Auctions: When you do not buy property but ... litigation

Legal Insight

Semptember 2022

George Psarakis LL.M. (mult.), PgCert

(republished from Euro2day.gr)

Since we have been dealing (since February 2020 - see here and here) with the issues of the risks of participating in an auction, we have received a lot of questions. In the last year in particular, bidders' participation in auctions has increased greatly and as a result the problems associated with this particular method of property transfer are beginning to arise. Since what we have mentioned in our two articles above continues to apply for the most part, despite the recent legislative changes, in this note we mention by way of indication some actual cases that have arisen within the last quarter and which have already been decided in the context of interim judicial protection, in order to make the legal issues raised for the auctioneers and their legal advisors more understandable.

1. In the first case, the seized property had been put up for auction before 2022, but no bidders were found. In fact, the 3rd time the first bid price had been judicially reduced based on the old law. The 4th time, the auctioneer declared the continuation of the auction in 2022 and, wishing to take advantage of the new provisions on the automatic reduction of the first bid price, incorrectly set the latter at 65% of the original price. However, the property in question was never "tested" at 80% of the original price so that this attempt was also deemed ineffective. It had indeed been reduced in court, but to a level higher than 80%. Finally, at the 4th auction a bidder was found (as the price was low enough - 65% of the original price) and the property was awarded to him. The owner, however, took legal action asking for the auction to be annulled as the price should not have been set at 65% of the original price without first being tested at 80% of the original price. In his attempt to enter the property with the assistance of a bailiff, the successful bidder was confronted by the owner, who was granted the necessary interim judicial protection. The matter will be finally resolved after several years. The successful bidder can criticise the notary or the bailiff who also set the price of the first bid, but the truth is that he himself should have checked the legality of the procedure. 

2. In the second case, a high value house is put up for auction and the bidding interest is high. There are two successful bidders who bid jointly with the aim of transferring 50% of the property to each of them. However, two problems arise: a) the first is that because the auction was conducted under the pre-2022 provisions, two persons could not bid jointly and therefore the award was ultimately flawed. Prior to 2022, the legislator prohibited joint bidding, both for technical reasons and to avoid collusion between bidders. The notary, however, allowed joint bidding, misinterpreting the law, and in effect caused himself a legal defect in his own act of awarding the property; b) the second is that the debtor had brought all the appeals he could bring against the attachment and the title on the basis of which the auction was being accelerated, but these had not yet been heard and therefore there was no relevant court decision. The result was that an auction was held, the validity of which would have been questionable. We had already pointed this out in a previous article (see here): 'At the same time, the debtor is likely to have already brought legal actions against enforcement acts or even against the enforceable title itself. He may have already appealed against the payment order or the final judgment on the basis of which the auction was accelerated, but he may not have succeeded in suspending enforcement. In this case, the auction procedure is not hindered by the possible exercise of the above-mentioned legal remedies and it is therefore possible that after the auction, for example, the payment order will be finally annulled and, if appeals have been lodged against the seizure and award report, that this annulment will also annul the auction itself'.

The successful bidder wondered what his responsibility was and what he should have done, when the objections to the foreclosure are not registered in a freely accessible database (e.g. on www.eauction.gr). The truth is that under the current legal framework he should have sought permission from the competent Court of First Instance to obtain copies of any pleadings filed in order to assess them appropriately. Such permission is granted because the successful tenderer, having paid the participation deposit, demonstrates its legitimate interest in obtaining documents between third parties. Ultimately, the property owner received interim judicial protection and the successful bidder accuses the Servicer of failing to give him proper notice and proceeding with an auction based on a foreclosure that is likely to be voided.

I do not know what will be the fate of the above cases at the level of final decisions. But what I do know is that the over-underwriters did not buy a property but a litigation (as already written in a legal journal in 1911 (!): "To the unfortunate overthrower! He filed the auction, took possession of the auctioned properties and after four years of the auction being cancelled, he returned the properties and is already fighting against a lender of the auctioned debtor... What a devilish curse of theirs led them to the auction and instead of buying the properties, they bought a lawsuit"). And this is understandable because the debtor cannot be deprived of his property when the auction process is flawed.