A spontaneous sentence circulated among people, causing a misconception about the prices of properties being sold at public auctions, suggesting that they would be sold at low prices! Especially those properties referred by banks!
This belief stems from the idea that the reason for referring the property for sale at public auction is the inability of the property owner to repay the property value regardless of the reason. Those who follow the announcements of public auctions in official newspapers will notice that most of the properties referred to auction are bank properties, after the debtor has defaulted on repaying the mortgage to the bank. Perhaps this indicates that bank properties, when referred to public auction, are sold at a somewhat higher price to ensure the creditor's right to recover the property price and preserve the debtor's right from exploiting the public auction.
But at Homes Jordan, we will clarify and correct all common misconceptions about public auctions and discuss the legal procedures for them.
Simply put, a public auction is one of the legal means of recovering financial rights! The public auction is the last resort resorted to by the creditor after exhausting all legal procedures to collect their dues from the debtor, by submitting a request to the Execution Department and obtaining approval from the Chief of Execution to refer the property for sale at public auction!
To correct the misconception of "Property Bargains for Sale at Public Auction" and the idea that it is sold at a low price, which many overlook as they rush to the public auction in pursuit of a "bargain," the role of the Jordanian legislature comes into play in protecting private properties and ensuring the rights of both the creditor and the debtor. This is achieved through reviewing and amending laws to ensure the creditor's right to recover their dues and protecting the debtor's right by preventing the exploitation of property referral to public auction and prohibiting its sale for less than its true market value, especially when it comes to bank properties, a type of non-transferable assets that will be focused on in our article.
Referring movable and immovable assets to public auction comes after a series of legal procedures in recovering the creditor's rights, so they resort to judicial procedures, which include public auction.
Generally, the legal procedures for placing movable and immovable assets in public auction are as follows:
- The execution lawsuit is registered.
- The debtor is notified to repay within 7 days from the date of notification before proceeding with enforcement.
- The debtor is required to repay during the notification period.
- If the debtor is unable to repay during the repayment period, they must offer a financial settlement of not less than 25% of the amount awarded in favor of the creditor.
- If the judgment debtor does not agree to the settlement decision and a decision is issued by the Chief of Execution to reject the settlement, the judgment creditor has the right to complete the enforcement procedures, which include:
- Requesting the debtor's imprisonment for 90 days per year, noting that this procedure does not extinguish the debt.
- Requesting a travel ban on the debtor to ensure they do not leave during the execution period.
- Requesting the seizure of the debtor's funds, and from here, the groundwork for seizing movable and immovable assets begins, with a reminder that we are specifically discussing real estate here, although all procedures apply to both movable and immovable assets. In the following paragraph, the stages of placing a lien on the property and selling it at public auction will be detailed.
When the debtor defaults on repaying the debt within 7 days of the seizure notification, the stage of selling the property at public auction comes after completing these procedures:
1. The creditor (the judgment creditor, here we will talk about the bank) applies for a lien on the property.
2. The Chief of Execution issues a decision to place a lien on the property in the land registry.
3. The creditor (the bank - the judgment creditor) applies for the sale of the property at public auction.
4. The Chief of Execution notifies the debtor that the property will be sold forcibly at public auction if they fail to repay the debt within 7 days of the notification date.
5. After the period expires without debt repayment, the Chief of Execution decides to put the property up for sale at public auction.
After the decision by the enforcement chief to auction the property publicly, the following procedures are initiated to prepare for the sale of the property at public auction:
- A list of sale conditions for the property is organized upon the request of the judgment debtor, by the enforcement officer who physically places his hand on the property after obtaining approval from the enforcement chief. The list of conditions includes: the execution instrument, registration of the commercial record on the date of the seizure, a certificate of taxes due on the seized property, and any associated costs.
- A date for the sale is determined after a decision is made by the enforcement chief confirming that all procedures have been correctly executed.
