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Acquiring real estate at a repossessed property auction – important points

Attractive price

There is no doubt that repossessed property auctions can be an interesting opportunity to acquire real estate far below market value. This is an attractive business alternative, especially now, when despite the slight stabilization observed recently, real estate prices are steadily increasing.

Important tip: A property cannot be auctioned for a price lower than 75% of the total valuation when put on auction for the first time.

According to current regulations, a bailiff may offer a property for a minimum of 75% of its value when it is auctioned for the first time. The price usually rises quickly, depending on the number of bids. During bidding, each bid cannot be less than 1% of the asking price, rounded up to the nearest whole zloty.

Next, i.e. if the real estate is not sold at the first auction, the bailiff sets a date for the next auction. In this case, the starting price is just two-thirds of the value determined by the surveyor. This is the lowest price for which the bailiff can sell the property belonging to the debtor.

Importantly, repossessed property auctions are open to all, and the only condition for taking part is the payment of a deposit, which is always 10% of the surveyor’s valuation. The real estate auction procedure is no different from other auctions, and the property goes to the highest bidder.

In addition to the tempting price, acquiring a repossessed property may prove affordable for other reasons as well. However, it is important to keep in mind the risks inherent in this type of transaction. Below, we present the important aspects that investors should pay attention to when considering acquiring repossessed real estate at auction.

Legal status of the property

Similarly to other forms of real estate acquisition, investors determine the legal status of the property by commissioning title due diligence before the transaction. It is vital to have the property verified before bidding commences, as the future owner has no recourse as to annulment of the sale or decrease of the price should any defects come to light.

Auction notices state when the real estate can be viewed, and the bailiff’s description and valuation, and the surveyor’s opinion, can be examined. The bailiff’s information includes the designated purpose of the property and the ascertained rights and encumbrances, and, where applicable, the year of construction, the condition, quality of construction workmanship, and facilities in the building.

Nevertheless, when the due diligence is conducted, verification of legal title is not as important as in the case of real estate acquired on the market, because real estate acquisition in enforcement proceedings has primordial nature.

Important tip: Acquisition of real estate in foreclosure proceedings is a primary sale, which means, in particular, that the property is acquired regardless of whether ownership title to the property was in fact vested in the debtor and whether that debtor was duly disclosed as the owner in the land register.

In addition, real estate sold at auction due to repossession is often mortgaged. This is registered to a bank which is trying to recover its mortgage receivable through repossession. Prospective buyers are rightfully wary of buying a mortgaged property, but in the case of a repossessed property sold at auction, investors should have no reason to worry.

Under Article 1001 § 1 of the Civil Procedure Code (CPC), all rights, and effects of registered personal rights and claims incumbent on the real estate, expire once the decision awarding ownership title becomes final. This expiration applies to all rights incumbent on the real estate, which means both limited rights in rem (use, mortgage, easements) and personal rights and claims related to the real estate (Article 16(2) of the Act on Land and Mortgage Registers and Mortgage). These rights are replaced by the right to satisfaction from the proceeds of the sale, and rules of priority apply in the same way as in legal provisions on the distribution of proceeds of sale in enforcement proceedings.

Another characteristic of sale of repossessed real estate is that the warranty of public faith of the land and mortgage records does not apply. The validity of the acquisition cannot be evaluated according to the criteria provided for in Articles 6-9 of the Act on Land and Mortgage Registers and Mortgage. In particular, there is no need to examine whether the person acquiring ownership title to the real estate observed the required level of diligence by reviewing the land and mortgage register, and whether that person may have acted in bad (good) faith.

When adjudicating of an ownership title to the real estate, the court states whether the purchase price has been paid in full, or whether a claim of the purchaser or other creditor has been set off against it, that the debtor has an obligation to deliver the real estate to the purchaser. The court also issues an order when an easement remains in effect (Section 201 of the Rules of Procedure of Common Courts).

Under Article 1001 § 1 of the Civil Procedure Code (CPC), all rights and effects of registered personal rights and claims incumbent on the real estate expire once the decision awarding ownership title becomes final. This expiration applies to all rights incumbent on the real estate, which means both limited rights in rem (use, mortgage, easements) and personal rights and claims related to the real estate (Article 16(2) of the Act on Land and Mortgage Registers and Mortgage), with certain limited exceptions. All rights encumbering the property should, as a rule, be disclosed in the property description and valuation.

As a rule, once final adjudication of ownership title is made, once the auction has been won, the mortgage is annulled. This occurs even if the funds obtained from the auction do not cover all the creditor’s claims.

Importantly, encumbrances on the property are satisfied from the proceeds of the sale at auction and are not borne by the buyer. Exceptions are non-pecuniary encumbrances , such as an easement for a necessary road, or easement for transmission. However, the purchaser enters into the rights and obligations under a lease or rental relationship.

