In terms of foreclosureThe sale by amicable agreement avoids the discount often associated with auction sales. However, this solution has its own disadvantages. What's more, it's technical to implement, and often confusing for the notary. Here's where we stand.
Authorisation to sell amicably
Requesting an out-of-court sale
To be sold amicably, the debtor must first request authorisation to the enforcement judge. This request must be presented at the orientation hearing, under conditions analysed in a dedicated publication.
Guiding judgment authorising out-of-court sale
When this request is authorised, the referral judgment will set :
- The net selling price below which the sale cannot take place.
- The date of the recall hearing.
The reminder hearing will take place within a maximum of 4 months of the referral judgment.
Judgment extending the deadline for amicable sale
At the reminder hearing, the judge may grant an extension of 3 months. However, the debtor must provide evidence of a written commitment to purchase. This means in particular that the notary must avoid preparing a promise to sell.
As a result, the debtor has a theoretical maximum period of 7 months.
In practice, this period is often longer. The 4 and 3 month periods are calculated from the date of the judgment. However, the judgment is often handed down in the month following the hearing. This means that the debtor often has a period of 8 months, and sometimes 9 months.
Closing the out-of-court sale
The debtor's due diligence
Firstly, the debtor must take all the necessary steps to conclude the amicable sale.
He must report to the creditor on the steps he has taken. In practice, creditors rarely ask for accounts.
However, if the debtor is negligent and does nothing, the debtor can be summoned before the enforcement judge. The judge can then order the sale by auction without further delay.
Payment of the price and procedural costs by the purchaser
The buyer must pay the sale price and the costs of the proceedings.
The law imposes a specific timetable on the notary. The buyer must :
- Deposit the sale price with the Caisse des dépôts et consignations,
- Pay the costs of the proceedings (the taxed costs) to the pursuing creditor's lawyer.
Once the deposit and payment have been made, the notary can draw up the deed of sale.
If the sale does not go ahead through no fault of their own, the purchaser loses the right to recover the amounts paid. These amounts are included in the procedure and will be distributed with the sale price when the property is finally sold.
Non-professional buyers retain the right to withdraw from the sale. The provisions of Article L. 271-2 of the French Construction and Housing Code are a matter of public policy.
Composition of procedural costs
The procedural costs that are added to the sale price are made up of three things:
- The costs themselves.
- Fixed fees payable to the pursuing creditor's lawyer.
- The proportional fee, also payable to the pursuing creditor's lawyer.
The costs incorporate all the expenses that the creditor has had to incur to reach this stage of the procedure. Given the progress of the proceedings, they include :
- Bailiff's fees, expert diagnostics and orders placed with the land registry,
- often the cost of the entire technical diagnostic file,
- sometimes additional costs, such as the cost of a locksmith.
The main variable that can affect the amount of costs is the size and nature of the property for sale. In fact, the cost of diagnostics and the descriptive minutes depends very much on the surface area to be treated.
The fixed emoluments pay the lawyer for carrying out certain tasks. Like bailiffs, these services are subject to a very rigid scale. This scale can be found at Article A. 444-193 of the French Commercial Code.
And finally.., the proportional fee also remunerates the lawyer for his work. The amount is calculated in accordance with articles A. 444-191 and A. 444-102 of the French Commercial Code, using the following scale:
| Base bracket | Applicable rate |
|---|---|
| From €0 to €6,500 | 3,870 % |
| From €6,500 to €17,000 | 1,596 % |
| From €17,000 to €60,000 | 1,064 % |
| More than €60,000 | 0,799 % |
Statement of expenses
Procedural costs are taxed. Taxation involves the lawyer submitting a list of his expenses to the enforcement judge. The judge checks that the expenses are in order and affixes the court's seal to order payment.
The lawyer has two options:
- Submit a statement of costs to the judge before the case is referred. This solution allows the judge to mention the amount of the costs in the referral judgment. This is not our preferred solution. It prevents the proportional emolument from being taxed if the amicable sale price is not known at this stage.
- Submit your statement of costs to the judge after the preliminary ruling, once the sale price is known. This allows all the sums to be included in the claim, including the proportional fee. Case law authorises this practice (Caen, 27 September 2012, no. 12/02041).
The notary draws up the deed of sale
Once the sale price has been paid and the costs of the procedure have been recorded, the notary can draw up the deed of sale.
He will have to ensure that the sale complies with the conditions set out in the referral order.
In addition, the creditor will be able to request disclosure of the documents collected by the pursuing creditor's lawyer in preparation for the sale. The creditor's lawyer will have access to a number of items needed to draw up the deed of sale.
The effects of an amicable sale
The effects of a voluntary sale
An amicable sale authorised by a court has all the effects of a conventional sale. All of them, with the exception of rescission for lesion. The buyer may not apply for rescission (cancellation) of the sale on the grounds that he has been wronged by more than seven twelfths of the price of the property (lesion).
Purging entries
An amicable sale automatically removes all mortgages and liens from the property.
However, the purging of registrations does not automatically result in their cancellation. This will be ordered at a later date by the judgment recording the completion of the amicable sale.
This is very confusing for the notary, who will have the impression that he is registering a sale without cancelling the registrations.
The judgement recording the amicable sale... or its failure
At the recall hearing, the judge checks that the sale meets the conditions set out in the judgment authorising the out-of-court sale. He will also check that the sale price has been deposited with the Caisse des dépôts et consignation.
Once these verifications have been completed, the court orders the cancellation of the mortgage and lien registrations made against the debtor.
This diligence, usually carried out by the notary at the time of the sale, is carried out here by the judge when he checks the sale. This time lag should not intimidate the notary or dissuade the buyer; it is normal and harmless.
If the amicable sale has not been completed, or under poor conditions, the judge will order a compulsory sale. A date is then set for the auction hearing.
Conclusion
An out-of-court sale allows the debtor to control the sale price. It avoids the risk of auctions. However, the reader should bear two things in mind.
Firstly, the tight property market has led many people to turn to auctions. This influx has led to a tighter auction market, which is gradually catching up with the conventional market price in some areas (Paris in particular).
Secondly, an amicable sale does not allow the debtor to be paid quickly. If the sale price is higher than the amount of the debt, the balance will be frozen for months. This will be distributed at the end of a second phase of the property seizure procedure, known as distribution of the price.
This is certainly the most deleterious and destructive effect of the seizure of property. The debtor will no longer have access to his cash for months or even years.
Only the involvement of a lawyer can help avoid this unfortunate outcome. There are solutions to this problem.
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