Lawyer - Seizure of property: role and cost

The seizure of property is a long and complicated legal process that forms part of the enforcement process. The lawyer's involvement can take several forms, depending on the stage of the proceedings and the person represented. In this publication, we will explain the conditions under which a lawyer may intervene in property seizure proceedings, before defining the scope of his role in this type of dispute.

The role of the lawyer under the Code of Civil Enforcement Procedures

Compulsory representation and out-of-court sales

Property seizure proceedings are subject to the rules on legal representation. In other words, the parties must appoint a lawyer to defend their interests. This rule derives from the provisions of article R. 311-4 of the Code of Civil Enforcement Procedures:

"Unless otherwise stipulated, the parties are obliged to constitute a lawyer.

The only exception expressly mentioned in the text concerns the case of a request for an out-of-court sale, in accordance with articles R. 322-5 and R. 322-15 of the French Code of Civil Enforcement Procedures.

Article R. 322-5 of the Code of Civil Enforcement Procedures :

"In addition to the information required by Article 56 of the Code of Civil Procedure, the writ of summons shall include, on pain of nullity :[…]6° A warning that the debtor may ask the enforcement judge to be authorised to sell the seized property out of court if he can prove that a non-judicial sale can be concluded under satisfactory conditions;".

Article R. 322-15 of the Code of Civil Enforcement Procedures :

"At the orientation hearing, the enforcement judge, after hearing the parties present or represented, verifies that the conditions of articles L. 311-2, L. 311-4 and L. 311-6 have been met, rules on any disputes and incidental claims and determines how the proceedings are to be pursued, by authorising an out-of-court sale at the request of the debtor or ordering a compulsory sale. When authorising an out-of-court sale, the judge shall ensure that it can be concluded under satisfactory conditions, taking into account the situation of the property, the economic conditions of the market and any diligence on the part of the debtor.

Compulsory representation and intervention by third parties

Broadly speaking, the execution judge must direct the property seizure procedure towards either an auction sale or an out-of-court sale. The application for an out-of-court sale is the only step that the debtor can take at the hearing without needing to be represented by a lawyer.

All other claims and disputes must be submitted to the court by a lawyer acting in the interests of his client. The legislator has provided for this because of the complexity of the procedure, which makes it impossible for a debtor to defend his interests alone in such proceedings.

This is because the seizure of property procedure draws on a varied and highly technical body of rules (property law, credit law, enforcement law, securities law, etc.). Moreover, it infringes a right guaranteed by the Constitution: the right of ownership. Its treatment is therefore somewhat serious.

Apart from the case of a request for an out-of-court sale made directly by the distrainee debtor, all the other parties involved in the procedure must appoint a lawyer. This applies in particular to registered creditors and the buyer who is declared the successful bidder. There are a few exceptions, however:

• A tenant who asserts a right of substitution may exercise his rights alone, although the rule is not very clear and the courts sometimes have divergent practices on this subject.
• The holder of the right of pre-emption (e.g. a public body) may also exercise its rights alone, but must then instruct a lawyer to deal with the court.
• The syndicat des copropriétés may notify its opposition to the sale alone.

The role of the foreclosure lawyer in practice

In practice, the lawyer acts mainly for three parties: the pursuing creditor, the registered creditor and the debtor.

The pursuing creditor's lawyer

The aim of the pursuing creditor's lawyer will naturally be to achieve the sale of the seized property and the distribution of its price. This means checking that the procedure is feasible and makes economic sense.

To begin with, the procedure will be feasible if the conditions are met. The creditor must be in possession of a writ of execution establishing a liquid and due claim (article L. 311-2 of the Code of Civil Enforcement Procedures). Naturally, all the criteria set out in the text may give rise to problems:

• Is the enforcement order final? Has it been validly served? Is it a notarial deed, and if so, is it in order?
• Is the claim liquid, i.e. validly quantified? Do the statements comply with the regulations?
• Is the debt due and payable? Does the creditor have the right to demand payment?
• Is the amount of the upset bid appropriate? Does it expose the creditor to the risk of missing a bid?

The foreclosure lawyer must then ensure that the procedure makes economic sense. The seizure and sale of the property is only the first stage of the procedure. The sale price is then deposited and distributed to preferential and mortgage creditors.

