The Reasons for Invalidity of the Foreclosure Report and the Property Auction - Defence against Incomplete Execution Deeds

Legal Insight

July 2021

George Psarakis LL.M. (mult.), PgCert

(republished from taxheaven.gr)

Summary: It is a fact that auctions are back in our lives. Hundreds of foreclosures are taking place and corresponding auctions are already being conducted electronically every week. This article summarizes the most basic and common grounds for opposition that can lead to the cancellation of the foreclosure and/or auction.

The fact is that auctions are back in our lives. Hundreds of foreclosures are taking place and corresponding auctions are already being conducted electronically every week. Unlike in earlier years, when auctions were held in town halls or magistrates' courts with the physical presence of the parties concerned, electronic auctions now involve two assumptions: (a) that the grounds for invalidation of the auction due to possible defects in its conduct are minimised; and (b) that the debtor in question can know the potential bidders at least two days before the auction (and thus also know of any lack of them which usually implies that the auction is invalid).

In an earlier article, we dealt generally with the auction procedure and the defence against it (see here). In this article, we will summarize through our case law some of the shortcomings of the procedure that ultimately lead to the annulment of the seizure and/or auction of property. 

1. Failure to comply with pre-auction formalities - Late posting of the seizure report on the website of the Judicial Publications Bulletin

Article 995 par. 4 of the Code of Civil Procedure stipulates that: "An extract of the seizure report, including the full names of the proponent and defendant of the execution, as well as their tax identification number and, in the case of legal entities, their name and tax identification number, a brief description of the property seized by its type, location, boundaries and extent, with its constituent parts and any annexes, as well as an indication of the mortgages or liens on the property, the price of the first offer, the amount for which the seizure is made, the conditions of the auction, if any, imposed by the person for whom enforcement is sought and notified to the bailiff by the order for enforcement of the article; and, the name and address of the auctioneer and the place, date and time of the auction, shall be issued by the bailiff and published under his custody by the fifteenth day after the seizure on the auction publications web page of the Judicial Publications Bulletin of the Electronic National Social Security Agency (e-NSSA)".

Therefore, the competent bailiff must proceed within 15 days from the seizure to publish the extract on the website https://deltio.tnomik.gr/. If the publication does not take place within the above deadline, the auction cannot be validly held and if it is held, it is challenged by way of an opposition and is ultimately annulled.

Similarly, the same bailiff must file the necessary auction documents with the competent notary within 10 days of the seizure and the relevant report must be drawn up (see Article 995 par. 4 of the CCP: "The bailiff shall, within ten (10) days of the seizure, file with the auction clerk the executory title, the report of service of the execution cheque, the seizure report and the reports of service of the execution cheque on the debtor, the third party owner or creditor and the mortgagee or whoever keeps the register or registry, the certificate of encumbrance, and, in paper and digital form, the valuation report of the certified valuer of p. d. 59/2016 (A` 95). The auction clerk shall draw up a report on all of these"). If such filing does not take place in due time, any auction held shall be cancelled by means of an appeal. 

2. Late service of a copy of the seizure report on the debtor

Article 995(5)(a) of Regulation No 995(1) provides that the court shall not give notice of default to the debtor of the debtor's claim. 1 of the Code of Civil Procedure provides that "If he is absent or it is not possible to prepare the copy immediately, the copy shall be served no later than the day following the day on which the seizure was made, provided that the person against whom the execution is directed has his residence in the district of the municipality where the seizure was made, otherwise within five (5) days of the seizure. Failure to comply with these formalities shall render the attachment null and void. When the seizure report is drawn up, the bailiff does not usually enter the property in question, although he has the right to do so. This is mainly because he does not want to get involved in any friction with the debtor. It is therefore usual not to deliver the seizure report on the spot but at a later date; and if the debtor resides in the same municipality as the seized property, the deadline for delivery is one day after the seizure. However, if he resides in a different municipality, the time limit is 5 days after the seizure. If these deadlines are not met, the seizure is null and void and therefore, with an appropriate objection, it is annulled. 

3. Determination of auction before 7 months or after 8 months

The auction must be held between 7 and 8 months from the time the seizure report is drawn up. Failure to comply with these arrangements and scheduling the auction before 7 months or after 8 months (amf.) will invalidate the seizure report and any auction held. In recent months, decisions of first instance courts have been published accepting that August should not be counted for the calculation of the seven-month period. This means, for example, that a seizure report drawn up in, say, June 2021 cannot support an auction conducted before February 2022. Because 7 months will not have elapsed, as the law requires. For example, see judgments No. 93/2021 and 1057/2019 of the Athens Single Member Court of First Instance; in the first judgment, the Court held that August is not counted in the mandatory 7 months that must elapse from the completion of the seizure until the execution of the compulsory electronic auction. The Bank determined the auction on 03.03.2021, after seven (7) months and eleven days from the closing of the foreclosure, which took place on 20.07.2020. However, in calculating the seven-month period, it included the period from August 1-31, in violation of the provision of No. 940 A, 998(2), 954(2)(e) of the CPC, because the seven-month period is suspended from 1 to 31 August (analogous application of Article 147(2) of the CPC).

