Borrower's Last Attempt to Rescue its Real Estate: the Opposition Against the Auction Procedure

Legal Insight

April 2022

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

(republished from taxheaven.gr)

Summary: In this article we will refer to the most frequently encountered reasons which can support the annulment of an auction already held. The remedy of opposition to the auction is the debtor's last attempt to cancel the transfer of ownership of his property to the third successful bidder after the foreclosure of the property by the foreclosing creditor.

In our previous articles (see here and here) we referred to the opposition against the payment order on the one hand, and the opposition against the seizure (seizure report) on the other hand. Both of these remedies are defensive mechanisms established to protect the debtor from illegal and unjust executions. They are exercised at an initial stage of the enforcement procedure and can ultimately annul it, if of course they are found to be well-founded. But if these attempts at annulment are ultimately unsuccessful (or if the debtor is negligent and fails to pursue a remedy) and the auction is successful, what is the debtor's reaction? Does he have any final move in his quiver to avoid losing ownership of his property? 

In these cases, the law provides for the remedy of opposition to the auction. This is the debtor's last resort, his last attempt to save his property. The time limit for lodging such an objection is 60 days from the day on which the successful bidder transcribes the summary of the auction report given to him by the notary at the competent mortgage office (or land registry office). This summary is usually given a few weeks after the auction has taken place and its delivery is subject to the payment of the auction premium by the successful bidder (see Article 1005 of the CCP 'As soon as the successful bidder pays the auction premium and the user fee, the auctioneer gives him a summary of the auction report'). The opposition to the auction is directed against the foreclosing lender and the successful bidder, who are also the ones who have every reason to uphold the validity of the auction. For the opposition to be admissible, it must be entered in the claim books of the competent mortgage office or in the relevant land registry (see the relevant land register). CCC 1010: 'A notice of opposition to annul an auction or re-auction of real estate is inadmissible if it is not entered in the register of claims of the district where the property is located within thirty days of its filing'). This registration has of course also consequences for the marketability of the property if the successful bidder wishes to sell it on (it would be difficult for a third party to be interested in buying a property whose ownership is being contested in court).

If this opposition is finally accepted, the auction is cancelled, the ownership reverts to the debtor and the third successful bidder has the following 3 alternatives: (a) to take action against the creditors (usually banks) to be reimbursed the amount they received from the auction; (b) to re-auction the property himself to collect the amount he paid and which he will receive first from all possible creditors; (c) to be announced in an auction to be accelerated by a third creditor and also be satisfied preferentially from the auction proceeds. All 3 alternatives, however, usually involve litigation.

A basic requirement of the Code of Civil Procedure, i.e. the law that regulates the procedure of enforcement and auctions, is that of the gradual appeal of the  enforcement acts. On the basis of this principle, in order to annul an auction, it is possible to rely either (a) on defects or defects in the conduct of the auction itself, (b) on defects in its pre-proceedings, or (c) on the fact that the acts of the enforcement procedure on which it is based (seizure, declaration of continuation) have been annulled by a final judgment. Therefore, apart from the first two groups, the third group of grounds for opposition presupposes that an opposition to the attachment or the continuation declaration has already been lodged (therefore, for the first two groups of grounds, the debtor can cancel the auction even if he has not yet taken any defensive action). This is why we mention the (mandatory) gradual challenge of the enforcement acts: if no opposition to the attachment has been filed and the time limit for challenging it has expired (45 days from the service of the attachment report), any defect in the attachment has been cured. Therefore, the auction cannot subsequently be annulled, even if the seizure report was defective and invalid. Here we understand how important it is to challenge all acts of the enforcement procedure in due time and not to exceed the relevant time limits.

The most common reasons for cancelling an auction are listed below:

1. Invalid Foreclosure

Firstly, if an auction is based on an invalid foreclosure, if the latter is cancelled, the auction is cancelled. Therefore, an objection against the foreclosure report must have already been filed, which will either not have been decided by the time the auction takes place (rare), or will have been rejected in the first instance but the relevant appeal will be pending. Attention: if an appeal against the foreclosure has been filed but no appeal against the auction has been filed, then even if the first one is upheld, the auction remains valid as long as it is not challenged by an appeal in due time. As stated above, on the basis of the principle of gradual challenge of enforcement acts applicable to enforcement, each act of the enforcement procedure should be challenged separately. Therefore, in effect, the debtor will have to file an objection against the attachment and, if the auction finally takes place, an objection against the auction as well. The court hearing the opposition to the auction will, however, in most cases suspend the proceedings until the question of the validity of the attachment is finally decided. In this ground, therefore, an opposition to the attachment must have already been filed, while in all the following grounds, as mentioned above, an opposition can be filed after the auction, even if no other judicial action has been taken by the debtor up to that time.

