Amicable sale before auction

An amicable sale before auction is often the preferred solution in property seizures. This mechanism allows the debtor to sell the property on more favourable terms than in a compulsory sale.

1. Definition and legal framework

The amicable sale with judicial authorisation, governed by the Code of Civil Enforcement Procedures, offers the distrainee debtor the possibility of avoiding the auction hearing by selling its property amicably rather than undergoing a forced sale. Article R 322-20 stipulates that this request may be made and judged even before service of the summons to appear at the orientation hearing.

The debtor may also proceed with a private sale even after the matter has been referred to a sale by auction, and until the auction opens. In this case, however, the debtor must obtain the agreement of his creditors, as the sale will not be conducted under the supervision of the judge. 

2. Amicable sales procedure

Application for authorisation

The debtor may submit a request for an out-of-court sale as soon as the summons to pay is served. This request for the amicable sale of a property may be made by the debtor by means of a writ of summons, involving the registered creditors. Note that article R. 322-17 specifies that this request may be made orally at the orientation hearing, without a lawyer.

The orientation hearing and the judge's decision

At the orientation hearing, the enforcement judge, after hearing the parties appearing, examines the validity of the seizure and rules on any disputes. In accordance with article R. 322-15, the judge ensures that the out-of-court sale can be concluded under satisfactory conditions, taking into account :

• the location of the property
• market conditions
• any action taken by the debtor

If the court authorises an out-of-court sale, it sets the price below which the property may not be sold, taking into account economic market conditions. This minimum price protects the interests of creditors.

Deadlines and organisation of the sale

The judgement ordering the out-of-court sale sets the date of the hearing at which the case will be recalled. According to article R. 322-21, this period may not exceed four months. At the reminder hearing, the judge may grant an extension only if the debtor provides evidence of a written commitment to purchase, and only to allow the deed of sale to be concluded. This extension may not exceed three months.

3. Steps taken by the distrainee debtor

Article R. 322-22 requires the debtor to take the necessary steps to conclude the amicable sale. The debtor must report to the pursuing creditor, on request, on the steps taken.

In practice, the debtor must :

• Finding a buyer
• Negotiate a price in line with that set by the judge
• Prepare the elements required for the sale (technical diagnostics, mortgage condition, etc.)
• Signing a preliminary sales agreement within the deadline

If the debtor fails to do so, the pursuing creditor can take the debtor to court to have the debtor's failure noted and to order the resumption of the forced sale procedure.

4. Completing the sale

Article L. 322-4 of the Code stipulates that the notarial deed of sale shall only be drawn up on :

• deposit of the price with the Caisse des dépôts et consignations
• proof of payment of the costs of the sale

The taxed costs are paid directly by the purchaser in addition to the sale price (article R. 322-24, paragraph 2). The sale price must be deposited with Caisse des Dépôts and will be distributed to creditors in accordance with the price distribution procedure.

5. Judicial review of the sale

At the reminder hearing, the enforcement judge shall ensure, in accordance with article R. 322-25, that :

• the deed of sale complies with the conditions set by it
• the price has been recorded

If these conditions are met, the judge will record the sale and order the cancellation of the mortgage and preferential rights registered against the debtor. This judgment is not subject to appeal.

6. Effects of the amicable sale

An amicable sale has the same effect as a voluntary sale under ordinary law (article L. 322-3). It may not be rescinded on the grounds of lesion.

Article L. 322-14 provides that payment of the purchase price or its deposit automatically removes all mortgages and liens on the property from the date of publication of the title of sale. However, the purging of registrations does not automatically entail their cancellation, which will be ordered at a later date by the judgment recording the completion of the sale.

7. Resumption of the compulsory sale procedure

If the amicable sale is unsuccessful, the judge orders the sale by auction. If the repossession takes place after the orientation hearing, the judge sets the date of the auction hearing, which will take place within a period of between two and four months.

The decision ordering the resumption of proceedings is not subject to appeal (article R. 322-22, last paragraph).

8. Practical advantages of amicable sales

There are several advantages to an amicable sale:

• This generally results in a higher price than a forced sale.
• It spares the debtor the trauma of an auction sale
• It can reduce the costs associated with the procedure
• It offers a less confrontational alternative

For the debtor, it is an opportunity to repay the debt while keeping part of the sale price. For creditors, it is often a way of recovering a larger sum than at a sale by auction.

For legal and property professionals (lawyers, notaries, property experts), an out-of-court sale with judicial authorisation is a solution that reconciles the financial interests of all parties.

Sources

• Code des procédures civiles d'exécution, in particular articles L. 322-1 to L. 322-14 and R. 322-15 to R. 322-25
• Decree no. 2006-936 of 27 July 2006 on seizure of real estate