Bankruptcy Law

With the exception of repossessions, the bankruptcy judge may order the sale of a debtor's real estate assets, by judicial or amicable auction. The Commercial Code sets out provisions common to these two methods of disposal, before considering their specific rules.
Firstly, in accordance with Article R. 642-22 of the Commercial Code, the bankruptcy judge's order must determine the price to be paid …

General provisions

With the exception of repossessions, the bankruptcy judge may order the sale of a debtor's real estate assets, by judicial or amicable auction. The Commercial Code sets out provisions common to these two methods of disposal, before considering their specific rules.

Firstly, in accordance with Article R. 642-22 of the Commercial Code, the bankruptcy judge's order must determine the price to be paid for each of the assets to be sold, the essential conditions of the sale, the methods of advertising, taking into account the value, nature and location of the assets, and the procedures for inspecting the assets. The bankruptcy judge may specify that in the absence of bids reaching this reserve price, the sale may be carried out at a lower reserve price set by the bankruptcy judge.

In accordance with Article R. 642-23(1) of the Commercial Code, the bankruptcy judge's order must then be notified to the debtor and to the creditors registered at their elected domicile by registered letter with acknowledgement of receipt. The auditors are notified by the court registrar. The “elected domicile” at which notification must take place can only be that elected by the creditor entered in the registration itself . The liquidator may not, without committing a personal fault engaging his liability, communicate to the lawyer he has instructed to sell the debtor's property by auction an inaccurate address, which has led to the summons sent to the latter becoming a report of unsuccessful searches, resulting in the nullity of the auction .

The pursuer or the appointed notary must draw up a book of conditions of sale, which includes the order, a mention of its publication, the designation of the property to be sold, the origin of ownership, the easements encumbering the property, the leases granted on the property and the description report, as well as a mention of the upset price, the conditions of sale and the terms of payment of the price .

The bankruptcy judge's order has the same effect as the summons provided for in Article R. 321-1 of the Civil enforcement procedures (Code des procédures civiles d'exécution). It is published in the real estate register at the request of the liquidator or the pursuing creditor, under the conditions laid down for the aforementioned summons . In accordance with Article R. 642-23(3) the land registry service publishes the order, even if previous orders have been published. These orders cease to have effect from the date of publication of the order. A property seizure procedure cannot be annulled on the grounds that the order authorizing the sale by public auction was published more than 90 days after it was pronounced, since the publication period actually runs from the date on which the order became res judicata with regard to the persons mentioned in Article R. 642-23 of the Commercial Code . Similarly, the auction of a property cannot be annulled on the grounds that the sale took place at a lower price, even if this option was not mentioned in the advertisements, when, duly provided for by the ordinance of the bankruptcy judge, it was included in the specifications, which could be consulted by potential bidders .

Failure to issue a summons to pay to the debtor cannot invalidate the sale by auction procedure, since the bankruptcy judge's order authorizing the sale of the property by auction, pursuant to Article L. 642-18, has the same effect as a summons to pay . Where the property sold by way of seizure is owned jointly by the spouses, the authorization of sale by the bankruptcy judge, followed by the judgment rendered on the opposition, replaces the summons to pay provided for in Article R. 321-1 of the Code of Civil Enforcement Procedures  for both the person in liquidation and the spouse in good standing.

Pursuant to Article R. 321-1, the seizure order for payment ceases to have effect ipso jure if, within five years of its publication, there has been no mention in the margin of this publication of a judgment recording the sale of the seized property . On expiry of this period, and until publication of the title of sale, any interested party may ask the enforcement judge to note the lapse of the summons and order that this be mentioned in the margin of the copy of the summons published in the real estate register . The time-limit may be suspended or extended . The enforcement judge is competent to rule on a request for an extension of the effects of an order issued by the bankruptcy judge ordering the sale of a property belonging to a debtor in liquidation by judicial auction . On the other hand, the liquidator cannot apply for a three-year extension of the effects of the order authorizing him to proceed with the seizure of a property belonging to the debtor, if the order ceased to have effect two years ago, in the absence of an auction mentioned in the margin of this publication or of a judgment extending the time-limit before that date . An extension of the auction period is justified when, despite multiple postponements, it has not been possible to reach a sale or an amicable agreement . In the case of a simple request for an extension of the auction period, the court is not required to determine whether the specifications were filed with the intervention of the bankruptcy judge .

