When it comes to foreclosures, the concept of private sale is little understood. It meets a very real practical need, yet is widely practised. How is it possible, and what does it involve?
OTC sales in theory
Private sale usually refers to the agreement of the seller and the buyer regarding the transfer of a right. The notion of free agreement is so central that it is usually said to be opposes sale by auction.
In terms of foreclosure procedureIt meets the same definition, but takes place in a very different context.
It is mentioned in paragraph 2 of Article L. 322-1 of the French Code of Civil Enforcement Procedures:
"The assets are sold either out of court by judicial authorisation or by auction.
In the event of an agreement between the debtor, the pursuing creditor, the creditors registered on the seized property on the date of publication of the summons to pay valid as a seizure, the creditors registered on the property before publication of the bill of sale and who intervened in the proceedings and the creditor mentioned in 3° of article 2402 of the Civil Code, they may also be sold by mutual agreement after the referral to forced sale and until the opening of the auction.
It should therefore refer to the sale which :
- Intervenes thanks to the agreement of the parties.
- Between the failure of an amicable sale authorised by the judge.
- And the auction ordered by the enforcement judge after the out-of-court sale had failed.
In other words, the private sale should take place here:
The text says no more. It simply states that a private sale can take place at this stage, if the parties agree. It is not clear whether the judge should intervene, or how the parties should end the procedure.
In the case of a friendly sale, for example, the judge intervenes to validate the sale and order the cancellation of the registrations.
In the case of a private sale, the agreement of the parties implies that the judge does not have to intervene. By extension, this implies that the parties agree to abandon the procedure.
As a summons to pay in the form of a seizure order renders the property unavailable, its sale requires the summons to be removed from the property register.
But if the procedure has to be abandoned, there is nothing to prevent the parties from doing so at a time other than between the failure of the amicable sale and the forced sale.
This is why, in practice, sales by private treaty are used much more flexibly than was envisaged in the text.
Private treaty sales in practice
The sale by mutual agreement is a theoretical structure based on the idea of abandoning the procedure.
It excludes the need for a judge to intervene. The parties are therefore free to reach the agreement that suits them best. This agreement can be reached at any stage of the proceedings.
This is always an advantageous solution for both parties. It allows parties to be paid quickly, a contrario a property seizure, which only authorises payment after a long and complex price distribution procedure.
It also makes it possible to limit the costs of proceedings. By causing the creditor to make a very early repayment, it :
- Reduces procedural costs.
- Reduces the amount of the lawyer's fee: it is lower if proceedings are abandoned.
- Reduces default interest on debt.
In other words, if the debtor has no means of defence, he should always opt for a private sale.
If, on the other hand, it has means of defence, it must carry out a cost/benefit analysis.
This analysis requires a very good understanding of how the procedure works, and requires the involvement of a lawyer.
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