Serwis Komorników Sądowych

Enforcement against Real Estate Property

Enforcement against real estates is a method of pecuniary performance enforcement. It is conducted to obtain monies to satisfy creditor's pecuniary performance, granted to the creditor from the debtor by an enforceable document (an enforcement title with an enforcement clause appended thereto). However, the creditor will obtain his/her satisfaction only if the real estate is sold during enforcement proceedings. However, if no sale takes place, the enforcement will be unfavourable for the creditor, and after the second compulsory auction, the enforcement officer shall discontinue enforcement proceedings, and another enforcement can be addressed to the same real estate only after one year elapses from the former enforcement discontinuation.

It requires highlighting that the debtor may avoid the real estate being sold if he pays the whole debt together with the costs of enforcement proceedings. In this case, the enforcement officer shall discontinue the enforcement proceedings at the creditor's request.

Polish process law adopts a principle of enforcement initiation at the request of the creditor, and this is similar in the case of enforcement against real estates. Therefore, an enforcement officer will be able to pursue enforcement, and to adopt enforcement activities only when the creditor submits an efficient motion for the enforcement to be initiated. This shall indicate the debtor; the real estate and determine the value of the claim which the enforcement officer is to enforce against the debtor, at the same time, enclosing to the request an enforceable document in which the performance under enforcement was adjudicated to the creditor.

An enforcement officer is the person who conducts enforcement against real estates, but he does it only until the auction is completed. After the auction of the real estate, the court takes over the enforcement, by the same excluding the enforcement officer from any further enforcement acts.

Thus, enforcement against real estates, depending on its phase, is pursued either by an enforcement officer or by the court. The name of this enforcement method indicates the fact that the enforcement is addressed to a real estate which according to Polish Civil Law means a part of a land area which makes up a separate object of property (land), as well as buildings permanently fixed to the land or parts of such buildings, if by force of particular provisions they make up an object of property separated from the land (e.g. a flat constituting a separate object of property). Apart from a real estate, enforcement can be also carried out from the right of perpetual land usufruct which is a right in property of a slightly different nature than the property right, but it is protected in the same way as the latter. It can be also pursued from several limited rights in property, such as: property co-operative right either to a flat or commercial premises and the right to a detached house in a housing co-operative. As a sea-going ship entered into a ship register is treated by law as a real estate, therefore, also such a ship can be subject to enforcement in this method.

The question of venue to pursue enforcement against real estates is determined by process law to the benefit of an enforcement officer in whose district the real estate is located. This enforcement officer is exclusively authorized to conduct enforcement unless this real estate is in a district of venue of several enforcement officers; then, the creditor determines the enforcement officer by choosing one.

Enforcement against real estates is composed of a few stages of proceedings, i.e. seizure of a real estate, its description and evaluation, auction sale, knocking down, adjudication of the real estate ownership and appropriation of the amount obtained from the enforcement. In the enforcement against real estates, it is very important to establish the moment of real estate seizure, as this determines to a large extent further proceedings of the enforcement. The provisions of the C.C.P. (art. 923-925) define in what manner and when a real estate is seized, stipulating that the real estate is seized with reference to the debtor the moment he has been served a summons by the enforcement officer to make the payment (before he undertakes the first enforcement act, the enforcement officer summons the debtor to make the payment of the debt within two weeks under pain of starting the description and evaluation). However, the seizure of a real estate (with reference to any person) always takes place at the moment when the enforcement officer submits a request to make a mention about the enforcement being in course in the land and mortgage register (if a land and mortgage register was opened for the real estate). Furthermore, a real estate will be always seized against anybody who knew about the initiation of the enforcement, the moment when this person learned thereon, although the enforcement officer has not sent summons to make the payment to the debtor, nor has he submitted a motion for a mention on the conducted enforcement to be entered into the land and mortgage register.

The essence of a real estate seizure is such that for the course of enforcement proceedings the fact of selling the real estate has no importance if it takes place after the seizure of the real estate. The enforcement is pursued in such a case notwithstanding the fact that the debtor transferred its ownership. The acquirer may act in the further proceedings in the character of the debtor.

