Electronic Auction Participation Procedure (e-auction)

legal insight

November 2023

Daphne Sfyri, LL.M.

Abstract: In recent years, there has been an increase in interest in acquiring property through auction, both by individuals and legal entities. This article deals, in brief, with the procedure that a prospective successful bidder must follow when participating in an electronic auction, from the inspection of a property to its final (if any) award.

1. Checking the property before the auction

As already mentioned in previous articles, acquiring a property by auction carries several serious risks. For this reason, an extensive legal and planning/technical audit by a qualified legal and engineering expert is required:

a) A legal check by a lawyer at the competent Land Registry, in order to obtain a full picture of the legal status of the property (legality of title deeds, existence of any claims on the property, etc.).

b) Carrying out an inspection at the competent Planning Office by an engineer and reviewing the valuation report (which is posted on e-auction.gr). This is because any fines for arbitrary actions of the property will also be borne by the new owner.

c) Submission of an application with documentation of the legal interest before the President of the Tripartite Administrative Council of the Athens Court of First Instance (if the property is located in Athens), in order to obtain a complete picture of any legal remedies exercised by the debtor in the context of the enforcement procedure (opposition against the cheque for payment, the seizure report, etc.).

d) Legal assessment of the likelihood of success of any legal remedies brought by the debtor.

f) Submission of a request for a public prosecutor's order and receipt of any lease documents from the local competent tax office, in order to assess any obligation of the successful bidder under existing lease agreements of the disputed property. 

g) Checking the pre-auction procedure to identify any invalidities/deficiencies that may lead to the cancellation of the auction. 

2. Auction participation procedure

- Step A: Registration of a prospective bidder - Certification in EL.SY.PLEIS.

To participate in an electronic auction a candidate bidder is required to register with the service on the entry page of the services www.eauction.gr. On the aforementioned website, he can log in with the codes he uses in TAXISNet, and then a special account activation procedure follows. 

- Step B: Selection of Auction (Property)

After successful registration and login to the above service and by 15:00 two working days before the auction date, the prospective bidder selects the property to be auctioned and in which he wishes to participate, while at the same time he deposits 30% of the price of the first bid to the auction clerk as a guarantee. It should be noted that the prospective bidder may deposit the aforementioned 30% of the first bid price either in a special unseized professional account held by the auctioneer in a Greek Banking Institution or with a bank letter of guarantee of at least one (1) month or with a cheque issued by a bank or other credit institution. However, the deposit of the guarantee in cash is not permitted. If the price of the first bid has been increased after the filing of an opposition by the debtor, as provided for in Article 954 of the Civil Procedure Code (injunction procedure), the prospective successful bidder must pay the auctioneer a security deposit of 30% of the new corrected first bid price. This decision on the opposition under Article 954 of the Civil Procedure Code is published by 12:00pm on the eighth day before the auction on the auction publications page of the Judicial Publications Bulletin of the Electronic National Social Security Institution (eEFKA). 

Within the same aforementioned deadline, the prospective bidder is obliged to present to the Auction Clerk the following documents. Legal Documents for legal entities (e.g. Certificate of Valid Representation, Articles of Association, Minutes of the Board of Directors or Partners' Meeting) and c. the Proof of Payment of the Auction Participation Guarantee.

The following example is also provided with regard to compliance with the above deadline: If the auction is scheduled for 27/3/2024, then the deadline for "selecting the auction", depositing the guarantee and sending the above documents is 21/3/2024 at 15:00 (and not 22/03/2024 at 15:00), given that 25/3/2024 is a public holiday. 

Thereafter, the Auction Clerk, i.e. the Notary, is obliged to check the validity of the application form and to inform the prospective bidder of the "good standing" of his application by 17:00, two working days before the auction. In practice, however, Auction Officials sometimes fail to comply with the above obligation to inform within the above deadline due to workload, without this automatically invalidating the procedure. Finally, the notary submits to the EL.SY.PLEIS a list of the potential bidders who are entitled to take part, and if the above obligations are not complied with by the potential bidder, this results in the exclusion of the person concerned from the list submitted to EL.SY.PLEIS.

3. Submission of an application/participation in the auction

a) Bid price - Open bidding - Open auction

Upon completion of the above two stages, the prospective bidder shall take part and participate on the date of the auction by submitting a bid. The price of the bid must be a positive, explicit, decimal number with a maximum of two decimal places to the right of the subdivision and at least €1 more than the price of the first bid (and then the current price), and there must be no spaces at the beginning or end of the number. 