At this stage, the price distribution procedure is based on the rank of each creditor. In other words, the creditor who initiated the seizure procedure is not necessarily the first to be paid. This is why the procedure is almost never initiated by second or third ranking creditors.

In particular, the lawyer must prepare the essential documents, such as the summons to pay and the summons to appear at the orientation hearing, and ensure that they are published in the land registry within 2 months of their issue, failing which the proceedings will lapse.

The registered creditor's lawyer

A registered creditor wishing to declare his claim in a property seizure procedure must appoint a lawyer to do so.

The procedure can be tricky: the deadlines and rules differ according to the date on which the claim must be declared, depending on whether the mortgage or lien was published before or after publication of the summons.

In addition, and this is a point rarely considered, the creditor with subsequent rank will have an interest in controlling the rights of the creditors who precede him. This brings us back to the question of how the seizure is implemented: is the title valid? Is the claim liquid and due? Is the amount of the claim correct?

The debtor's lawyer

The role of the lawyer accompanying the debtor is by far the most complex to understand. This is because the handling of property seizure proceedings evolves over the course of the proceedings, bringing different strategies into play.

Even before proceedings begin, we can usually draw up an inventory of the options available to the debtor. Our analysis of the summons to pay in the form of a seizure order usually serves to confirm the diagnosis, so that we can adopt an appropriate strategy at the orientation hearing in the court.

For example, if proceedings are brought on the basis of a final court decision, the debtor will not have many options for defending himself. In such cases, our role will often be to help the debtor to draw up the necessary statement of affairs, to mourn the loss of a property that often represents a life project, and to help him or her to refer the matter to the over-indebtedness commission or to sell the property.

In such cases, our specialist firm is often called upon to deal with the issue of costs and settlements. If it is impossible to avoid a sale, it is best to minimise its impact by checking all the accounts, negotiating any costs that may be incurred (interest, penalties), and organising an amicable sale of the property to avoid the constraints of legal proceedings.

If, on the other hand, it is possible to organise an effective defence, our task will be to analyse the case's chances of success in the light of the latest developments in case law. In the muffled world of civil enforcement proceedings, these developments have proved spectacular in recent years, in the light of :

• the Court of Cassation's tightening of the screws on the accelerated repayment of mortgage contracts,
• the importance reaffirmed by the Court of Justice of the European Union of the protection of public policy in consumer matters, including enforcement,
• of the countless consequences this can have, particularly on the processing of statements of the amount due.

However, each line of defence must be considered in the light of the cost/benefit ratio. Defending yourself considerably delays the procedure. And time costs a lot of money, in the form of late payment interest that accumulates. In this context, what are the real financial stakes in the case, given its chances of success?

The cost of a foreclosure lawyer

The cost of the procedure depends, on the one hand, on the party for whom the lawyer is acting and, on the other, on the complexity of the case.

Firstly, the pursuing creditor will have to advance all the costs of the procedure, which will then be reimbursed by the successful bidder. These costs cover all the parties involved:

• commissaire de justice (formerly bailiff),
• locksmith,
• expert diagnostician for the descriptive report,
• legal gazettes for legal advertising.

The average cost of a smooth procedure is around €4,000 in the provinces, and around €8,000 in Paris and the Paris region. The difference is due to the cost of publishing notices in a legal gazette. The average cost is between €2,000 and €3,000 in the provinces, while it is closer to €6,000 in the Paris region.

This should not be a source of concern for the pursuing creditor. In fact, these expenses are staggered over the course of the procedure and the legal advertising service, which is by far the most expensive, must be paid shortly before the auction. It is therefore quickly reimbursed by the winning bidder if the higher bid is not used.

In the event of a repeat bid due to non-payment of the main sale price, the first defaulting bidder may bear the cost of these expenses and must reimburse the difference between the first and second auction prices.

The cost of the lawyer's services is a matter for each party to decide and depends very much on the complexity of the services provided: implementation of the seizure, simple statement of claim, simple or complex defence, contesting the seizure of property, handling an appeal, etc. Our firm of lawyers at the Paris Bar therefore works on the basis of an estimate, following a case-by-case analysis.

The debtor may qualify for legal aid if he meets certain means tests, which can considerably reduce the cost of defending this type of case.