EDITION: September - November 2020

Changes related to real estate auctions

By Armin Gutschick & Anja Sämann-Gutschick
In 2015, legislation regarding the forced sale of jointly-owned properties changed and the electronic judicial auction was brought in. This procedure is carried out online through the Auction Portal of the BOE State Agency and intends to allow a wider audience to participate in auctions, without the need to be physically present.

In order to facilitate this novelty, quite a number of provisions were changed in the Code of Civil Procedure. Nowadays, those interested can actively participate in these auctions through this website as long as they fulfil certain conditions. All bidders must previously register and identify themselves through an electronic signature. Detailed information as to the conditions required in order to participate in these auctions can be found at: subastas.boe.es/infoRegistro.php

In order to participate in the bid you must deposit 5% of the price of the auctioned property. You can obtain additional information such as the appraisal report on the website. 24 hours after the forced sale has been published, the online auction is held. Offers are accepted over the following 20 calendar days. Once the auction is over a notification is sent to the relevant courtroom confirming who was the highest bidder. The remaining bidders are also named, as they are allowed to maintain their bids even after the property has been awarded, in case the winning bidder does not finally pay the full amount within the established timeframe.

Should there not be an agreement amongst the joint owners as to the profit sharing, the Law on Voluntary Jurisdiction offers them the possibility of requesting the distribution of the joint property through an auction. Article 400 of the Civil Code establishes that “no co-owner will be obliged to remain in a community. Each one of them will be allowed to request at any point for the joint property to be divided”.

The tribunal that is in the district where the property lies will be responsible for processing such an application, which must clearly identify the property and carry attached a certificate from the Property Registry that establishes the position of co-ownership of whoever is presenting it. Said application will define the framework conditions for the auction. For example, a minimum expected price can be set. An appraisal report must also be presented, although in this type of proceedings it may be of subordinate importance, since it is the parties involved who themselves determine the value of the property.

Once the application has been presented, the tribunal will set a date for the auction. In order for the property to be assigned through a normal online auction, a bid must reach 50% of the minimum offer. However, in this type of proceedings, this stipulation by the Code of Civil Procedure is not applicable, since the interests of possible creditors do not need to be protected. Generally, it tends to be one of the owners who will retain exclusive ownership. Dividing a joint property through an auction offers co-owners whose relationship has broken down a solution to avoid endless disputes over who pays the running costs and who can enjoy the property.

Online auctions and the possibility to divide jointly-owned properties through an auction are, without a doubt, significant changes, which have also provoked a noticeable increase in the public’s interest in judicial auctions.