposit the difference between his bid and the money already deposited with the court treasury. If the judgment creditor buys the property himself at a price that is at least 70% of the determined auction value of the property, the clerk of the court responsible for the auction shall take into account the principal, interest and costs and pay any surplus to the judgment debtor, Art. 670(2) LEC. If only bids are submitted that exceed 70% of the auction value of the property, but an installment payment is to be made, the judgment creditor may, within a period of 20 days, demand that 70% of the auction value be paid to himself, Art. 670(3) LEC. Otherwise, the bid is awarded to the bidder who can present the best collateral.
However, if all the bids submitted are below 70 % of the auction value of the property, the judgment debtor may, within a period of ten days, nominate a third party who submits a bid that is above 70 % of the auction value or at least high enough to satisfy the judgment creditor in full, Art. 670 para. 4 LEC. If this period expires without action, the judgment creditor may, within a further period of five days, demand that the property be knocked down to himself, provided that he pays either 70% of the auction value or exactly as much as is owed to him, whereby in the latter case the sum may not be less than 60% of the auction value of the property and must be higher than the highest bid. If the judgment creditor does not make use of this option, the highest bid submitted will be accepted, provided it is more than 50% of the determined auction value or at least covers the principal and ancillary claims as well as the costs of the forced sale. If the highest bid does not meet these criteria, the award of the bid is at the discretion of the clerk of the court, who must carry out a comprehensive weighing of interests. An appeal against the clerk's decision can be lodged with the court that ordered the forced sale.
If, on the other hand, the clerk of the court refuses to accept the bid or if there is no bid, the judgment creditor may demand that the bid be accepted. If the object to be auctioned is not the principal residence of the judgment debtor, the judgment creditor must pay either 50% of the auction value or the amount owed to him, including interest and costs. If it is the main residence of the judgment debtor, the amount is either 70% of the auction value or 60% if the debt is less than 70% of the auction value, Art. 671 LEC.
IX. What happens after I have been awarded the contract?
In addition to being the owner of the auctioned property, the successful bidder is also the legal successor to all encumbrances and burdens of the auctioned property, Art. 670 (5) LEC. Therefore, it is extremely important to have a detailed legal examination of the auctioned property carried out even before submitting a bid. The court does not carry out a legal and construction law review of the auctioned property.
The final decision on the acceptance of the bid, which is necessary, for example, for the change of the owner in the land register, is issued only after the difference between the deposited money and the final price of the auction has been deposited with the court cashier, Art. 670 par. 8, 674 LEC.
If, after deduction of all costs and payment to all creditors, there are proceeds from the auction, these are paid out to the judgment debtor, Art. 672 para. 1 LEC. At this point, the judgment debtor can redeem his property, provided he settles his debts to the judgment creditor. He must also pay interest and the costs of the auction, Art. 670 Para. 7 LEC.