For the needs of enforcement, there is a legal fiction adopted meaning that the new owner of the real estate is still deemed to be the debtor although the contract of sale had legal consequences and transferred the ownership of the real estate to a third person. The adoption of any other solution would frequently lead to the annulment of enforcement by a debtor who, selling the real estate, would be able to avoid the enforcement.

The seizure of a real estate has also another effect. Burdening of a real estate after its seizure, e.g. with a mortgage has no impact on enforcement course as the mortgage creditor who obtained the entry of the mortgage cannot claim his rights arising from this entry during the course of enforcement. Such a creditor has the nature of a personal creditor not a mortgage one, and in consequence, his claim shall be satisfied in the distribution plan of the sum obtained from enforcement as a non-privileged claim.

Another consequence of the real estate being seized is the inadmissibility of addressing any other independent enforcement against the real estate being seized. Therefore, if another creditor wants to conduct enforcement against the same real estate, he may only join the enforcement being initiated, and participate therein as a subsequent creditor. If he acts in such a way, he will have the same rights as the creditor who initiated the enforcement.

At the phase of real estate seizure, there is another process institution, and this is the management of the real estate being seized. This comes into being by force of law the moment the real estate is seized, and it consists in the fact that an administrator takes over the management of the real estate (conducting all matters relating thereto). It is the debtor who plays this function, as the provisions of the C.C.P. stipulate that the real estate seized is left at the management of the debtor. However, starting from that moment, the debtor pursues the managing acts of the real estate not as its owner, but exclusively as its administrator.

The purpose of this management of the seized real estate is to protect the proper course of enforcement, and primarily to protect the real estate from a loss of its value (the real estate which lost its value in consequence of improper management of its matters will not be attractive to potential purchasers, and furthermore, the amount obtained from its sale will be lower than expected).

The administrator submits reports on management to the court in deadlines assigned by the court. They include reports on acts undertaken and accounting data. Based thereon, the court evaluates if the administrator undertakes proper acts, and if his acts do not prejudice enforcement procedure.

If the administrator fulfils his duties in an improper manner, to the detriment of the proceedings being in progress, the court shall deprive him of the management, and entrust it with another person. The court adopts this decision ex officio, or at the request of the creditor or debtor as the management can be withdrawn not only from the debtor but also from any other administrator appointed thereafter.

Thus, the debtor may initiate this activity of the court. When the debtor has not paid the debt in the deadline assigned to him, the enforcement officer at the request of the creditor shall start a subsequent phase of enforcement, i.e. drawing up of the description and evaluation of the real estate. The description and evaluation takes the form of a protocol in which the enforcement officer describes the real estate (its location, area, borders, designation, buildings and facilities located thereon, rights and charges ascertained on the real estate, and he also indicates in whose possession the real estate is), and he states the value which must be established with the assistance of an expert for the assessment of real estates. The enforcement officer may not fix the value of the real estates independently as the C.C.P. limits his right in this area, introducing the duty of getting an expert opinion to assess the real estate, as the evaluation of a real estate value is so important that it must be carried out by a person having a proper vocational education. The enforcement officer notifies all participants in the proceedings about the deadline for the description and evaluation of the real estate, and furthermore he must publish this information, putting up a notification in the building of the court or of the municipality in which this real estate is located.

The description and evaluation may be appealed against to the court within seven days from its completion in the form of a complaint against the enforcement officer's deeds.

The subsequent phase of enforcement is the real estate's auction. Its deadline is assigned by the enforcement officer not earlier than a month after the description and evaluation of the real estate becomes legally valid. The date of public auction should be also reconciled with the enforcement court, as the enforcement officer shall carry out the auction under the supervision of a judge. The enforcement officer notifies the public on the auction by a public notification which is displayed at least a month before the date of the auction in the court building and in municipality premises where the real estate is located, and when the real estate is evaluated for an amount in excess of fifty thousand zloty, the enforcement officer shall also publish the auction in a newspaper popular in a given locality. At the request and cost of the party, the enforcement officer may also order the publishing of the auction date by another method indicated by this party, which usually means publishing this information in another newspaper indicated thereby.

Furthermore, the enforcement officer serves the notification on auction to the participants of the proceedings, the municipality and the treasury office of the place where the real estate is located, as well as to social security bodies.

