I’ve been posting about auctions since January 12, 2009 (yes, for ten years now) and I still haven’t stopped to explain what a judicial auction is.
The anniversary is going to catch me sliding down the snowy Austrian slopes. However, I am going to make the automatic publication of this post coincide with the tenth anniversary of that day when this auctioneer crossed his mind to start publishing his ideas about judicial auctions.
1. Origins of the judicial auction
The word auction comes from the Latin “sub hasta”, where “sub” means below, and “up to” refers to the spear that the Romans placed in the places where some public sale was held.
Thus, the term “auction” is not a modern creation but is a survival of ancient Roman law according to which the sale of property owned by the State was called substation because the spear was present in it.
At first, these substations were dispositions of properties of the Roman State. Later, at the beginning of the 7th century, the auctions carried out in the compulsory procedure were introduced by the praetor Rutilio, as a means of converting the debtor’s seized assets into money when he had died.
From then on, the creditors who had a favorable judgment went to the praetor requesting the possession of the debtor’s assets. This sale of the property was carried out by one of the bankrupt creditors through a public auction and the successful bidder was in charge of paying all the debts of the ex-owner up to the amount set as the award price.
In historical law, reference is made to auctions from the Jurisdiction of the Court.
2. concept of judicial auction
What is a judicial auction? As can be deduced from our Civil Procedure Law, the judicial auction, in the strict sense, is only the phase of the enforcement procedure aimed at determining, through public bidding, the price at which the goods to be sold, and individualizing the person who acquires them.
Therefore it can be stated that:
1) The judicial auction is a phase of the enforcement procedure integrated in turn by a series of procedural acts.
2) The objective of the judicial auction is to try to achieve the widest diffusion in order to get the best price.
3) The purpose of the judicial auction is to set a sale price and find a buyer.
We already know what a judicial auction is according to the LEC, but, on the other hand, adopting a broader definition of the judicial auction, the auction of real estate would include, in addition to the auction itself, all the previous acts that are essential for its celebration (for example the certification of loads, the appraisal, the publicity in the BOE, etc.), and also the subsequent acts that are a consequence of the same (for example the approval of the auction, the award decree, delivery of the possession and the distribution of the price among creditors, etc.).
But the definition of what a judicial auction is that I prefer is of my own making: The judicial auction is nothing more than a forced judicial sale. That is, it occurs when someone who does not want to voluntarily pay his creditor is legally forced to sell his property to pay his creditors with the money collected from the sale.
3. The enforcement procedure
The enforcement procedure is closely linked to the definition of auction. The enforcement is the final phase of a judicial execution in which the satisfaction of the right of the executor is sought.
Therefore, the constraint means that we finally have a part of the judicial procedure, the debtor, who has been sentenced to pay his creditor a certain and determined amount of money and who has not done so voluntarily, having to proceed against his assets to convert them. in money.
It all begins with the subjection of the debtor’s assets called “seizure”, a judicial act whose purpose is to subtract (or separate) assets from the debtor to later convert them into money (through auction) so that the creditor can collect their debt.
4. The conversion of the seized assets into money
From the definition of the auction, it follows that the judicial auction is not the only way to convert the assets seized from the debtor into money. The Civil Procedure Law offers several possibilities:
1. The collaboration agreement, whereby the creditor and the debtor agree on how to convert the seized assets into money. It is the smartest way for the debtor to proceed, as this way he can obtain the best offers for his property.
That is why it is almost never carried out because it requires that the debtor be someone reasonable.
2. Sale through a specialized person, who offers the possibility that the sale is carried out by real estate agents. Obviously unreasonable debtors do not opt for this option either, but rather follow the ostrich tactic as if nothing happened and in the end, everything would be solved.
3. And so we come to the judicial auction 1, defined as the judicial act that has as its object the sale of the goods subject to a judicial proceeding, in order to make the payment to whoever is a creditor of said amount with their conversion into money.
5. Types of auction
There are three types of auctions:
Judicial auctions: Strictly speaking, those held in the courts, although in this group we could also include notarial or extrajudicial auctions.