- A clear advertisement for the sale of the property is issued, including specifications of the property at the time of seizure, names of the debtor and creditor, the specified time for bidding, sale conditions, and participation requirements.
- The advertisement is published in a daily newspaper, and a copy is posted on the court's bulletin board and on the door of the seized premises.
- The enforcement department under the Court of First Instance is responsible for selling immovable properties at public auction.
- Seizing the property where the debtor resides or their common share in it is not permitted unless the house or common share is mortgaged, subject to security, or the debt arises from it. In such cases, a portion of it may be seized and sold to satisfy the mortgage, security, or loan.
- When seizing rented property, the tenant must be notified to refrain from paying rent to the debtor (the judgment debtor) and instead deposit the amount with the court fund.
- Forceful entry onto the property, such as breaking doors, is prohibited except by order of the enforcement chief and in the presence of police officers or witnesses, with the minutes signed.
Firstly, physically placing the hand on the property by the enforcement officer requires the assistance of experts to evaluate the property and its value based on its specifications. Later, a detailed report is prepared by the real estate expert regarding the property's value and placed in the custody of the court within the legal period. This is a requirement of the property's conditions list.
Secondly, the base price is established to commence bidding on the property, which is the price set to start the auction or bid opening.
Upon issuing an advertisement for the sale of bank properties at public auction, notifications of the advertisement are also sent to all relevant parties such as the creditor and debtor. This session constitutes a formal legal meeting subject to the internal regulations of the session management, and it proceeds under the following conditions:
- Each participant must pay a deposit of 10% of the assessed value of the seized property offered for sale, from each participant in the session.
- The attendance must not be less than three individuals submitting bids.
- The session chairman verifies the legal quorum of the bidders.
- After opening the bids, the chairman must ascertain the presence or absence of the concerned parties and notify them of the auction session.
- The chairman also ensures the proper publication of the auction session announcement with all its conditions.
- The session commences by writing the name of each participant and the price they offer, which must not be less than the base price set for the property.
- The bid is provisionally handed to the highest bidder, then the bid is reopened for a second time for a period of 15 days. After this period, an open auction is conducted among the bidders to determine the highest bidder.
Within 10 days of the definitive referral, the judge issues a decision to finalize the auction and complete the sale of the property by paying the sale price and all due amounts and depositing them with the enforcement department. Only then does the property become the ownership of the judgment debtor.
- The creditor may be exempted from paying the participation deposit if the debt amount exceeds the base price of the property.
- If the judgment debtor is the purchaser, he may be exempted from the decision to deposit the entire price or part of it, taking into consideration his debt amount and position, upon receipt of the referral notice thereafter.
- The judgment debtor is prohibited from disposing of the property for a full year from the moment it is registered in his name, and he can retrieve the money he paid if the debtor or heirs pay the auction price along with fees and dues.
- In some cases, the offered price may be lower than the base price of the property. In this case, the session chairman may postpone it to another date to be decided later.
The electronic auction service is an online bidding system launched by the Ministry of Justice to achieve justice in conducting public auctions and safeguarding the rights of creditors. The Ministry of Justice has a dedicated section for online auctions on its website, listing all immovable and movable properties referred to public auction. This service facilitates bidding for bidders wherever they are, with continuous access to the latest updates of electronic auctions. The steps are as follows:
- Register an account on the Ministry of Justice website under the electronic auctions section by entering personal information as stated on the ID card, along with the IBAN number of the bank account, for the purpose of refunding the bidders' security deposits without the need to visit the court.
- The data is verified by the enforcement department for authentication.
- Payment of the security deposit is made through the electronic payment service.
- Commence electronic bidding.
The article was written based on the following sources:
- https://auctions.moj.gov.jo/UserManual/AuctionInstructions.pdf
- https://jordan-lawyer.com/2022/01/14/selling-real-estate-by-public-auction/
- https://auctions.moj.gov.jo/UsagePolicy.aspx
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