Repeated and Re-Auction: What the Difference Means
In enforcement proceedings the compulsory realization of seized property takes place through a public auction, and the failure of the first auction does not mean the end of the process. The Law on Enforcement Proceedings distinguishes two scenarios: a repeated auction is held where no winner was revealed at the auction, and a re-auction where the winning person did not pay the price of the property within the period established by law. The difference between these two routes is practical: under Article 76 of the law, a re-auction is not counted as a repeated auction.
The realization of movable property takes place according to the rules established by Chapter XIII of the law, taking into account the specific requirements concerning auctions. For a creditor, a debtor or a prospective buyer, knowing these rules matters because the announcement of a repeated or a re-auction, the repeated valuation and the cancellation of results each occur under different conditions.
Valuation of Seized Property and Repeated Valuation
Article 47 of the Law on Enforcement Proceedings establishes the procedure for the valuation of seized property. At the time of the description of the property, where it is possible to determine its market value, the market value of the property is recorded in the act of description and seizure. If it is impossible to determine prices at the description of the property, the property is valued, after the registration of the seizure, by the National Bureau of Enforcement or by another competent person instructed by the National Bureau of Enforcement.
Where, on the basis of an agreement between the National Bureau of Enforcement and the tax authority, a seizure is imposed on a taxpayer's property for the purpose of securing the collection of tax arrears, a repeated valuation of that property in the enforcement proceedings is not mandatory if the valuation of the property to be realized was carried out within 1 year before the commencement of the enforcement proceedings. In addition, a party to the enforcement proceedings has the right to submit an expert conclusion on the market value of the property, under which the property was valued within 6 months before the commencement of the enforcement proceedings; whether to admit the submitted conclusion is decided by the National Bureau of Enforcement.
Announcement of the Auction and the Involvement of Pledgees
Under Article 50 of the law, the National Bureau of Enforcement or another person acting on the basis of a contract with it announces a public auction for the realization of movable property within 1 month from the imposition of the seizure, and in the tax-related case — within 2 weeks from the commencement of the enforcement proceedings. If a right of pledge in favor of another pledgee is registered on the debtor's seized movable property whose compulsory realization is requested by the creditor, the Bureau notifies the pledgee of the commencement of the enforcement proceedings in connection with the realization of the object of the pledge and sets a deadline for the submission of claims.
Another pledgee must submit a claim expressed in monetary form within 10 calendar days of receiving the notice. From the proceeds of the realization of the object of the pledge, the remuneration and the costs of enforcement are covered first, and then the claims of the pledgees are satisfied according to their rank and the submitted claims. Where a tax pledge exists, the claim of the tax authority is satisfied first, while the pledge of certain financial institutions — a licensed commercial bank, micro-bank, microfinance organization or insurance organization — if registered before the tax pledge, takes priority over the claim of the tax authority.
Scenarios After a Failed Auction
If the enforcement proceedings are conducted for the benefit of the state, the autonomous republic's republican or the municipal budget, and no winning person was revealed at the first auction, or if the winning person did not pay the price of the property within the period established by law, the National Bureau of Enforcement is authorized, within 15 days of the end of the auction, to issue an order on the transfer of the property in natura into ownership. If the order is not issued within that period, the Bureau ensures the holding of the first repeated auction — where no winner was revealed — or of a re-auction, where the winner did not pay the price.
The same rule operates at the second repeated auction: if it fails too, the Bureau again has 15 days to issue an order on transfer in natura, and if no order is issued, the property is released from the seizure imposed for the benefit of the enforcing creditor and is returned to the debtor. This sequential system of repeated auctions means that a person interested in the purchase has more than one opportunity, while the debtor and the creditor have a predictable endpoint of the process.
Cancellation of Auction Results and the Re-Auction
Article 76 of the law determines what happens when the winning person at an auction does not pay the price of the property within the period established by law: that person loses the amount submitted as a guarantee on the day of the holding of the auction, and the amount becomes the property of the National Bureau of Enforcement. The National Bureau of Enforcement issues an order on the cancellation of the result of the held auction and, within 3 days of its issuance, announces a re-auction, which is not counted as a repeated auction.
The winner's failure to pay thus entails a sanction — the loss of the guarantee — and moves the process to a new stage: the property is announced again at auction shortly after the order on cancellation. It should also be borne in mind that, upon the transfer of the seized movable property into the ownership of the purchaser, all seizures, rights in rem and obligatory rights existing on it are extinguished, except for the case provided for by the legislation, unless the purchaser expresses the wish to become a party to the obligatory relationship connected with that property.
Frequently Asked Questions
When is a repeated auction held and when a re-auction?
A repeated auction is held where no winning person was revealed at the auction; a re-auction where the winning person did not pay the price of the property within the period established by law. A re-auction is not counted as a repeated auction.
What happens to the winner's guarantee if the price is not paid?
The winning person loses the amount submitted as a guarantee on the day of the holding of the auction, and it becomes the property of the National Bureau of Enforcement.
Within how many days is the re-auction announced after the cancellation of results?
The National Bureau of Enforcement issues an order on the cancellation of the auction result and announces the re-auction within 3 days of its issuance.
What happens to the rights existing on movable property after its purchase?
Upon the transfer into the ownership of the purchaser, all seizures, rights in rem and obligatory rights existing on the property are extinguished, except for the case provided for by the legislation, unless the purchaser wishes to become a party to the obligatory relationship.
Who values the property and how current must the valuation be?
If prices cannot be determined at the description, the property is valued by the National Bureau of Enforcement or a competent person instructed by it. In the tax-related case a repeated valuation is not mandatory if the valuation was carried out within 1 year before the commencement of the enforcement proceedings.
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