The distribution of the sale price of a seized property is the culmination of the seizure procedure. This is a delicate and decisive stage, both for the debtor, who sees his assets realised, and for the creditors who are waiting to be paid. For the non-expert, this phase can seem like a complex legal maze. However, the law has sought to simplify and speed up this process, in particular by favouring a consensual solution that is in line with a procedure such as the out-of-court sale of the property. The intervention of a lawyer competent in property seizures is then essential to navigate between the legal requirements and the interests of each party. This phase, which concludes the the foreclosure processThis article sets out the mechanisms for the amicable distribution of the purchase price. This article details the mechanisms for the amicable distribution of the price, a route designed to avoid the cumbersome nature of a purely legal procedure.
Distribution of the sale price in a property seizure: a central objective
The reform of civil enforcement procedures has placed the distribution of the purchase price at the heart of the property seizure process. Previously seen as a simple consequence of the sale, it is now anticipated and integrated at a very early stage, in order to streamline the entire process and reduce the delays often considered excessive.
Approximation of procedures and faster turnaround times
One of the main aims of the legislation is to speed up the distribution procedure, which was a major stumbling block under the old system. To achieve this, the legislator has brought the property distribution regime closer to that applicable to movable property, which is considered to be more flexible. This harmonisation is reflected in a constant desire to encourage agreement between the parties. The procedure is designed to ensure that the distribution of funds is prepared well in advance of the final sale, in particular by means of an updated declaration of claims, which provides a clear view of the liabilities to be settled as soon as possible.
Role of the enforcement judge and lawyers
The distribution of the proceeds takes place under the supervision of the enforcement judge (JEX). His jurisdiction extends to the entire procedure, from the initial seizure to the final distribution of the funds, which guarantees consistency and unified supervision. The judge is the guarantor of the smooth running of the operations and intervenes to settle any disputes.
Legal representation is compulsory throughout the procedure. The pursuing creditor's lawyer plays a central role: he or she is responsible for initiating the distribution procedure, drawing up the proposed distribution and notifying it to the other parties. This obligation to represent the creditor ensures that the procedure is serious and that everyone's rights are protected. The costs of the distribution procedure are advanced by the party requesting it, but are deducted first from the sale price, before any other claim. As for the lawyer's fees for drawing up the project, the Cour de cassation has specified that they do not constitute preferential legal costs and cannot therefore be deducted automatically from the price, unless the terms and conditions of sale expressly provide for this.
Amicable distribution in the presence of a single creditor
When the sale has taken place and only one creditor has asserted its rights to the price, the distribution procedure is particularly simplified. It is based on a direct request for payment, governed by precise conditions of form and deadline to guarantee the legal certainty of the transaction.
The payment claim and supporting documents
Within two months of publication of the title deed at the land registry office, the sole creditor sends a request for payment to the receiver or consignee of the funds (usually the Caisse des Dépôts et Consignations). This request, sent by registered letter with acknowledgement of receipt, must be reasoned and accompanied by several supporting documents, as stipulated in article R. 332-1 of the Code des procédures civiles d'exécution.
In particular, the creditor must attach a recent mortgage statement, an enforceable copy of the referral judgment, the auction judgment (or the contract of amicable sale) and a certificate from the registry stating that no other registered creditor has come forward. These documents make it possible to check that the claimant is the sole creditor and that the claim is well-founded.
Payment of the claim and remittance of the balance to the debtor
Once the complete application has been received, the receiver or consignee has one month to make the payment. If he delays beyond this deadline, the sums due to the creditor begin to accrue interest at the legal rate. This mechanism encourages prompt payment. After paying the creditor, the organisation holding the funds informs the debtor of the amount paid. If there is a balance, i.e. a sum remaining after full payment of the principal, interest and costs, this is immediately returned to the debtor. This return of the balance is a right for the debtor, as the seizure must not deprive him of what exceeds his debt.
Amicable distribution in the presence of several creditors
Logically, the situation becomes more complex when there are several creditors. The aim of the amicable procedure is to reach a consensus on the order of payment and the amounts allocated to each creditor. There are several stages in the procedure, from the updating of claims to the judicial approval of an agreement.
