Buying real estate at a compulsory auction often means an attractive offer, but this transaction is unlike an ordinary sale: the winner faces strict deadlines, the guarantee deposit is at risk, and the fate of the rights registered over the property depends on who conducts the enforcement. A dedicated legal check before purchasing seized property is essential — we perform that audit and the buyer’s representation on Legal.ge.
How a Compulsory Auction of Real Estate Works
Enforcement against real estate is regulated uniformly: it covers land plots, buildings and a share in common ownership entered in the public registry. Enforcement is carried out by the enforcement bureau in whose territory the property is located; where interests conflict, the decision is taken by the chairperson of the Bureau. The forms of enforcement are registration of a compulsory mortgage, a compulsory auction and sequestration — the creditor chooses one of them and may change the form several times until the claim is fully satisfied. Where the debtor is registered in the public registry as the owner, the compulsory auction is held within 1 month of the imposition of the seizure, and in a separate case provided by law — within 2 weeks of the start of the enforcement proceedings. The forms and procedure of the auction are determined by an order of the Minister of Justice.
The Stability of the Auction After Announcement
From the day the compulsory auction is publicly announced, termination, suspension or postponement of the auction or of the enforcement proceedings, and release of the property from seizure, are not allowed — except in the exceptional cases established by law. This means that the chance of winning an announced auction is real, and the purchase plan must be ready before the announcement. The debtor, or another person acting in the debtor’s interests, may deposit with the Bureau’s account, before the announcement, the amount needed to cover the fee, the enforcement costs and the creditor’s claim; an amount deposited after the announcement is distributed after the auction ends, and the surplus is returned to the debtor if no other proceedings are pending.
The Winner’s Obligations and the Guarantee
The winner of the auction must pay the full price of the property within 10 calendar days of the end of the auction. After full payment the National Bureau of Enforcement issues an order on the right of ownership of the property purchased at the auction. If the price is not paid within the established period, the winner loses the amount submitted as a guarantee on the day of the auction, which passes into the Bureau’s ownership; the Bureau issues an order annulling the result of the auction and, within 3 days of its issuance, announces a new auction, which is not counted as a repeat auction.
Which Rights Survive on the Property and Which Are Extinguished
The consequences of the transfer of ownership differ depending on who conducts the enforcement. If enforcement is carried out by a creditor whose claim is unsecured, the rights registered in the public registry remain unchanged. If it is carried out by a mortgagee or pledgee, on the transfer of ownership all real rights registered after the enforcing creditor’s mortgage are extinguished, except the right of tax lien; a separate rule exists for financial institutions. Earlier registered rights remain unchanged in every case. In addition, the new owner steps into the old owner’s place in the legal relations connected with possession and use, and from the moment of transfer the old owner loses every right to the property.
Third-Party Claims and Our Representation
A third party who claims a right over the property that is the object of enforcement may bring a lawsuit for its release from seizure, served on the debtor and the creditor. Nevertheless, where the property is realized within the enforcement proceedings, its purchaser becomes the owner, and the third party claims damages from the debtor. Note also: the auction consists of a first auction and two repeat auctions; where the market value of the property is less than 5000 GEL, only one auction is held. We check the registries, the seizure acts and the enforcement officer’s orders, assess the risks, and represent you before the auction, during it, and at the registration stage.
Other auction-related services: on the full legal package for the buyer of real estate at auction — Buying Real Estate at Auction — Legal Package for the Buyer, and on the forced auction of vehicles — Forced Auction of Vehicles.
Frequently Asked Questions
Answers to the questions buyers most often ask about compulsory auctions.
Within what time must I pay the price?
The winner must pay the full price of the property within 10 calendar days of the end of the auction.
What happens if I fail to pay in time?
The winner loses the amount submitted as a guarantee on the day of the auction — it passes into the Bureau’s ownership. The Bureau annuls the auction result and announces a new auction within 3 days of issuing the order.
Which rights are extinguished on the property?
It depends on the enforcing creditor: with an unsecured creditor the registered rights remain; with a mortgagee or pledgee, real rights registered after the mortgage are extinguished. Earlier registered rights always remain.
Can the auction be cancelled after announcement?
No — from the day of announcement termination, suspension and postponement are not allowed, except in the cases established by law.
What is the risk if a third party claims the property?
A third party’s lawsuit for release from seizure is directed at the enforcement, but upon realization the purchaser nevertheless becomes the owner; the third party claims damages from the debtor. An audit lowers this risk in advance.
How does a compulsory real-estate auction work?
Enforcement against real estate is regulated uniformly: it covers land plots, buildings and a share in common ownership entered in the public registry, and is carried out by the enforcement bureau in whose territory the property is located. The auction consists of a first and repeat auctions; the winner faces strict payment and guarantee deadlines, while the fate of the rights registered over the property depends on the enforcing creditor — which is why a dedicated legal check before purchase is essential.
How We Help on Legal.ge
Our package includes: a full legal check of the property in the public registry and the enforcement case file; analysis of the seizure and valuation acts; establishing the status of the enforcing creditor, which determines which rights will survive; planning the guarantee and the payment deadline; and representation in obtaining the ownership order. Contact us for a consultation on Legal.ge.