From 1 July, creditors will be at a significant disadvantage when repossessing a property.

Where a property remains unsold after a second auction, it may be repossessed by the creditor for 50% of its estimated value (70% for residential properties).

If more than one creditor has requested enforcement, the bailiff will organise an electronic repossession process for tendering the different repossession bids. The winning creditor may only set off 50% of the repossession price against its outstanding claims against the debtor. The remaining 50% must be paid to the bailiff (or the balance, where claims in total are less than 50% of the repossession price).

This means that distribution does not follow the usual order of satisfaction. The creditor repossessing the property only receives a share of the second 50% of the repossession price if any money is left after all other creditors have been satisfied.

By way of example:

  • a property belonging to D is worth €5 million
  • the first ranking mortgagee (F) has claims against D of €10 million
  • the second ranking mortgagee (S) has claims against D of €1.5 million
  • F and S both seek repossession after the property is unsold at 2 auctions
  • F’s winning repossession bid is €3 million
  • the proceeds are set off against to €1.5 million of F’s claims
  • the remaining €1.5 million is paid to the bailiff to satisfy S’s claim

Assuming F cannot satisfy its claims from D’s other assets and the property cannot be resold, F will lose €8.5 million (85% of its claim), whereas S will be repaid in full while if the property is resold at €6 million, F will lose €2.5 million (25% of its claim).

This means that creditors with claims of up to 50% of the repossession price will be able to set off their entire claim as usual, but the rights of creditors claiming larger amounts will be limited. As a result of the amendment, creditors repossessing the property will actually pay the amount of claims over and above 50% of the repossession price to the bailiff for distribution it to other creditors in order to satisfy their claims. 

Law: amendments to the Act on Judicial Enforcement