It is common practice for potential bidders to activate 'over-bid protection' on the online platform for security reasons, which ensures that the bid submitted will not be more than twice the current price of the previous bid. This feature can be deactivated at any time by the prospective bidder and in effect ensures that the prospective bidder does not inadvertently enter an excessively high bid price. Greek case law has been concerned with cases where the bidder has inadvertently entered an additional numerical digit "0" and submitted a tenfold higher bid price (!) (See also the decision of the MPA No. 7017/2018, where the MPA rejected the objection of the successful bidder as legally unfounded, which held the following: "That by obvious clerical error {...} the incorrect amount of EUR 3,090,303 was entered as her bid, instead of the amount of EUR 309,033, which was the amount she submitted as her last actual and responsive bid, because the digit zero (o) was added between the last digits of her bid (the number 33)"). In other words, the auction, because of its public nature, cannot be challenged on grounds of defects of will. Consequently, the auction cannot be annulled on the grounds of error, fraud or threats against the successful bidder. In fact, for the same reason, it is also common for participants in electronic auctions/submitting bidders to use special screen recording programs in order to produce the recording as evidence in the event that any such discrepancy between the bid submitted and the willful bid is attributed to a technical error in the electronic auction system.

At the same time, when participating in the auction, the prospective bidder may observe the bidding history, i.e. the amount of the bid price and the time of submission of the bids of all other prospective bidders, as well as distinguish the order in which they were placed when submitting their bids. It is precisely this 'live' bidding that ensures both the transparency of the procedure and healthy competition and the protection of the debtor, since the continuous information of the bidders on the highest bid submitted allows them to submit a higher bid. In contrast, the system of sealed bids under the previous regime did not contribute to achieving the highest possible bid, as the potential bidder could not be aware of any higher bid from another bidder. It should be stressed, however, that the prospective bidder cannot be informed of the identity of the other bidders (for example, the name or business name of the other bidders if they are legal persons), as was also the case under the sealed bidding system.

- Time of the auction

In accordance with Article 959 par. 8 of the Civil Code: 'Electronic auctions shall be held only on a working day, Wednesday or Thursday or Friday, from 10:00' to 12:00' and from 14:00' to 16:00', while auctions cannot be held from 1 to 31 August, as well as the week before and the week after the day of the elections for the nomination of members of parliament, representatives to the European Parliament and local authorities. This prohibition shall also apply to by-elections and only to the regions where such elections are held.

It is also provided for in the same Article: In the event that a bid is submitted during the last minute of the electronic auction, i.e. from 11:59:00 to 11:59:59 or from 15:59:00 to 15:59:59, an automatic extension of five (5) minutes shall be granted. Therefore, in order for the auction not to be extended, the bid from the prospective bidder must be submitted by 11:58:59 or 15:58:59. Any bid submitted during the last minute of the extension shall be granted a new automatic five (5) minute extension if a higher bid is submitted. Extensions may continue for a period not to exceed one (1) hour from the designated closing time of the electronic auction, at which time the bidding process shall be completed. Therefore, the maximum total number of extensions that may be granted is 12.

(b) Persons eligible to participate in an auction

It is expressly stated in Article 965(1)(a) that the following may be auctioned in the auction 1 of the CCP that the debtor - the owner of the property, the auctioneer and his employees cannot bid in the auction in question, while according to Art. 4354/2015, neither the companies managing loans and credits may bid in the auction, in relation to real estate connected to the loans and credits they manage. 

It is also clarified that direct bidding in the electronic auction in the name of a third party by virtue of a mandate or other legal relationship is permitted. However, as provided for in Article 1003 § 2 of the CCP, any person bidding on behalf of a third party must submit a special notarial power of attorney electronically (see 959 § 5(a)). Otherwise, the property shall be assigned by the proxy.