4. Incomplete preparation of an impoundment report

The preparation of the seizure report must meet certain conditions. For example, it must be signed by the bailiff and by a witness in whose presence it is drawn up. It must also be certified that the bailiff went to the property on the spot, since a distant seizure cannot be carried out. However, the seizure report must also contain the necessary information for a precise description of the property (type: urban or rural property, shop, apartment, flat, office, detached house, area, street, number, floor, etc.; boundaries and area). If doubt arises as to the local and economic identity of the seized property, the seizure may be cancelled. Such a case occurs e.g. when the seizure report does not mention a building of significant size and value on the property (see EphDoc 205/2019) or when there are large discrepancies in the surface area of the property (e.g. see decision of the Dodecanese Court of Appeal No. 211/2020): "The above inaccuracies and deficiencies in the description of the property seized and put up for auction, in particular the inaccurate description of the property which does not have a surface area of 189,275 sqm but 269 sqm, does not have a separate dining room but a kitchen with an internal dining room and full equipment, does not have a hall but has an open plan living room - living room, has five main rooms of which three large bedrooms, two bathrooms, a w. c but also the complete omission of mentioning full air conditioning installation, underfloor heating, parquet flooring 200 sq.m., double glazing, fitted Italian wardrobes, Jacuzzi, fireplace, two external storage rooms, one of which has been fitted with electromechanical installations [boiler, boiler], the perimeter garden with plants and ornamental trees, the parking space for three cars with a garage door closure, create doubts in general about the identity (and value) of the property seized and put up for auction and it is presumed that the forced execution that is being accelerated will be cancelled... ".

5. Non-service of the seizure report to the competent land registry office

Article 995 par. 2 of the Code of Civil Procedure provides that:  "Under penalty of nullity, a copy of the seizure report shall be served to the mortgage officer (land registry) of the district where the seized property is located within five (5) days of the seizure". If such service does not take place within the time limit, the seizure report shall be null and void.

6. Failure to issue an order on the document

Article 927 of the Code of Civil Procedure provides as follows: "Enforcement shall be carried out by the person entitled to carry it out, who shall give, on the document, the relevant order to a designated bailiff and shall specify the manner and, if possible, the objects on which the enforcement is to be carried out".

If the order for execution by the attorney-in-fact does not appear on the body of the instrument, the seizure report shall be null and void. It is important not only that the order of execution is present, but that it is given directly on the body of the title deed. Indeed, this defect is rare, but it is still a ground on the basis of which seizure reports have been annulled (see e.g. Athens Single Municipal Court of First Instance 726/2018). 

7. Deficiencies of a cheque for execution 

Any defects in the procedure of the cheque for execution and its contents may result in the invalidity of the seizure. The same is the case with any defects in the procedure for notification of the necessary documents when we have a transfer of loan receivables to a special purpose company in the context of securitization or a company acquiring receivables under Law no. 4354/2015 for transfers of "red loans", or mergers/divestitures of credit institutions or transfers following a transfer order from the BoE in the context of the liquidation of credit institutions. It has already been stated that 'The provision should be considered to apply also in the case of assigning the collection of claims from bank loans or credits to a management company under Article 1 of Law No. 4354/2015, as amended, which must notify the relevant management contract, as well as, when the management is entrusted to a company acquiring such receivables, and a certificate of registration in the public register under Article 3 of Law No. 2844/2000 of the contract of sale and transfer to the latter' (Mazis, in K. Kerameys/D. Kondylis/N. Nikas, Interpretation of the Civil Code - Enforced execution, 2nd ed, 2021, Article 925). It has recently been held that a cheque is invalid due to the lack of communication of the necessary documents on the basis of which he is entitled to act as liquidator of a credit institution in special liquidation: 'In this capacity, the special liquidator conducts the proceedings concerning the credit institution in special liquidation in his own name, as a non-beneficiary party, and not in the name of the credit institution. It is further shown that although the defendant company took over the enforcement proceedings for the recovery of the same claim by attaching the attachment, it did not notify the change in the person of the attaching party to the defendant opposing the enforcement, nor did it communicate the documents that legitimize it, as provided for in Article 925 of the CCC, with a detailed reference to the elements that legitimize the defendant in the place of the original garnishee, as well as the documents that indicate it, namely, in particular, the act of appointment of the special liquidator' (MMP 136/2021); see also See also 61/2016 judgment of the Single Judge of the Court of First Instance of Chalkida: "In particular, it did not communicate to the applicants in original or certified copy the SALE AND TRANSFER AGREEMENT of 26.3.2013, which was drawn up on 26.8.2013 between BANK as "seller" and BANK as "buyer", which shows whether the transfer of the claim of BANK ... arising from the contract no. AL- ..../13.05.2008 credit agreement concluded between BANK ... and the creditor company "...................." (Monarch 293/2001, No. 2002.436, Monarch 475/2003 (unpublished); in this case, following the Bank's request of 18.3.2014.

8. Deficiencies in the title - invalidity of the payment order

The invalidity of the seizure report may also lead to the invalidity of the enforceable title on which it is based, which usually takes the form of a payment order. Therefore, if an objection has been lodged against the payment order (Article 632 of the Code of Civil Procedure), the court hearing the objection against the seizure report will have to rule on its invalidity in order to issue any decision to cancel the seizure before the auction takes place. This of course opens up a very large field of defence, since the possible shortcomings of the payment order may be dozens. 

9. Abusive enforcement

Many times cases of enforcement actions have been brought before our courts, where the debtor claims that they are carried out in an abusive manner. For this case we have mentioned several issues in an earlier article dealing with this very malpractice (see here).