The sale of a property on foreclosure is a long and technical process that does not end with the hammer of the auction hammer. The final phase, which is often overlooked, is the distribution of the price. This is the moment when creditors, after what can sometimes be a long wait, can finally hope to recover all or part of what they are owed. This stage, which is crucial for both creditors and the seized debtor, has been radically overhauled by successive reforms, in particular those to the law on security interests, which came into force in 2022. The aim of this article is to provide an overview of this complex process, highlighting the key mechanisms and the rights of each party. Given the complexity of the rules and the financial stakes involved, the assistance of a lawyer specialising in property seizures is a major asset in securing your rights. We will look at the various stages here, each of which can be analysed in more detail in our dedicated articles.
Introduction: understanding the final phase of foreclosure and the key reforms
Distribution of the purchase price is the second phase of a property seizure, after the property has been sold. Before analysing the distribution of the price in detail, it is essential to understand where this stage falls in the process. the overall foreclosure process, From the summons to pay to the sale of the property. Formerly autonomous, it is now integrated into the overall procedure, with a new philosophy based on consensualism and a central role entrusted to lawyers for the amicable procedure.
The context of post-2021 legislative and case law reforms
The law on securities underwent a major overhaul with Orders 2021-1192 and 2021-1193 of 15 September 2021, which came into force on 1 January 2022. These decrees modernised the classification of securities, transforming certain special real estate liens into legal mortgages (new article 2402 of the Civil Code) and introducing new securities such as pledges on buildings by destination. These changes have a direct impact on the order in which creditors are paid when the price is distributed, making understanding the hierarchy of rights and securities more complex than before for the debtor and each creditor, for whom this information is crucial.
Publication of the sales title: starting point for distribution
The procedure for distributing the price can only begin once the title deed has been published with the Land Registry. Whether the sale has been forced (auction) or amicable (with the authorisation of the judge), this publication marks a decisive turning point. It is from this act that the property is «purged» of its securities and that the distribution of funds can officially begin.
Purging property security interests: mechanisms and transfers
Publication of the title deed triggers the purge, a complex legal process designed to clear the property of any encumbrances by transferring creditors' rights to the price. This stage is directly linked to the nature of the security mechanisms such as pledges and mortgages, The 2021 reform radically altered the scheme.
Legal effects of publication and conditions of purge (amicable and compulsory)
For the purge to be effective in the case of a sale by auction, three cumulative conditions set out in article L. 322-14 of the Code of Civil Enforcement Procedures must be met: payment or deposit of the price, payment of the costs of the sale and publication of the bill of sale. In the case of an out-of-court sale with judicial authorisation, the purge takes place once the price has been deposited, the costs have been paid and the notarial deed and the judgment recording the sale have been published. This mechanism guarantees the purchaser a property free of any debt owed by the seized debtor.
Transferring the guarantee to the sale price
The main effect of purging is to transfer creditors' rights. The mortgage or other security on the property does not disappear, but is transferred to the sale price, which has been consigned or sequestered. The price then becomes the new pledge of the creditors, who will no longer have to assert their rights on the building, but on the resulting funds, the proceeds of the sale no longer available to the debtor.
Cancellation of mortgage registrations and other security interests: distinguishing between purge and cancellation
It is important not to confuse purging with striking off. Purging transfers creditors« rights to the price, but does not automatically remove the entries visible in the property register. Striking off the register is the physical act that cleans up the property's »criminal record". In an out-of-court sale, the judge orders it at the same time as recording the sale. In a compulsory sale, it is not carried out until the end of the distribution procedure, but the successful bidder may request that it be struck off in advance by means of a petition, which is essential practical information.
Identification and ranking of creditors for prize distribution
Price distribution is a strictly hierarchical procedure. The Code of Civil Enforcement Procedures sets out a restrictive list of creditors entitled to assert their rights. The rank of registered creditors is determined by the date of their registration, in particular in relation to the publication of the summons to pay in lieu of seizure (CPVS), the founding act of the procedure.
The pursuing creditor and its rank: privileged or unsecured?
The creditor who initiated the seizure of property (sometimes referred to as the seizing creditor) is entitled to distribution. His ranking depends on the nature of his claim. If he has a mortgage, he will be paid according to the rank of his registration. If he is unsecured (without guarantee), the case law, in particular a decision of 26 May 1992, considers that he does not benefit from any particular preference and will compete with the other creditors of the same rank after payment of all the preferential creditors.
Creditors registered before and after the summons to pay
Creditors who had registered a mortgage or lien prior to publication of the summons to pay must declare their claim within two months of notification of this deed in order to retain the benefit of their security. Creditors who register a mortgage or lien after but before publication of the sale must actively intervene in the seizure proceedings in order to be entitled to the distribution of the price.
Hidden creditors: general liens and special mortgages of the syndicate of co-ownership (2021 reform)
Some creditors, known as «hidden» creditors, do not need to be registered publicly in order to be paid. This is the case for legal costs and certain wage claims. Order no. 2021-1192 of 15 September 2021 transformed the former special lien of the syndicate of co-owners into a special legal mortgage (new article 2402, 3° of the Civil Code). This concealed guarantee ensures payment of charges for the current year and the last four years in arrears, and takes precedence over most other creditors.
The pledge on immovable property by destination: a new «immovable» security and its ranking (2021 reform)
The reform, which came into force on 1 January 2022, created the possibility of pledging furniture considered as immovable property by destination (a fitted kitchen or a boiler, for example). The pledgee is now entitled to distribution of the sale price of the property. In accordance with article 2419 of the Civil Code, their rank is determined by the date of publication of their pledge, placing them in direct competition with mortgagees, which complicates the order of payments.
