1. Principle and definition of repeat bids
Evolution of terminology: from "folle enchère" to "réitération
The repetition of auctions replaced the term "folle enchère" ("irresponsible bidding") when the seizure of property procedure was reformed by order no. 2006-461 of 21 April 2006. In the past, this term was used to refer both to unconsidered bids made by defaulting bidders and to proceedings brought against them to resell the property.
The term "folle enchère" ("irresponsible bid") still appears in certain texts (in particular article 1278 of the Code of Civil Procedure), but it is gradually being replaced by more precise and technical terminology.
Scope of application
Re-auctioning refers to the re-sale of a previously awarded property when the successful bidder has not paid the price and costs within the specified time. This mechanism applies to both real estate and personal property sales.
It mainly concerns :
- Property seizure sales
- Sales by auction
- Sales of property belonging to minors or adults under guardianship
- Sales of real estate as part of a judicial liquidation
- Voluntary notarial sales
- Securities auctions
The principle is the same: the losing bidder bears the difference between his bid and the resale price, if the latter is lower, as well as the costs of the first sale.
2. Repeat property auctions
Substantive conditions
Real estate auctions may be repeated if the successful bidder fails to fulfil his obligations within the allotted time. These obligations consist of :
- Payment of the sale price
- Payment of taxed costs
- Payment of transfer duties
The payment period is generally two months from the date of the final auction. The price must be paid to the designated escrow agent or deposited with the Caisse des dépôts et consignations.
Only certain players can apply for this procedure:
- The pursuing creditor
- Registered creditors
- The seized debtor
- By extension, the creditors of a registered creditor via the action oblique (article 1341 of the Civil Code)
Unsecured creditors do not have this right.
Repeat procedure
Certificate of non-payment
The procedure begins with the issue of a certificate attesting to the non-payment. This document is issued by the registry at the request of the pursuing party. It states that there is no proof of payment of the price, costs or transfer duties.
Meaning
This certificate is served on the defaulting bidder, the distrainee and, where applicable, the creditor who requested the sale. The document serving the certificate shall contain, under penalty of nullity :
- A summons to pay within eight days
- A reminder of the legal provisions concerning the consequences of non-payment
Dispute
The successful bidder may contest this certificate within fifteen days of it being served. This challenge must be made by filing an attorney's brief at the registry of the enforcement judge. The judge's decision is not subject to appeal.
New hearing
If no payment is made within the eight-day period, the pursuing party applies to the judge to set a new hearing. This hearing is scheduled within two to four months. All parties (the distrainee, the pursuing creditor, the registered creditors and the defaulting purchaser) are informed by registered letter with acknowledgement of receipt.
Advertising and auctions
The new sale is preceded by the usual advertising formalities, mentioning the amount of the unpaid bid. Bids are repeated under the same conditions as the initial sale. The defaulting bidder may not bid, either personally or through an intermediary.
A higher bid may be made at the reiteration hearing, as confirmed by the Court of Cassation (Civ. 2e, 7 January 2016, no. 14-26.887).
Legal effects
Resolution of the sale
The first auction is cancelled retroactively. The defaulting bidder is deemed never to have been the owner, and any deeds he or she may have signed concerning the property are annulled. Moreover, the law prohibits him from carrying out any acts of disposal before full payment has been made, except for the creation of a mortgage to finance the acquisition.
Consequences for the defaulting bidder
The defaulting bidder remains bound :
- To pay the difference between its bid and the price of the new auction, if the latter is lower
- Taxed costs relating to the first auction, even if the property is resold at a higher price
- They cannot claim reimbursement of sums already paid.
Consequences for the new successful tenderer
The new successful bidder becomes the owner of the property but must bear the costs of the new auction. The title de vente is not issued until these costs have been paid.
3. Repeat auctions of movable property
Specific features compared with property sales
La repeat securities auction shares the same principle as its real estate equivalent, but has a number of specific features:
- Shorter lead times: default is generally detected immediately, and the buyer has to pay cash
- Simplified procedure: fewer formalities prior to resale
- Variability depending on the type of property: the rules differ depending on whether the property is ordinary movable property, goodwill, or ships and aircraft.
For ordinary furniture, default occurs when the winning bidder fails to pay the sale price plus costs (generally between 14.40% and 30% depending on the nature of the sale). The successful bidder is then considered to be the highest bidder.
Procedures applicable depending on the type of property
Ordinary furniture
For the judicial sales of furnitureArticle L. 322-14 of the French Commercial Code stipulates that if the successful bidder defaults, he is liable. The property is put back up for sale and the defaulting buyer is liable for the difference between its price and the resale price, without being able to claim the excess, if any.
The procedure is simplified: the court commissioner notes the default and immediately puts the property back up for sale, often at the same auction. The writ of execution is the record of the sale recording the default.
Business assets
In the case of business assets, the rules for reiteration are similar to those applicable to immovable property. The Commercial Court sets a new hearing date for the resale. The defaulting buyer is not entitled to purchase the business and must bear the difference in price and costs.
Ships, boats and aircraft
For these specific goods, Article L. 5114-24 of the French Transport Code provides for a specific procedure. The certificate of non-payment is issued by the clerk of the court. The procedure is similar to that for real estate, with specific publication in specialised maritime or aeronautical newspapers.
Repeat bids are therefore a an essential mechanism for ensuring the efficiency of auctions. It punishes the defaulting bidder while allowing rapid realisation of the property for the benefit of the creditors. Its detailed and regulated rules vary according to the nature of the property in question, but are based on a constant principle: the protection of the interests of the pursuing creditor and the distrainee against the negligence or insolvency of the successful bidder.
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