Benefits of public auction

Written by: René Jakl
Photo by: Věroslav Sixt

How can you recover a debt that a court has already recognized as your due – perhaps you have a lien, for example, as collateral – but the debtor is unwilling to pay?

Until 2000 there existed only the possibility of court enforcement of a decision based on a legal finding (see “Legal Labyrinths” in the 9/2003 issue). However, since May of 2000, Law No. 26/2000 Coll., on public auctions, has been in force, allowing creditor satisfaction out of court. Over the course of three years the enforcement of this law in practice has sufficiently brought to light its strengths and weaknesses. As compared with court enforcement of a decision, so-called execution, its main advantage is the speed of the procedure. On the other hand, higher costs usually appear as the disadvantage of this method for settling disputes.
As attorney Mgr. Denisa Přibylová says, the law on public auctions recognizes two types of auction: voluntary, which is held on the proposal of the owner of the real estate or movable, and involuntary. If a creditor wishes to satisfy his claim through an involuntary public auction of the debtor’s property, he turns to a concession-holding auctioneer, to whom he submits documentation proving his rights. Most often this involves an enforceable court decision, but an enforceable arbitration finding also suffices, as does a notarial record, or possibly an affidavit in the form of a notarial record.
Items, apartments, non-residential spaces, rights to property values that are transferable, and companies can all be auctioned. All persons affected by the auction are notified by the auctioneer via an auction announcement. As opposed to court execution, he has the obligation to announce the public auction at a central internet address, 30 days prior to the auction. Only those who deposit a certain amount of money, a so-called auction security, are entitled to participate in the auction.
If the auction’s yield is not sufficient to settle the accounts receivable of all of the creditors who have registered for the auction, they are settled in an order stipulated by the law. In certain cases an auction can be aborted. This happens mainly in cases when the debtor voluntarily settles his debt, when the party proposing the auction requests that it be aborted, when the subject of the auction has been included in bankruptcy property, as well as further reasons set forth in the law. If the subject of the auction has not been sold, or if the winner of the auction fails to pay the auction price, another auction can be held with a lower initial bid price.