2. Repayment / settlement of claim

The auction may be cancelled if between the expiry of the 45-day period from the service of the seizure report (where the time limit for an objection against the seizure also expires) and the auction, events occurred that resulted in the removal of the due date or the claim, such as when the debt was adjusted or paid. If the adjustment took place before the 45 days after the foreclosure, this ground supports the objection to the foreclosure report and should be raised at this stage. 

3. Contradictory/abusive behaviour of the obligee

There is also rich case law on the issue of abusive foreclosure of property. The following sub-cases can be distinguished (for details see here):

a) Discrepancy between the value of the property and the recoverable amount

This sub-case includes actions such as the seizure of property of high value for a claim of less than 5% of the latter, etc. 

b) Absence of benefit to the lender 

The second concerns the misuse of the claim, i.e. an auction is improperly convened despite the fact that the disproportionately larger part or the whole of the debtor's debt has been paid or a vacant property that constitutes the debtor's primary residence is seized, while the latter owns a mortgaged shop property that could well be auctioned without the risk of losing his residence. In the same category is the case of the seizure of a multiply encumbered property by a creditor who has no security (mortgage, etc.) simply to put pressure on the debtor, knowing that he will not receive part or a minimum part of the auction price. 

c) Contradictory behaviour 

There is a substantial body of case law (court decisions) in relation to the following issue: the debtor enters into an informal agreement with the creditor to suspend the auction and pay part of the claim. The creditor assures the debtor that he will proceed to postpone or cancel the auction. However, this agreement is not reflected in a document. However, the auction is not suspended and the auction is carried out as normal, with the property being awarded to a third party. In this case, the debtor takes legal action to annul the auction, claiming that the creditor, despite their verbal agreement and while paying him the agreed amount of money, proceeded with the auction in the normal way. In such cases, however, it is settled case-law that the auction is only annulled if the third successful bidder was also aware of the existence of that agreement. Because it is deemed worthy of greater protection from the debtor for the sake of the security of transactions and the auction process (Athens Court of Appeal No. 5595/2019: "On the other hand, if the abuse is linked to a certain conduct of the obligee, which, combined with the actual situation formed by the intervening circumstances, created in the debtor the reasonable belief that the auction will not be carried out, so that its subsequent conduct, due to the change in the attitude of the obligee, to cause unforeseen and intolerable adverse consequences for the debtor, in order for the auction to be invalid, the successful bidder must also be aware of the behaviour of the debtor and of the events that occurred before the auction, which render the auction improper within the meaning of Article 281 of the CC, since the successful bidder is mainly prejudiced by the cancellation of the auction'). 

Of the above abuses, only the last one concerns the auction and events that take place after the seizure. For the first 2 sub-cases, therefore, the debtor's claims must be raised in the opposition to foreclosure and cannot be admissibly raised for the first time in the opposition to the auction. For example, if the claim for which the auction is ultimately accelerated is incomparably smaller than the value of the property, it is a fact that existed at the time of the seizure and could therefore be a ground for opposition to the seizure.

4. Shortcomings in the pre-auction procedure

Reasons for annulment may also include deficiencies related to the pre-auction procedure. In particular, the auction will be void if the following notifications/receipts were not complied with:

a) A copy of the seizure report was not notified in due time to the debtor, if the latter was absent, at the latest on the day following the day of the seizure if the person against whom the execution is directed has his/her residence in the district of the municipality where the seizure was made, otherwise within eight (8) days from the seizure (see e.g. decision of the Aegean Court of Appeal No 18/2020: "Therefore, in accordance with the requirements of Article 995(1) of the CCP, as this article was replaced by the eighth article of Article 1 of Law 4335 /2015, the service of the copy of the above statement should have been made no later than the day after the day on which the seizure took place, i.e. on 31-5-2017, since, as it was proved, the opposing party - the executor - had his residence in the place where the seizure took place, so that the service at his residence in Athens, on 2-6-2017, was out of time, rendering the seizure invalid and without the prejudice of article 159 no.3, according to the first ground of the contested opposition, which is well-founded in this respect").

b) A copy of the seizure report was not served in due time to the mortgage officer (or land registry office) of the district where the seized property is located within five (5) days of the seizure (see decision No 95/2007 of the Rhodes Court of First Instance: "However, as evidenced by the certificate of the locally competent mortgage officer of Karpathos, submitted with reference to 15.6.2006, the above-mentioned foreclosure report No. 1808/2006 was not delivered to him (the mortgage officer of Karpathos) and subsequently recorded in the Mortgage and Seizure books kept at the Mortgage Office there, within the period of eight days from the seizure as stipulated in Article 995 par. Therefore, the sole ground of appeal must be upheld as well-founded in substance and the report on the compulsory seizure of property No 1808/2006 and the summary of the report on the seizure of property No 1809/2006 must be annulled...').