Administrative auctions: Those regulated by the Law and other legal norms that the Administration celebrates. For example auctions Social Security, the auctions of Treasury, auctions of the National Plan on Drugs, and auctions municipalities or councils.
Private auctions: Those carried out by any person or private entity and that are only subject to the conditions that the former provides. Currently, they are hardly celebrated, but at the end of the nineties, they were very fashionable.
6. Requirements to participate in an auction
All types of auctions, from judicial auctions to AEAT auctions, coincide with certain requirements that we must always meet to participate, which are:
1. Having entered the deposit
2. Identify ourselves properly with name and NIF
3. State that the conditions stipulated in the auction decree are accepted
These three conditions are common to any type of auction.
And another requirement that nobody talks about but which is essential: HAVE OWN LIQUIDITY TO PAY THE AUCTION PRICE WITH OUR OWN MONEY.
So that it happens to us like so many unconscious who participate in auctions without having money with the erroneous belief that someone will lend it to them when the auction has been awarded.
7. What goods are eligible for auction?
The auctions that I like the most and the ones that make me enjoy the most are the judicial auctions of real estate, but in reality, any good is susceptible to being auctioned. And let no one doubt that there are dozens of investors making a lot of money for having specialized in the auctions of the following goods:
7.1 Real estate:
- Storage rooms
- Commercial premises
- Rural properties
- Right of transfer
- Rights over any real estate
- Aquatic bikes
7.3 Jewels, Art and Antiques
7.4 Industrial machinery
7.5 Goods and raw materials
7.7 Utensils and tools
7.8 Industrial property rights
7.9 Intellectual property rights
And so many other properties that I don’t remember at the moment, but with which, as I have already mentioned, surely there are specialized investors making a lot of money.
8. The electronic judicial auction
In October 2015, the electronic judicial auction was implemented.
For a couple of months, the face-to-face judicial auctions that had been indicated prior to the entry into force of the Law continued to be held, but these immediately disappeared and currently, it is only possible to participate in the judicial auctions electronically from the BOE’s Auction Portal.
Incredibly, this has given new impetus to judicial auctions, which are no longer the closed preserve (only for professionals) that they were years ago.
Now, anyone with Wi-Fi access and a smartphone can research auctions on the other side and participate in them while sipping a daiquiri by their pool.
And since last autumn the auctions of the AEAT and of some organizations have joined the judicial auctions and are only offered from the same BOE portal
And soon the Social Security auctions will follow the same path.
9. Unfair enrichment theory
The question is the following: Can the winner of an auction be sued by the former owner if after the auction he sells the auctioned property for a manifestly higher price, obtaining large capital gains in a short time?
Hehehe, this would love those of Podemos.
Investors in judicial auctions can rest assured in this regard because the defendants will never be able to bring the unjust enrichment action against us, whatever the price at which we sell or the time elapsed.
And this is so because to apply unjust enrichment, the absence of “just cause” is required, which does not occur when “there is a judgment or other judicial resolution, sufficiently motivated and defining the rights of the litigants. “
In other words, in the judicial auction business the “just cause” is obvious since there has been a judicial proceeding after which a judge has ruled on the rights of the creditor and the debtor. And it turns out that what the judge has ruled is that for the creditor to be able to collect what the debtor owes him, the sale of his assets must be forced until the amount owed is reached.
And as the Supreme Court points out, “(…) whoever buys a good at auction can later sell it at a set price without being able to apply the legal figure of unjust enrichment” .
10. Do you want to do well in the auctions? sign up for the online course Succeed With The Auctions
In February 2017, I launched my online auction course . Today, Succeed with Auctions is the best online auction school, with a large community behind it and dozens of professionals who already invest and have achieved the financial freedom they so much desired thanks to real estate investments.
If you are interested in knowing more about my way of living and generating passive income through real estate investments, I invite you to visit the auction school (following the link above) and sign up for the only course that will teach you to invest and to achieve the highest profitability in your business.
Believe me, training with me is the only serious and reasonable way to ensure that you are going to succeed in the auction business.
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Read more : How to Find the Best Property to Invest?