What is an auction?
A sales method. It is an old form of trading that has not changed significantly to this day. An auction — also known as a sale by auction or licensing — is a way of concluding a sales contract. Interested buyers (bidders) place binding bids on an auctioned item. They make an offer to the seller or the auctioneer or auctioneer acting on the seller’s behalf. It is a declaration of intent aimed at the conclusion of a contract. The highest bid is accepted.
What is a public auction?
A sovereign act in which material value is converted into monetary value in accordance with a regulated procedure. The legal definition of Section 383 (3) sentence 1 BGB applies to public auctions. Pledged items or rights based on a statutory or contractual pledge of rights must be sold by public auction. The possible market price for this place and time is determined. Auctions based on pledges of rights must always be public and can only be carried out by authorized persons, such as notaries or sworn auctioneers who are generally publicly appointed. The reason for this is that the debtor cannot influence the price and must rely on the auctioneer’s independence and special expertise. The auctioneer is sworn to carry out his task conscientiously, without instructions and impartially. This means that he is obliged to carry out the valuation and realization at reasonable cost, taking into account the rights of all parties involved.
In contrast to the usual method of debt collection by means of dunning, legal action or insolvency proceedings, the realization of pledges is carried out by means of a simplified procedure. However, because the debtor’s rights are not reviewed in court proceedings, the legislator prescribes a procedure regulated by the German Civil Code (BGB), Commercial Code (HGB), Code of Civil Procedure (ZPO), Compulsory Administration Act (Zwangsverwaltungsgesetz), Pawnbroking Ordinance (Pfandleihverordnung), Limited Liability Companies Act (GmbHGB), Stock Corporation Act (AktG) and Auctioneers Ordinance (Versteigererverordnung) as a supervisory authority.
What is the difference between an auction and a sale?
Under German law, an auction is the sovereign act of realizing a lien. The term “auctioneer” is used in the Auctioneers Ordinance (VerstV). In connection with public auctions (lien auctions) by a publicly appointed, sworn auctioneer, the term auction or auctioneer is therefore not used. A public auction is conducted according to the surrogate principle, which means that the material value is converted into monetary value.
In an auction, on the other hand, a highest bidder is determined for items voluntarily consigned for sale.
Is a title first to be obtained from the court in order to assert the pledge of rights?
No — the pledge of rights arises by law or contract.
Does an expert opinion have to be drawn up?
No — the auctioneer’s estimate of value is recognized in court according to current case law.
Why is the public auction legally secure?
It is a sovereign act that may only be carried out by authorized persons such as publicly appointed, sworn auctioneers in accordance with a legally regulated procedure.
What legal advantages does the client have in a public auction?
Acquisition in good faith, exclusion of warranty, legal peace.
Who can take part in a public auction?
The law stipulates that an auction (realization of a lien) must always be held in public. A public auction must be accessible to a larger, not individually defined group of people. Everyone, including the debtor, has the right to participate.
Can I participate in the auction in my capacity as a creditor?
Yes, the pledgee can participate in the auction: Section 1239 BGB (1) Bidding by the creditor. If the pledgee wins the bid, the purchase price is deemed to have been received by him. This means that the creditor can bid up to the amount of his claim without having to make an actual payment for the hammer price on the pledge. The pledge then becomes the legal property of the creditor and he can dispose of it freely. If the pledge is awarded to the creditor for a lower amount than his claim, he retains a claim against the debtor or the insolvency estate for the remaining amount. The creditor thus retains control and can prevent the goods or rights from being sold for less than the price he had in mind.
Where do the auctions take place?
It is regulated by law that the realization of liens must take place at the place where the lien arises. The exception is if higher proceeds could be expected at another location.
What is a consignor?
A consignor is the person or entrepreneur in whose possession the pledge to be auctioned is located.
How can I submit pledges for auction?
The basic prerequisite is that a contractual pledge has been agreed or that there is a statutory pledge of rights. The lien must have matured. This means that the claim has fallen due and the debtor has been informed of the assertion of the pledge of rights and the intended realization of the pledge in due time. Otherwise, the procedure is very simple for you as the client: Fill out the online form to determine the maturity of the lien (“Initiate lien realization”) and send it to us (“Submit” button). Then send us meaningful digital photos in jpg format by email — or by WeTransfer for large image files. You will then receive the auction contract from us, which constitutes our offer. Your order is only placed with us once you have signed the contract.
What costs will I incur?