c) The seizure documents were not submitted to the auctioneer in due time (CCC 995 par. 4). In the case of an auction of real estate, the bailiff must within twenty days from the day of the completion of the seizure deposit the executory title, the report on the delivery of the cheque for execution, the seizure report to the auction clerk, who draws up a report, the reports on the service of the copy of the writ of execution on the debtor, the third party owner or tenant of the mortgaged property and, where applicable, the mortgagee or the head of the land registry office, the certificate of encumbrance, and, in paper and digital form, the valuation report of the certified valuer of the p. δ. 59/2016.

d) The extract of the seizure report was not published in due time on the auction publications website of the Judicial Publications Bulletin (https://deltio.tnomik.gr/). An extract of the seizure report, including the full names of the debtor and creditor, as well as their tax identification number and, if they are legal entities, their name and tax identification number, a brief description of the property seized by type, location, boundaries and extent, with its components and any annexes that are co-opted, and a mention of any mortgages or liens on the property, the price of the first bid, the amount for which the seizure is made, the terms of the auction, set by a creditor and communicated to the bailiff by the order for execution and the name and address of the auction clerk, as well as the place, day and time of the auction shall be published by the fifteenth (15th) day after the seizure on the website of the Judicial Publications Bulletin.

e) The extract of the foreclosure report was not communicated to the mortgage (or mortgagee) creditors in due time. An extract of the foreclosure report must be served within 20 days of the foreclosure to any mortgage or charge lenders (if of course the bank that has registered a charge is the one that is accelerating the auction, it must serve it on any other charge holders). The reason for this service is, among other things, to increase the bidding interest and thus raise the price of the auction. Hence, the debtor is also justified in its legitimate interest to exercise its opposition in the event of failure or late service (cf. AC 1655/2001: "Moreover, the debtor in default has a legitimate interest in claiming that the auction is invalid because the summary of the seizure report was not served on the mortgagee, in order to achieve a higher bid with the participation of all creditors").

In the above cases where we have lack of performance of the contested acts or late performance of the same, we have an invalid auction, if the latter takes place. And service at a place of residence other than the debtor's actual residence is also treated as lack of service if it is proved that the creditor who effected service was aware of his actual residence or that he himself had notified him in good time of any change in it. The same is not the case, however, if the acts take place in due time but in a defective manner. In that case, those defective acts should have been challenged by means of an objection to the seizure report 45 days after service of the latter. Therefore, if the excerpt of the seizure report was served in due time but does not contain all the information required by law (e.g. it does not mention all the encumbrances), the debtor should file an opposition within 45 days of the service of the seizure report (and this only if this defect cannot be corrected by an opposition under CCC 954 par. 4). If, however, it has not been served on the premortgaged creditors, then the auction will be invalid and can be annulled by an appeal against the auction (see Supreme Court decision no. 936/2020: "If, however, it is not merely a defect or disorder in the pre-procedure of the auction, but a complete lack of all or one of the formalities prescribed by law for its conduct, and despite this lack the auction is conducted, then it is invalid regardless of any damage and its invalidity is declared after an objection by anyone with a legal interest within the time limit of Article 934(1) c' of the Civil Code, since this is a ground for invalidity of the auction itself and not a formality of the pre-proceedings, which was never carried out (OLAP 3/2007).The same applies, accordingly, in the case where all or some of the formalities of the auction were not omitted, but were carried out in time or in a manner that renders them procedurally invalid. The failure to serve a summary of the statement of the seizure of immovable property is also equivalent to the service of the statement at a residence other than the actual residence of the person to whom the service relates, since, as a result of that incorrect service, that person is unaware of the auction being held and may, if it is held, challenge it, without more, as invalid within the time-limit laid down in Article 934(1). c' of the CCP, with an objection in which he will rely for its admissibility that the person who expedited the execution knew his actual residence or that he had timely notified him of any change in it (OLAP 3/2007, AP 477/2019, AP 1869/2017, AP 1081/2014, AP 8/2011").

5. Invalidities of the auction procedure itself

Before the recent digitisation of the auction, which is now conducted electronically (the beginning was made by Law 4472/2017), the procedure was prone to various invalidities. Now the occurrence of formal defects is becoming quite rare to practically impossible. As a well-known theorist of enforcement law has typically stated, the electronic auction has been the requiem of the most frequently encountered formal defects in the procedure. 

In any event, the failure to comply with the provisions governing the auction itself may also render the auction null and void, provided, however, that there is also a procedural prejudice to the applicant (i.e. the breach of the provisions must result in a loss of property or deprivation of rights). 