Updated statement of receivables
The initiative lies with the pursuing creditor. Within two months of publication of the sale, the pursuing creditor must send a request for an updated declaration to the other registered creditors and to creditors benefiting from a lien exempt from registration (such as the co-owners' association). This is a crucial stage, following the initial statement of claim earlier in the procedure. Creditors then have fifteen days to respond through their lawyer. It is important that this deadline is respected: if no response is received, the defaulting creditor loses the right to any interest that has accrued since the first statement of claim. The aim of this measure is to make creditors more aware of their responsibilities and to speed up the process of drawing up a final statement of account.
Drawing up and notifying the distribution project
On the basis of the updated claims, the pursuing creditor's lawyer draws up a draft distribution plan. This document is a detailed plan for distributing the sale price. It ranks the creditors according to their legal preference (liens, mortgages) and determines the sums due to each, after deduction of the costs of the proceedings, which have priority.
The draft is then notified to the debtor and all the creditors concerned. From the date of notification, they have fifteen days in which to contest it. The notification must clearly state this period and specify that if no objection is made, the draft will be deemed to have been accepted and submitted to the judge for approval.
Court approval of the distribution plan: conditions and effects
If no objection is raised within the allotted time, the draft is deemed to have been accepted. The most diligent party, usually the pursuing creditor, then applies to the enforcement judge to have the agreement approved. The judge's control here is essentially formal: he checks that the procedure has been followed and that each party has had the opportunity to assert its rights. He also ensures that the draft agreement complies with public policy, but he does not have to re-examine the substance of the agreement or the merits of the claims.
Once the probate order has been made, the draft distribution becomes enforceable. It becomes a true title allowing the receiver or consignee to make payments. This decision has the force of res judicata and makes it possible to order the cancellation of the mortgage registrations that encumbered the property.
Management of disputes and attempts at conciliation
What happens if a creditor or the debtor contests the proposed distribution? The law requires a final conciliation stage before legal proceedings are initiated. Any objections must be formulated with care, as the possibilities for contesting a proposed distribution of money are subject to strict deadlines.
The party initiating the dispute must convene all the parties to a conciliation meeting. If an agreement is reached at this meeting, it is recorded in minutes signed by all parties. These minutes are then submitted to the judge for enforcement. If the disagreement persists, the amicable route is exhausted. The only way out is then judicial distribution, a more formal and potentially longer procedure in which the judge himself decides the points in dispute and draws up the distribution statement.
The effects and advantages of amicable distribution
The amicable distribution procedure, whether it concerns one or several creditors, is designed to be quicker and less conflictual than a purely judicial procedure. However, its effects are just as binding once the agreement has been approved.
The amounts distributed and their scope
The sum to be distributed is not limited solely to the sale price of the property. It also includes any income generated by the property since the seizure (rent received, for example), any interest generated by the deposit of the price and, where applicable, any sums paid by a potential buyer in the event of an unsuccessful attempt at an out-of-court sale. Only registered or preferential creditors and the pursuing creditor can claim a share of this sum. Unsecured (non-registered) creditors can only expect to be paid from any remaining balance, once all other creditors have been paid.
Consequences in the event of collective proceedings against the debtor
A major point of vigilance concerns the relationship between the distribution of the price and the possible opening of collective proceedings (safeguard, reorganisation or judicial liquidation) against the debtor. Article L. 622-21 of the French Commercial Code lays down a strict rule: if the distribution procedure has not produced an "attributive effect" before the judgment opening the collective proceedings, it lapses.
In practical terms, this means that even if a distribution plan has been approved by the execution judge, it can be annulled if the funds have not yet been effectively paid to the creditors. In this case, the sums deposited are handed over to the trustee or liquidator, who will distribute them in accordance with the specific rules and order of priority set out in insolvency law. This rule underlines the importance of completing the distribution procedure as quickly as possible to secure creditors' rights.
The price distribution procedure, even in its amicable form, involves imperative stages and deadlines, non-compliance with which can have serious consequences. To secure your rights and guarantee a favourable outcome, whether you are a debtor or a creditor, the assistance of a lawyer is essential. Contact our firm for an analysis of your situation and tailored support.
Sources
- Code of civil enforcement procedures
- Civil Code
- Commercial code
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