In the notification on auction, the enforcement officer shall indicate the real estate which is to be sold. (He describes its location, shows its economic designation, indicates who is the debtor). He gives the time and place of auction. He mentions the evaluated amount (the determined real estate value) and the starting price (the lowest price at which it is possible to buy the real estate at the auction - at the first auction it is three fourths of the evaluated sum, and at the second auction it is two thirds of the evaluated sum). Then, he states the value of the deposit (this is an amount of money corresponding to one tenth of the evaluated sum which shall be submitted to the enforcement officer by everybody who intends to participate in the auction of the real estate) and indicates other circumstances significant to people who intend to participate in the auction.

A properly drawn up notification on auction shall give all necessary information with reference to the real estate and the auction conditions, so as to provide sufficient data to the people who intend to participate therein, and so as to facilitate their adoption of a decision to join the auction.

The real estate auction is public; it is conducted by the enforcement officer, supervised by a judge. Anybody who pays the deposit to the enforcement officer may participate in the auction with the intention of purchasing the real estate. However, this right does not pertain to the debtor, enforcement officer, their spouses, and their children, parents, brothers and sisters. Nor may the persons who appear in an official capacity at the auction (the judge who supervises its proceedings), nor those who made the highest bid at a former auction but did not pay.

The auction is conducted orally and shall be pursued if at least one person takes part in it. It is pursued in such a way that the bidders submit subsequent bids (they submit subsequent price proposals for which they are ready to purchase the real estate) which may not be lower than 1% of the starting price.

When there are no more proposals, the enforcement officer informs those attending that after the third notification of the price offered as the latest one, no further deeds shall be accepted, and he repeats the last bid offered three times and closes the auction, stating the name of the bidder who offered the highest bid. The court in the person of the judge who has supervised the auction issues a decision on the real estate being knocked down to this bidder. In this decision, the court states who purchased the real estate and for what price.

If nobody expressed an intention to participate in the auction, the auction may take place at another time within another deadline if the creditor so requests.

Starting from the moment when the decision on the knocking down of the real estate has been adopted, the enforcement proceedings are conducted by the court and therefore, it is exclusively the court that adopts any further enforcement activities. The court summons the acquirer of the real estate to put the whole price of the real estate purchased in cash into the court deposit within two weeks, with the deduction of the deposit paid earlier.

If the acquirer of the real estate makes the payment, the court shall issue a decision adjudicating the property thereto. This decision finally transfers the ownership of the real estate to the acquirer. It forms a basis to reveal this right in the land and mortgage register conducted for a given real estate and to cancel mortgages.

From the moment it has become legally valid, the acquirer has the right to all fruits coming from the real estate, and is charged with all public charges related thereto.

A valid decision on property adjudication also has another effect - all rights and results of personal rights and claims which are revealed as charging the real estate expire, in consequence of art. 1000 §1 of the C. C.P.

These rights are replaced by the right of the beneficiaries to satisfy themselves from the price obtained from the sale of the real estate.

In consequence, the acquirer of the real estate may demand all rights which have expired (art. 1003) be cancelled from the land and mortgage register. He may do it by presenting the decision on the adjudication of the property with the validity clause appended.

The decision mentioned above also makes up an enforcement title for the acquirer to take over the possession of the real estate, if the real estate is in the possession of the person mentioned in the description and evaluation of the real estate as its possessor, and this person objects to the real estate being delivered. The acquirer of the real estate does not need to conduct separate examinatory proceedings for the real estate to be issued, addressed against its possessor. Intending to conduct enforcement of a decision for the delivery of the real estate, he must request the court to append a fieri facias clause to this decision, as on principle any enforcement may be pursued exclusively on the basis of an enforceable document (an enforcement title with a fieri facias clause appended).

The last phase of enforcement against a real estate is drawing up of an appropriation plan of the amount obtained from enforcement. This plan is drawn up by the court and therefore, it takes the form of a decision. In the plan of appropriation of the sum obtained from enforcement, the sum which is subject to appropriation is mentioned (the sum gained as a result of the enforcement), claims and rights of the appropriation participants, amounts which fall to each appropriation participant, amounts which may be paid out, or which are to be retained in the court deposit, with the reason justifying their retention stated, and the rights revealed in the land and mortgage register which have expired in consequence of the property being adjudicated.