Therefore, any deficiencies in the procedure of the announcement of e.g. the auction on the eauction platform (Article 5 of the RA 41756/2017), in the preparatory acts of the bidders (Article 959(5)), in the payment of the security deposit by the prospective bidders (cf. Efath 2653/2011: "From the reading of the above auction report ... it is proven that the security deposit was paid by the second and third defendants (successful bidders) after the bidding, only as a guarantee for the fulfilment of their obligations to pay the bidding price .... [...] The harm resulting from the breach of that provision, which (harm) is pleaded in a clear and definite manner by the opponent, is self-evident and self-evident for it, since in the event of non-payment of the securities before the start of the bidding, the auctioneer was obliged to cancel the auction, with the result that the opponent did not lose its property... "), the publication of the list of those entitled to participate (no. 959(6) of the CCP), in the procedure (e.g. the time of the auction itself) of the auction can render the auction null and void with the corresponding procedural prejudice, which can only be invoked by means of an opposition to the auction. By way of illustration, therefore:

a) The debtor, the auctioneer and his employees cannot bid in the auction (Article 965 CCP). Therefore, in this case the auction is declared null and void. 

b) One of the omissions that could also give rise to invalidity is the failure of the auction clerk to publish a list of participants on the day before the auction (Article 959(6)). This is important for the debtor to be able to verify the legality of the participation procedure, on the other hand to know whether there is a risk of loss of his assets and thus to arrange for any repayment in accordance with Article 1002 of the CCP ('Until the award, the person against whom enforcement is sought shall be entitled to repay the claims of the person in whose favour enforcement is carried out and of the creditors who have an enforceable title and have been notified, as well as the costs and the fee for the use of the electronic auction system. In this case the auction is cancelled and the attachment is lifted."). As a representative of the theory states: "As mentioned the preparatory stage of par. 5 and 6 of Article 959 allows the debtor to have a more secure picture as to the prospects or not of the bidding and therefore facilitates the decision whether or not to make use of this option (of redemption) and until the last moment". 

c) An incomplete description of the property with reference to less square meters on the eauction platform could result in invalidation of the auction due to e.g. reduced bidding interest and thus depriving the debtor of his right to expect a higher bidding price.

d) Rejection of a bidder's application to participate could render the auction null and void due to, for example, reduced bidding interest and thus deprive the debtor of its right to expect a higher bid price. The same result is also achieved in cases of fraudulent removal of bidders, which, however, with electronic auctioning, could hardly occur. 

In the latter two cases, however, the debtor must, in order to determine whether an objection is admissible, indicate the names of the specific potential bidders who were prevented or discouraged from bidding because of the defects in question so that the court can check whether they had the capacity, intention and financial capacity to participate (cf. and Supreme Court decision No 282/2020: "Further, it follows from the provisions of Articles 200, 281 and 288 of the CC, (in conjunction with those of Articles 959, 963, 988 and 1005 of the CCP) that, any action of the lender or of the successful bidder, the third parties in collusion with the successful bidder, which hinders the bidding and consequently the success of a higher auction and in particular any action of the above persons which tends to obstruct free competition by removing bidders in order to award the item to the successful bidder for a lower price is contrary to the good faith which governs the freedom of transactions and an auction conducted by such unfair acts and actions is void. However, in order to claim invalidity in such a case, the party invoking it must also specify in the statement of opposition the persons who were present or were to be present at the auction and who were removed or prevented from being present as a result of fraudulent acts by the creditor or the successful bidder, so that the validity of the claim can be verified. Otherwise there is a lack of clarity in the statement of opposition, which cannot be supplemented by the pleadings or by reference to other documents or evidence (CP 1716/2011, CP 1343/2008, CP 147/2004").

After the auction, the competent notary shall draw up the auction report, in which he shall state the entire course of the proceedings, the names of the participants and the successful bidder and, in general, everything that took place throughout the auction. It should be noted, however, that any omission or failure by the notary who drew up the auction report to mention essential elements in the auction report is invalid only if there is an element of fault, which in such cases is extremely difficult to establish. 

Moreover, after the auction, the debtor must be aware of the successful bidder in order to be able to bring an action against him. As was reflected in the decision of the Council of State No 1846/2020: "Particularly with regard to the person and details of the successful bidder, as well as of the other participating bidders, the debtor is not able to gain electronic access to the relevant data through the Electronic Auctions system, since there is no electronic entry of these data in the system. However, within the meaning of the relevant provisions, if the above information is submitted to the auctioneer, the debtor may approach the auctioneer in order to obtain all the relevant information. In addition, the information relating to the auction procedure is recorded in the auction and award report drawn up by the auctioneer (see Articles 959(12), 965(2) and 934(2) of the CCP), of which the debtor is informed. This is in order to safeguard the debtor's right to effective judicial protection, who may bring an appeal...'. The debtor can therefore learn the name of the successful bidder on the day following the auction and in any event on the day of the auction, when the auction report is served.