E-note 5 – The attachement of immovable property (Professional E-note)

The regulations governing the attachment of immovable property are found in Chapter VII of the second part of Act LIII of 1994 on Judicial Enforcement ("e;Vht"e;).

1. General rules on the attachment of immovable property

The immovable property owned by the debtor shall be subject to attachment without regard for the nature of said property, the agricultural zoning regulations applicable to it, any rights or prohibitions encumbering it, or any facts regarding the property registered at the Land Registry.

Attachment may apply to the entire property or to the title of the debtor.

The judicial officer must obtain the data related to the immovable property from the authentic Land Registry. Such data may also be requested electronically. The judicial officer may also obtain a non-authentic copy of the title deed, or, using the debtor’s personal data, can request the data related to the immovable properties in his/her ownership via computer nationwide.

2. Seizure of the immovable property

Section 138 of the Vht governs the seizure of immovables:

"e;Vht Section 138 (1)³¹² If the enforcement document contains the data related to the immovable, the judicial officer shall seize the immovable within the next three working days as an advance payment of the enforcement fees, including the payment to the judicial officer of the administrative service fee for the Land Registry procedure. If the party requesting attachment has specified in his/her request that the immovable of the debtor also be subjected to attachment, or if the immovable property of the debtor has not been excluded from attachment, but the data of the immovable were not indicated in the request for attachment, the judicial officer shall take measures towards the seizure of the immovable once the advance on the costs of enforcement has been paid, the data of the immovable has been obtained, and within three days of the date when the administrative service fee is paid to the judicial officer for the Land Registry procedure.

(2)³¹³ With the seizure warrant, the judicial officer shall request the immovable properties authority to register the execution lien in the Land Registry and shall also request that the immovable properties authority, when sending notification of registration of the execution lien, inform the judicial officer of the names and residences (registered offices) of any parties having rights against the immovable registered with the Land Registry. Seizure shall become effective upon registry of the execution lien.

(3)³¹⁴ The immovable properties authority shall grant priority to the registration of the execution lien and to processing the preliminary documents required for it.

(4)³¹⁵ The immovables authority shall serve the judicial officer and all parties holding a right against the immovable registered at the Land Registry with a copy of the decision regarding the registration of the execution lien, and shall also provide the judicial officer with the notification specified in Subsection (2).

The judicial officer’s liability for damages underlies the failure to register the execution lien in the Land Registry.

Registration of the execution lien does not prevent the immovable from being placed on the market, nor does it constitute a prohibition on alienation or encumberment; thus, the immovable may be sold. If a buyer purchases the immovable property from the debtor when it is encumbered by an execution lien, that does not prevent the immovable from being sold by auction. In this case, the buyer could only enforce a claim for damages against the debtor.

3. Time of sale of the immovable property

Vht Section 139 (1) The judicial officer may take steps towards the sale of the seized immovable if the claim in Section 7(2) cannot be recovered in a relatively short time, and if 45 days have elapsed since the judicial officer has received notification of the registration of the execution lien.

(2) If an action for recovery of the property has been launched within 8 days of receipt of the notification of the registration of the execution lien, measures for the sale of the immovable property can be taken after the action for recovery has concluded with a binding decision.

(3)³²⁰ The judicial officer has the obligation to publish an announcement regarding the auction of the immovable property and stating its estimated value in the electronic registry of auction announcements. If an action for recovery was launched, this shall be done within three months of receipt of the binding court decision on the estimated value.

4. Estimated value of the immovable

Before the sale of the immovable, and - upon the request of any party to this effect - taking into consideration tax and evaluation certificates issued no more than 6 months previous, the judicial officer shall set the estimated values for sale of the immovable in a vacant and in an occupied condition, based on the appraisal of an evaluator.

The judicial officer shall notify the parties of the estimated value of the immovable, as well as all persons having a right on the immovable registered with the Land Registry. When notifying parties of the estimated value, the judicial officer shall also inform the party requesting enforcement that the property shall be sold in an occupied state if this party submits a request to this effect to the officer within 15 days from receipt of the notification.

When notifying the parties of the estimated value, the judicial officer must also notify the debtor that a request for the postponement of the obligation to move out of the property after the sale may be brought before the court no later than within 15 days of notification.

When notifying the parties of the estimated value, the judicial officer must inform the parties of the options and conditions for payment in instalments.

When notifying the parties of the estimated value, the judicial officer must also inform the mortgagee that s/he may enforce his/her claim based on the mortgage right (insofar as this party is not the one initiating the attachment procedure) as part of the attachment procedure, and must inform the judicial officer of his/her intentions to this effect within 15 days of receipt of the notification. The judicial officer must immediately (no later than on the working day following receipt) forward this request to the court having issued the writ of execution.