Subject to any incapacities arising from the functions they perform , any person may bid if they can provide guarantees of payment . In accordance with Article L. 322-10 of the Civil enforcement procedures code, the auction results in the forced sale of the seized property, transferring ownership to the successful bidder. It confers no rights on the latter other than those belonging to the distrainee. The latter is obliged to deliver the property to the successful bidder and to guarantee against eviction. The successful bidder must have the auction deed or judgement published at the Land Registry within two months of its date and, in the event of an appeal, within two months of the confirmatory judgement, failing which bids may be reopened at the behest of the liquidator .

Within three months of the auction, the successful bidder must also pay into the deposit account opened by the liquidator at the Deposit and Consignment Office (Caisse des Dépôts et Consignations) the full amount of the auction price, including interest at the legal rate from the date on which the sale became final until the date of payment. Once this deadline has passed, the liquidator will send a registered letter with acknowledgement of receipt requesting the buyer to make the payment, failing which the auction will be repeated . On the other hand, the successful bidder is not obliged to pay, even provisionally, the amount of annual instalments due to the mortgagee .

The deed of sale is only issued to the successful bidder on proof of payment of the taxed costs . In the absence of payment of the price or its deposit and payment of the costs, the sale is cancelled ipso jure, in application of Article L. 322-12 of the Civil enforcement procedures code. The defaulting buyer is also liable for payment of the difference between his bid and the resale price, if the latter is lower, and cannot claim reimbursement of the sums he has paid.

Payment of the price to the liquidator and of the costs of the sale entails purge of all mortgages and liens on the debtor, in application of Article L. 642-18 of the Commercial Code. The successful bidder may not, before having made these payments, carry out any act of disposal on the property, with the exception of the constitution of a mortgage accessory to a loan contract intended for the acquisition of this property. In the case of a forced sale, payment of the auction price or its deposit is not a precondition for the mortgage to take effect, since it occurs on the day of publication of the auction judgement, after which the registered creditors have no claim other than on the price .

The judgment of adjudication must be notified to the debtors so that it can be enforced against them, even if they have been divested of the property awarded by the judgment of judicial liquidation and are occupants without right or title . On the other hand, the rights of the purchaser of a property, awarded by outbidding, to demand payment of an occupancy indemnity and eviction of the debtor, who has become an occupant without right or title, are not affected by the failure to notify the debtor of the adjudication judgment, if the debtor has, during the course of the proceedings, rectified this omission, provided that it has not constituted an obstacle to the debtor's exercise of the irresponsible bidding procedure .

Cass. com., 26 February 2020, LawLex202300005417JBJ (LJ).

Cass. com., 14 January 2004, LawLex202300005658JBJ (LJ).

Cass. civ., 18 April 2018, LawLex202300005064JBJ (LJ).

Cass. com., 7 April 2004, LawLex202300005406JBJ (LJ).

Cass. com., 2 June 2004, LawLex202300005415JBJ (LJ).

C. com., art. R. 642-26: the liquidator may not, in his capacity as agent, be declared the purchaser of the debtor's real estate.

Cass. com., 9 June 1992, LawLex202300005069JBJ (LJ).

Cass. com., 25 September 2019, LawLex202300007477JBJ (LJ).

Cass. 2e civ., 5 June 1996, LawLex202300005504JBJ (LJ).

Cass. 2e civ., 13 July 2005, LawLex202300005408JBJ (LJ).

Cass. 2e civ., 30 March 2000, LawLex202300005404JBJ (LJ).

Cass. 2e civ., 9 December 1997, LawLex202300005403JBJ (LJ).

Cass. com., 26 January 2010, LawLex202300005400JBJ (LJ).

Cass. com., 16 June 2004, LawLex202300005402JBJ (LJ).

CPC exec., art. R. 321-21; Cass. civ., 18 April 2018, LawLex202300005064JBJ (LJ), issued before the adoption of Decree 2020-1452 of 27 November 2020 modifying the time-limit from two years to five years.CPC exec., art. R. 321-21; Cass. civ., 18 April 2018, LawLex202300005064JBJ (LJ), issued before the adoption of Decree 2020-1452 of 27 November 2020 modifying the time-limit from two years to five years.

Bankruptcy Law

911. General provisions

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911. General provisions

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