Provisional payments to senior creditors: conditions and limits
To avoid waiting for the sometimes lengthy outcome of the price distribution procedure, the law authorises the first-ranking creditor to apply to the enforcement judge for a provisional payment, i.e. an advance on the funds available after the sale.
Definition of the purpose of and conditions for granting a provisional payment
This payment is strictly reserved for the first-ranking creditor and may only be made in respect of the capital of the claim, excluding interest and costs. The request is made by application to the judge, after publication of the title deed and on the basis of a mortgage statement showing the creditor's ranking.
The prohibition of clauses to the contrary and their reapplication in the event of collective proceedings
There is no clause extending this right to other creditors or other sums. Although this payment is in principle definitive, there is a risk of questioned in the event of collective proceedings subsequently opened against the debtor. If the price distribution procedure is not finalised before the opening judgment, it becomes null and void and the funds, including those paid on a provisional basis, must be remitted to the judicial representative, a fundamental principle.
Price distribution: amicable and judicial procedures
The law favours a consensual resolution. The distribution procedure is therefore initially amicable, under the guidance of the lawyers. It is only in the event of deadlock or dispute that the judge intervenes to settle the matter.
Amicable distribution: regulated consensualism and the role of lawyers
The most diligent party, often the pursuing party's lawyer, notifies the other creditors of a request for an updated statement of their claims, in accordance with article R. 332-2 of the Code of Civil Enforcement Procedures. On this basis, he draws up a draft distribution and submits it to them. The creditors and the debtor have fifteen days in which to contest the proposed distribution. If there are no objections, the proposal is submitted to the judge by petition for approval, which gives it enforceability.
Judicial distribution: intervention by the JEX in the event of failure
In the event of disagreement over the proposed amicable distribution, intervention by the enforcement judge (JEX) becomes essential to settle disputes and order the distribution of funds. The judge then draws up a statement of distribution in a judgment that is subject to appeal.
Legal costs and distribution fees for lawyers: a complex tariff reform
The costs of the distribution procedure are deducted first from the sale price. Lawyers« remuneration for this phase has been the subject of complex fee reforms. Since the »Macron" law of 6 August 2015 and the implementing decree of 9 May 2017, fees and emoluments have been codified in the French Commercial Code. These emoluments, which may be fixed or proportional (art. A. 444-187 et seq. of the said Code), are considered to be legal costs and therefore benefit from a privilege, unlike freely agreed fees. The technical calculation of these fees depends on the date on which the seizure is initiated and on evolving scales - practical information that is often overlooked.
Payment of distributions and cancellation of registrations
Once the agreement has been approved or the distribution judgement has become final, the last stages involve settling each creditor and finalising the legal status of the property sold.
Role of the receiver or the Caisse des Dépôts et Consignations
The receiver or Caisse des Dépôts et Consignations (the consignee), which holds the funds from the sale, is notified of the approved distribution proposal or the judgment. This organisation then has one month to pay each creditor in accordance with the distribution statement. It also pays any balance to the debtor.
Discharge and cancellation of post-distribution registrations
The proposed distribution or distribution judgment orders the release of the security interests and the cancellation of the summons to pay in lieu of seizure. Once this decision has been published with the Land Registry, the property file is finally cleared. The buyer is thus assured of owning a property that is free of any previous encumbrances, and the property seizure procedure is definitively closed.
The distribution of the price after a property seizure is a technical matter where every detail counts. Recent reforms have added new levels of complexity that require specialised legal expertise. To help you navigate these procedures and defend your interests to the best of your ability, particularly in the event of a dispute, you need the support of an expert. lawyer specialised in enforcement is essential.
Frequently asked questions
What is the starting point for the price distribution procedure?
The procedure for distributing the purchase price begins once the deed of sale (auction judgement or notarial deed of amicable sale validated by the judge) has been published with the Land Registry. It is this deed that triggers the purge of securities, a key principle of the procedure.
Who are the main creditors eligible for distribution?
The main creditors are the pursuing creditor, registered creditors (holders of mortgages published before the sale), and certain «hidden» creditors such as the co-owners' association or those benefiting from the privilege of legal costs, in accordance with the list set out in article L. 331-1 of the Code of Civil Enforcement Procedures.
What is the difference between amicable distribution and judicial distribution?
Amicable distribution is a consensual process carried out by lawyers who draw up a draft distribution plan. Judicial distribution only takes place if the amicable phase fails or if there is a lack of diligence. In this case, it is the Enforcement Judge (JEX) who decides the disputes and sets the order and amount of the payments.
Can a creditor be paid before the end of the distribution procedure?
Yes, the creditor registered first may ask the judge for a provisional payment. This advance may only relate to the capital of the claim and is subject to strict conditions, in particular the fact that it may be called into question if insolvency proceedings are opened against the debtor.
What is the impact of the 2021 security reform?
The reform, which came into force on 1 January 2022, has modernised the classification of collateral. It has transformed certain privileges (such as that of the co-ownership syndicate, provided for in article 2402, 3° of the Civil Code) into special legal mortgages and introduced new securities such as the pledge on immovable by destination, the ranking of which is determined by its publication date, in accordance with article 2419 of the same code.
What happens to mortgages once the sale price has been paid?
Once the price has been paid and the title deed published, the mortgages are «purged»: creditors' rights are transferred from the property to the sale price. At the end of the distribution procedure, the registrations are physically removed from the property register, leaving the property unencumbered.
EN 
FR