If an objection to the enforcement of the order is raised within 15 days of its announcement, the court shall set the estimated value, with the assistance of an expert if necessary.

5. Auctioning of immovable property

Vht Section 141 (1)³³³ As a rule, unless otherwise provided by the law, the immovable property shall be sold by auction.

(2)³³⁴ Subject to the exception in Subsection (3), the immovable property shall be auctioned off in a vacant condition.

(3)³³⁵ The immovable shall be sold in an occupied condition

a) if it is occupied by a tenant holding a valid lease signed before the attachment proceedings were launched, unless where the debtor and the mortgagee had earlier concluded an agreement regarding the sale of the immovable in a vacant condition and where the lease was signed in breach of the former agreement,

b) if the immovable is occupied by a usufructuary (except for cases falling under Section 137 (2)),

c) if an immovable held in undivided co-ownership is occupied by a co-owner other than the debtor,

d) if the debtor and the party requesting attachment (in the event that attachment was requested by several parties, all of these parties) have agreed to sell the immovable property in an occupied condition, or

e) if all the parties requesting attachment agree on sale of the immovable property in an occupied condition,

f) if the immovable is occupied by the debtor’s lineal ascendant and was so occupied in the six months prior to the date on which the attachment proceedings were launched, and where this occupant had obtained title to the immovable gratuitously, except where the debtor and the mortgagee had a prior agreement regarding the sale of the immovable in a vacant condition.

Auctions can be divided into two phases: the first is the call for electronic bids, while the second is the live auction held at the designated time and location.

Location of the auction

The auction can be held at the following places:

• a) in the courthouse,
• b) upon the premises of the municipal government of the village or town or at the location designated by the municipality’s clerk,
• c) at the site of the immovable property,
• d) at another location designated by the judicial officer.

The judicial officer shall choose the location which s/he believes to be most conducive to the success of the auction in the circumstances.

Announcement of the auction

The judicial officer shall announce the auction in a notice containing the following:

• a) the name, official address, telephone number and escrow account number of the judicial officer,
• b) the names of the parties, grounds and amounts of the claims of the main creditors,
• c) the data of the immovable taken from the Land Registry [topographical number, applicable zoning regulations, location, etc.]
• d) any accessories to the immovable and any particular features of the property,
• e) whether the immovable is to be sold occupied or vacant,
• f) the estimated value of the immovable property,
• g) the amount of the auctioning advance (hereinafter: advance),
• h) to what extent the reserve price for the auction can be reduced, and whether the municipal government having jurisdiction over the location of the immovable has a right of first refusal that it can exercise at the auction,
• i) the time and location of the auction,
• j)a bid threshold equivalent to 2% of the estimated value (but at least HUF 1,000) where the estimated value is no more than HUF 10 million, or equivalent to 1% of the estimated value where the estimated value is over HUF 10 million,
• k) the provisions of this law directly affecting the auction (auction terms and conditions, payment of purchase price, escrow account of the judicial officer, holding of a second auction),
• l) criteria and deadline for the submission of electronic bids.

Vht Sections 144 and 145 stipulate how the announcement of the auction is to be made and delivered:

Section 144 (1) The auction announcement must be served upon

a) the parties,

b) all those who hold a right against the immovable property registered with the Land Registry,

c) the municipal clerk of the village or town having jurisdiction over the location of the immovable,

d)³⁴³ the immovable properties authority.

(2)³⁴⁴ The immovable properties authority shall register the decision to hold an auction in the Land Registry.

Section 145 (1) The auction announcement must be posted at

a) the courthouse notice board,

b) the notice board of the town hall of the village or town having jurisdiction over the location of the immovable,

c)³⁴⁵ the notice board of the immovable properties authority.

(2)³⁴⁶ The auction announcement must be posted on the notice board for at least 15 days and must remain posted until at least 5 days before the auction.

(3)³⁴⁷ The public officer shall publish an abbreviated version of the announcement in the official gazette of the Chamber. The announcement must include the name and telephone number of the judicial officer, a number identifying the case, the zoning regulations applicable to the immovable property, its topographical number, the ownership share, the area of the immovable, whether it is occupied or vacant, its estimated value, and the time and place of the auction and for viewing the immovable. This announcement must be published no later than five days before the auction.

(4)³⁴⁸ At the request of any of the parties, the judicial officer must ensure that the auction is publicised through other appropriate means.

(5)³⁴⁹

Section 145/A³⁵⁰ (1) The judicial officer shall also publish the announcement of the auction in the registry of electronic auctions; the legal consequence attached to the publication of the auction is tied to publication before the bidding log is closed. The auction shall not be deemed to have been published if, during the time when it was published, the registry of announcements of electronic auctions was not accessible to users for more than 10% of the time during which it was published.

Bidding on electronic auctions

In the electronic bidding phase of an auction for an immovable property, bidders must register with the auctioneer before placing bids.