In the appropriation of the amount obtained from enforcement, apart from the creditor who conducts the enforcement (the creditor who initiated the enforcement and also that, who joined the enforcement initiated) there participate creditors who deposited the enforceable documents with the confirmation that the debtor has been summoned to make the payment, and the creditors who obtained a safeguard of their claims, if they reported at the latest on the day when the decision on the real estate property adjudication became valid. Also those who before the real estate seizure, obtained the rights on the real estate confirmed in the description and evaluation, or claimed and proved at the latest on the day when the decision on knocking down has become valid. Furthermore, employees participate therein with their claims for earnings confirmed by a document if they submitted their claims before the appropriation plan was drawn up (their claims shall be accounted for in the appropriation plan although they have no enforceable document).

The provisions of the C.C.P. foresee a determined sequence for satisfying claims submitted, dividing them in two categories. There is a principle that the satisfying of claims of a further category may take place on condition that the claims from the former categories are fully satisfied. However, if the sum under appropriation is not sufficient to satisfy wholly the claims and rights of the same category, they will be satisfied proportionally to the amount of each of them (the principle of proportional satisfaction of claim was adopted; but when claims safeguarded as a mortgage or pledge, or else enjoying the binding priority are to be satisfied, they will be satisfied in the sequence corresponding to their priority).

Another principle which should be met while appropriating the amount obtained from the enforcement, is that the sum assigned to a creditor is first of all accounted for costs of proceedings (costs incurred in the proceedings in which the enforceable document was appended), then interest and at last the due amount.

The claims submitted shall be satisfied in the following sequence:

1) enforcement cost,

2) maintenance dues,

3) earnings for a period of 3 months, up to the amount of the lowest remuneration for work determined in separate provisions, and a pension which is an indemnity due to: a disease, a work disability, lameness or death, and costs of an ordinary funeral for the debtor,

4) dues arising from claims safeguarded with a maritime mortgage,

5) dues safeguarded with a mortgage or a pledge by registration, or those safeguarded by being entered into any other register,

6) earnings unsatisfied in the third category,

7) dues to which the provisions of chapter III of the 29th August 1997 Tax Code (Journal of Laws no 137, item 926, as amended) are applied if they were not satisfied in the fifth category,

8) dues safeguarded with the right of pledge or which were entitled to legal priority, not mentioned in the earlier categories,

9) dues of creditors who conducted enforcement, those adjudicated in penal proceedings included, such as dues arising from the duty to redress a damage, smart money or a pecuniary benefit, unless because of the type of these dues, they are subject to satisfaction in a higher category (art. 196 § 2 of the Executive Penal Code),

10) other dues.

After all claims have been satisfied, pecuniary penalties, judicial and administrative fines are satisfied.

Together with the claims, interest and costs of proceedings are satisfied to an equal extent. However, exclusively interest for the last two years before the adjudication of the property, and the costs of proceedings which do not exceed one tenth of the capital have the priority equal to the claims of the sixth category. Other interest and costs are satisfied in the eighth category. The same refers to performances due to a life annuitant (performances arising from a life annuity contract).

If any of the following: a co-operative property right to a flat, a co-operative right to commercial premises or to a detached house in a housing co-operative is the enforcement object, the claim of the housing co-operative arising from an unpaid 'building deposit' related to this right is satisfied before the claim secured on this mortgage right.

The court notifies the debtor and the persons who participate in the appropriation on having drawn up a plan of appropriation of sums obtained from enforcement, therefore, there is no duty to serve them this plan.

The persons notified may become familiar with the appropriation plan in the court's secretarial office.

The appropriation plan of the sum obtained from enforcement may be appealed against in the form of objections. The deadline to submit the appeal is two weeks starting from the date of being served the notification on its drawing up. Objections to the appropriation plan for the amount obtained from enforcement are examined by the court which pursued the enforcement and its decision issued in consequence of the objection being examined may be appealed against to a higher instance court with a complaint submitted within seven days following the decision being served.

After the appropriation plan becomes legally valid, the payment of sums in accordance with the adopted plan is ordered from the court deposit.

It needs emphasizing that in spite of any objections, the plan shall be carried out, although only to the extent that is not concerned by the objections.

Roman Kowalkowski

Exchange rates of 2010-07-29

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