Do you have as security for a claim from a debtor a security interest in the form of a “Grundschuld” or mortgage right in respect of immovable property in Germany?
And do you wish to recover this right? If so, you should be aware that the proceedings there differ massively from those in the Netherlands.

Proceedings in Germany
In order to start the proceedings, you – or your lawyer – must file an application with the local court (Amtsgericht) in the district where the immovable property is situated. For this application, the original entitlement to enforcement relating to the security interest must be submitted.
The entitlement to enforcement must meet a number of requirements and must be served on the debtor.
If the title and the application meet the requirements of the court, the court will then handle the proceedings and an expert will be instructed to prepare a valuation report of the immovable property. The expert subsequently draws up his/her report, which might take several weeks and in some instances even months. The report is then served on the debtor and the creditor, who has filed the application concerning the forced sale. Both parties now have the option of lodging an objection to the amount of the established value. If no objection is made, the court will draw up the value of the immovable property based on the report. Then a date for the sale of the immovable property is set.

Needless to say, the creditor may at any time terminate the proceedings, for instance due to the fact that the debtor effects payment or because a buyer has been found that will purchase the immovable property privately. A private purchase regularly generates more proceeds and is a preferred option for that reason. A condition for this is that the debtor cooperates. However, the German system does not, in contrast with the Dutch system, provide the option of privately selling the immovable property via the civil-law notary involved in the auction. In the Netherlands, any interested party may submit an unconditional written bid to this civil-law notary up to 14 days prior to the auction date. For a sale in this manner, the civil-law notary involved in the auction requires the acceptance of both the creditor and the debtor; a purchase agreement is valid only when the judge in preliminary relief proceedings of the court approves the purchase agreement. In Germany, a private purchase will take place in accordance with the general rules, whereby the debtor, in his/her capacity of owner, must sell the immovable property. He/she does, however, require the consent of the creditor thereto.

In the Netherlands, the house is publicly put up for auction in the auction room. The auction in the Netherlands takes place in two stages: first the ascending-bid session takes place (sale to the highest bidder) and then the descending-price session (sale by Dutch auction). Normally, the ascending-bid and the descending-price sessions are held in one session – unlike in Germany, where the auction of the immovable property is held at the court. Each item of immovable property is sold in an individual session. In the Netherlands, the civil-law notary fulfils the central role in the auction process; in Germany, the proceedings are guided by a staff member of the court (“Rechtspfleger”). This employee – a registrar – is not a judge, but has received legal training. After the auction is started, those present may make a bid during a period of time lasting at least 30 minutes. In an initial auction, the court must duly observe the statutory floor of 50% of the established value. If someone makes a bid below this amount, the immovable property may not be sold pursuant to the law. Upon conclusion of the auction, the negotiations concerning the awarding of the immovable property begin. If the creditor is satisfied with the amount of the highest bid, he/she may accept the bid. In that case, the immovable property is sold to the highest bidder. If the creditor is not satisfied, he/she may – depending on the amount of the highest bid and the strategy opted for – invoke a right of veto or dismiss the proceedings for a maximum of six months.

It is important to select a strategy in advance. In respect of the second auction, it needs to be determined whether the statutory floor for a bid will continue to be observed or not. As you can see, there are several different scenarios involved.

Susanne Hermsen

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