The bidder registration fee is HUF 6,000. The fee for modifying a registration is HUF 3,000, while deletion is free of charge.

Persons wishing to place a bid on the immovable must deposit an advance of at least 10% of the property’s estimated value in the judicial officer’s escrow account before making a bid. The deposit of the advance in escrow may be made by bank transfer, in which case the amount of the advance must be transferred such that it is deposited into the judicial officer’s escrow account prior to the auction. In the latter case, the depositor may place a bid if s/he presents the judicial officer with a bank record of the transfer having been debited before placing a bid, and gives the judicial officer a copy of this document.

Procedure for sale of immovable property by auction

At the beginning of the auction, the judicial officer shall inform the bidders of the estimated price, the reserve price, the terms and conditions of the auction, and shall invite bidders to place bids. The reserve price is the estimated price. If offers to purchase were published in the bidding log, the reserve shall be the amount of the last purchase bid published.

If the purchase price offered is less than the reserve price, then the latter must be gradually dropped until it reaches half of the estimated price. If a purchase bid has been published in the bidding log, the reserve price cannot be dropped.

In the case of residential immovable property, the reserve price can be dropped to 70% of the estimated price if this is the sole residential property of the debtor and if this is his/her place of residence, and if this was also the case within the six months prior to the launching of the attachment proceedings.

The auction must continue so long as bids are placed. If there are no further bids, the judicial officer shall - after calling out the highest purchase bid three times - state that the immovable has been sold to the highest bidder, or, in the event it is exercising a right of first refusal, to the municipality holding this right. The judicial officer shall record the sale by auction and the sale price in the electronic bidding system, which automatically publishes this data on the auction announcement.

The amount deposited by the buyer in escrow must be counted towards the purchase price.

The winning bidder must pay or transfer the entire purchase price to the judicial officer’s escrow account within 15 days after the auction (unless the latter was contested by legal recourse, in which case this period shall begin to run as of the date of the final court decision ruling on the matter); failure to do so will result in forfeiture of the advance deposit.

The judicial officer can defer the deadline for payment of the purchase price for no more than two months, insofar as this is justified by the magnitude of the amount or by other important circumstances.

The judicial officer shall keep minutes of the auction in accordance with Section 152 of the Vht.

152. § (1)³⁶⁵ The judicial officer shall keep minutes of the auction, which shall contain (in addition to the content provided for in Section 35):

a) the land registry data of the auctioned immovable, whether it was sold in a vacant or occupied condition, its estimated value, the rules that govern how the estimated value can be dropped (Section 147) as well as the price for which the property was sold at the auction,

b) the name, personal identification data, place of residence or registered office of the winning bidder.

(2) The winning bidder must also sign the minutes of the auction.

(3)³⁶⁶ In addition to the minutes, the judicial officer shall also make sound and video recordings of the auction.

(4)³⁶⁷ If the winning bidder submitted the bid electronically,

a) s/he shall be summoned by the judicial officer to appear at the judicial officer’s office in order to sign the auction minutes within 15 days of having received this summons; failure to so shall result in forfeiture of the advance deposit;

b) at the time of the signature of the auction minutes, the judicial officer may grant the buyer a deferral for the payment of the purchase price, in accordance with the criteria in Section 149(2).

Once the buyer has paid the full purchase price and 30 days have elapsed since the auction, the judicial officer shall hand over the property purchased at the auction to the buyer.

The debtor as well as persons occupying the immovable on the debtor’s title must vacate the immovable, removing all movable property, and must ensure that the judicial officer can hand the immovable over to the buyer within 30 days from the auction, or if the judicial officer has granted a longer deadline for the payment of the purchase price, then by that time, or, in the case that legal recourse has been sought, then within 15 days from the date on which the decision on this matter becomes final.

6. Sale of immovable without auction

Section 157 of the Vht provides for the sale of the immovable property without auction.

Section 157 (1) At the request of the parties, the judicial officer shall sell the immovable without auction (although the sale shall have the effect of an auction) to a buyer whom the parties have designated and for an estimated value which they have determined.

(2)³⁷⁹ If the amount of the purchase price for the sale referred to in Subsection (1) is foreseeably sufficient to cover the costs of the attachment proceedings and the claims of all of the parties requesting attachment - including those of mortgagees involved in the attachment proceedings - and if no other affected parties have a right registered at the Land Registry against the immovable, sale without auction can proceed without requiring the consent of the parties requesting attachment. In this case, the judicial officer shall sell the immovable to the person designated by the debtor for the estimated value determined by the debtor.

Up until the beginning of the auction, the immovable can be sold without auction.

7. Takeover of the immovable property by the party requesting attachment

If the second auction was also unsuccessful, the party having requested attachment may take over the property.