4. After the auction has been awarded/confirmed

The auction shall be terminated upon the award of the property or upon its cancellation for any reason whatsoever.

i. If the prospective bidder fails to bid on the property (and therefore another person emerges as the highest bidder) or the auction is cancelled, the deposit paid by the prospective bidder, which corresponds to 30% of the price of the first bid, is immediately returned (in practice within a few working days) upon request to the auction official - notary.

ii. If the prospective bidder succeeds in bidding, then the latter must take the following steps, in cooperation with the auctioneer-notary and his legal adviser: 

a) Within 5 days from the date of the auction, the tax return shall be submitted by the auctioneer and his/her legal advisor, the auctioneer and his/her legal advisor. The above-mentioned declaration must be carefully checked and then accepted by the successful bidder.

b) Within 3 working days from the date of submission of the declaration, the relevant tax must be paid by the successful bidder.

c) Within 10 working days, the successful bidder shall pay the remaining amount of the auction and the user fee, after deducting the amount paid as security deposit. This amount shall be paid either into the above-mentioned special bank professional account of the auctioneer or by cheque issued by a bank on the third working day following the auction. If the successful bidder fails to pay the balance of the auction price and the user fee in due time, the auctioneer will send an extrajudicial notice within 2 working days (although in practice it takes much longer to send the notice). If the auction fee is not paid within the 5 working days following the summons, the auction will be overturned and the security deposited will be forfeited. In simple terms, non-payment of the bidding premium or late or incomplete deposit of the bidding premium does not immediately result in the invalidity of the auction but renders the successful bidder in default without notice after the 10th working day following the award. However, after 15 working days from the day of the auction and the auctioneer's compliance with the above procedure, the award will be reversed.

d) Obtaining a copy of the auction report from the auction clerk, as well as the summary of the auction report.

e) Registration of the summary of the auction report at the competent land registry office in order to effect the transfer of the lien on the property.

f) Within 60 days of the registration of the abstract at the competent land registry office, the time limit for filing an appeal for annulment of the auction on behalf of the debtor begins.

In the event of the auction being cancelled due to the absence of bidders (declaration of the auction as inconclusive), Article 966 of the CCP applies, which provides for the following:

a) The creditor calling the auction may request that the property be awarded to him at the first bid price.

b) In the event that the obligee fails to request that the auctioned property be awarded to him, then a second re-auction shall be held on a new date to be determined by the auction clerk within forty (40) days and at the same first bid price. Unless expressly provided by law, the aforementioned time limit shall commence upon the filing of a notice of resumption of the auction.

c) If the 2nd auction is also declared unsuccessful, in the 3rd auction the first bid price is automatically reduced by 20%.

d) If the 3rd auction is also declared inconclusive, in the 4th auction the first bid price shall automatically be reduced by an additional 15%, i.e. by a total of 35%.

e) In case the 4th auction is also declared unsuccessful, then upon filing an objection 933 CCC of anyone with a legitimate interest, the Court may either lift the seizure or order a new auction with a bid price equal to 65% of the originally set price or even with a lower price.

iv. The auction may not be held (suspended or cancelled), not only because it has been declared inconclusive, but also for the following reasons: 

- Repayment of a claim by the debtor.

- Agreed cancellation of the auction due to e.g. debt adjustment or a one-off payment of a significant part of the debt.

- Suspension of enforcement proceedings due to a court decision or final submission of an application for inclusion in Law 4738/2020 (extrajudicial mechanism - see here).

- Judicial suspension of the auction under Article 1000 of the Code of Civil Procedure (see here).

- Option to revoke an order on behalf of the debtor up to a few minutes before the auction is completed, for reasons relating to the latter.

5. Instead of epilogue: The case of cancellation of the auction

Finally, it is worth mentioning that if for any reason the auction of the property is cancelled by a final court decision, then the transfer of the auctioned property to the successful bidder becomes legally defective and, consequently, it is considered that the defendant - the original owner of the property - never lost ownership of it. Accordingly, the successful bidder, who in fulfilment of his obligations from the auction has paid the auction price, is entitled to take the following actions:

- First, pursuant to Article 1018(c) of the CCP, he may accelerate an auction on the disputed property, based on the decision that annulled the execution and the certification of the auction official that the auction proceeds have been paid and distributed. In any case, if a new auction (by a third party/lender) is held on the disputed property, the claim of the successful bidder in the cancelled auction to take over the auction proceeds paid and distributed in the cancelled auction shall be ranked immediately after the costs of the execution of the new auction and before the preferentially secured claims.

- Second, on the basis of the principle of the right to claim the property of the estate, which is derived from Art. 904 CC, that the sums paid in fulfilment of an invalid contract are recoverable, he can demand the return of the auction proceeds by an action not against the debtor, but primarily against the bank that accelerated the auction and the other creditors who may have received part of the auction proceeds during its distribution (cf. on this issue and the decision of the Plenary of the Supreme Court No. 5/2018, where it resolved the controversy).