The recycling process must be carried out at reasonable cost. The deposit must be advertised appropriately so that no accusation of squandering can be made. This is more complex for a special machine, a warehouse or a work of art, for example, than for an easily saleable car.
What securities are available in the event of third-party claims?
Legislation privileges the sale of pledges by public auction.
All items purchased in a public auction are always acquired in good faith in accordance with § 935 BGB para. 2. Any warranty can be excluded. Claims of trademark rights are excluded.
Do third parties have a claim to the return of items brought in by the tenant?
No. A landlord can rely on the tenant’s presumption of ownership in the context of the landlord’s lien. If a third party claims to be the owner of the items brought into the rented premises by the tenant and therefore demands their return, the landlord can rely on the tenant’s
Can vehicles that have been pledged be sold at public auction without registration papers?
Yes — the buyer receives a confirmation of purchase for submission to the registration office.
Is there a minimum price for lien auctions?
Lien realizations are carried out according to the Surogat principle. The material value is converted into monetary value. The possible market price for that day and place is determined. There is therefore no minimum premium price. The deposit may not be squandered. The highest bidder must be determined at a reasonable cost. As a regulation, the legislator allows the client to participate in the auction. Of course, he does not have to pay for a knockdown up to the amount of his claim.
What is the premium?
The buyer’s premium is a fee that the bidder pays in addition to the hammer price. Statutory VAT is charged on the buyer’s premium. The amount of the premium is stated in the auction announcement for the respective auction.
How is payment made?
In the case of a public lien realization, payment is always made in cash or by cash-like means of payment such as bank-certified checks.
Can I simply sell pledged items or rights myself?
In principle, it should be noted: An object taken in pledge is not the property of the creditor! A creditor may not dispose of it as he sees fit. Third parties may have legitimate claims of which the creditor is unaware. The debtor has the right to have the pledge sold in accordance with the statutory provisions of the pledge of rights. Cf. section 1244 BGB Unlawful sale (1): “The sale of the pledge is not lawful if the provisions of section 1228 (2), section 1230 sentence 2, section 1235, section 1237 sentence 1 or section 1240 are violated.” Non-legal realization of liens can have consequences under civil and criminal law.
Can I auction items that have been taken in pledge on Ebay?
No, a sale via internet platforms such as Ebay is not a public auction within the meaning of the law.
What happens if the tenant removes pledged items?
Important note: If a rent debtor removes some or all of the pledged property from the rented property while a pledge of rights exists and the creditor has previously asserted the pledge of rights, the rent debtor is liable to prosecution under § 289 StGB. In this case, creditors should consider filing a criminal complaint against the tenant.
What happens in the event of insolvency?
In its ruling (BGH, October 9, 2014, Ref.: IX ZR 69/14), the BGH strengthened the landlord’s lien in insolvency proceedings.
Landlord’s lien in insolvency proceedings — BGH ruling
In its ruling (BGH, October 9, 2014, Ref.: IX ZR 69/14), the BGH strengthened the landlord’s lien in insolvency proceedings. Note: If a commercial tenancy with the debtor as tenant continues after insolvency proceedings, the insolvency administrator is NOT entitled to distribute the proceeds from the sale of items subject to the landlord’s lien to the landlord with the repayment provision, to offset the payment primarily against the rent claims established as a liability of the estate after the opening of the proceedings and only then against the rent claims that arose as insolvency claims before the opening of the proceedings. Case dealt with by the BGH: A tenant was in considerable arrears and fell into insolvency. The insolvency administrator continued to use the rental property even after the opening of insolvency proceedings, so that the rents due from the opening of insolvency proceedings were to be adjusted by the insolvency administrator as liabilities of the estate. However, the insolvency administrator did not pay these rents. The landlord exercised his landlord’s lien for all rent arrears. Pursuant to 3 166 InsO, only the insolvency administrator was entitled to realize the items subject to the landlord’s lien. However, the landlord was entitled to a right to separate satisfaction of the realization proceeds! After the liquidation, the insolvency administrator returned the liquidation proceeds with the repayment provision that the insufficient proceeds were to be credited with priority to the rents due AFTER the opening of insolvency proceedings. The BGH ruled in favor of the landlord, as the insolvency administrator was not authorized to deviate from the statutory order of repayment when selling the items subject to the landlord’s lien. The landlord therefore receives priority in the realization of his insolvency claims from the landlord’s lien, with which he would otherwise default (further details: juris.org).