If the lease term is not fixed, both the landlord and the tenant may terminate the lease according to contractual deadlines, or statutory deadlines if no contractual deadlines apply. In the case of a fixed-term lease, they may terminate the lease as per the contract.

Active conduct of the debtor vs. errors made by the bailiff

In our practice, we have recently encountered several situations in which the debtor made attempts to thwart realization of acquisition of repossessed real estate by our clients. Some of these have proved successful.

Participants of the enforcement proceedings in which real estate is sold, including the debtor, may file a complaint about wrongful actions of the bailiff, and in fact these are not isolated cases.

It is possible to contest individual actions of a bailiff – both in the course of a foreclosure sale (before the ownership title is awarded) and, as the case may be during eviction.

Important tip: A complaint against the actions of a bailiff in the course of an auction may be filed by any participant until the moment the auction proceedings are concluded. A complaint against the actions of a bailiff in the course of a real estate auction may be made orally to a judge or court referee present at the auction.

In addition, the Civil Procedure Code provides for the possibility of contesting court orders issued in the course of enforcement (Article 997 of the CPC). This might prolong the enforcement process, including as a result of intentional filing of unjustified appeals in order to draw out the proceedings.

This means that a repossessed property auction alone does not determine the outcome of the case. There are also subsequent stages, which are the bidding and the adjudication of ownership title to the real estate. Participants can file objections at any of these stages. As long as enforcement is in progress, it is not too late to stop the bailiff’s actions, which is often exploited by the debtor.


Under Articles 948 § 1 and 11 of the CPC, the property is valued by a licensed surveyor appointed by the bailiff. However, if the property was valued for market trading in the six months prior to seizure and the valuation meets the requirements for valuing real estate in enforcement proceedings, no new valuation is performed.

In addition, if an application for new real estate enforcement proceedings is filed within three years from the date of discontinuance of proceedings in which the property was described and valued, the bailiff will produce a new description and valuation only if requested by the creditor or debtor. The debtor may submit such a request for up to two weeks from the date of receipt of an order for payment, and must be advised accordingly when the order is delivered.

The debtor may also file a request with the bailiff for repossession of the property to be stopped and an order given for an additional description and valuation of the seized property to be produced. They can do this by referring to Article 951 of the CPC. This states that if there are significant changes in the condition of the property from the time the description and valuation are produced to the auction date, an additional description and valuation may be produced at the request of the creditor or debtor.

If the first description and valuation were drawn up several years before an auction that the investor is attending, the market value of the real estate will undoubtedly have changed in the meantime.

The bailiff does not have an obligation to grant the debtor’s request. Nevertheless, this will consequently constitute grounds for filing a complaint against the bailiff’s actions, together with a subsequent request to suspend the enforcement proceedings for the sale of the property and a request for the court to place the bailiff’s proceedings under appropriate supervision (Article 759 § 2 and 3 of the CPC: The court issues orders ex officio  to the bailiff to ensure that enforcement proceeds correctly, and has to remedy the observed deficiencies. The legal assessment given by the court in the orders issued is binding on the bailiff. The court may require the bailiff to report on the actions taken as a result of the orders).

Before proceeding to the first or subsequent auction, the investor needs to determine whether the survey based on which the upcoming repossessed property auction is to be held was prepared within twelve months prior to the auction and certified by a valuer, and whether it contains an revision clause, as the case may be.

Current regulations dictate that the valuation  must be accompanied by an analysis confirming that there have been no changes in legal conditions or significant changes in factors affecting the valuation since it was produced, as referred to in Article 154 of the Real Estate Management Act. If the debtor files a complaint against the bailiff’s actions after title to the real estate is awarded, this might be successful in court and thus the auction might be invalidated.

The requirement to use an updated valuation has also been confirmed by the Supreme Court in judgments such as the judgment of September 30, 2016, case ref. I CSK 646/15, and in the statement of reasons for  the judgment of January 26, 2018, case ref. II CSK 117/17:

The enforcement authority, like the court, does not have the power to independently assess whether the value of the property determined in the opinion has changed. Instead, it is obliged to determine, as part of its review of the formal requirements of the valuation (cf. the Supreme Court judgment of February 5, 2016, IV CSK 232/15, unpublished),  in light of Article 156(3) of the Civil Code, the time for which the valuation may be used and, if necessary, to obtain confirmation from the surveyor that the valuation is up to date. (…) Therefore, since in the circumstances of the case, as determined by the proper court, the bailiff produced the description and valuation relying on an opinion prepared nearly two years before, without obtaining confirmation that the valuation was up to date, the applicant’s view is correct that this action was unlawful within the meaning of Article 23(1) of the Act on Land and Mortgage Registers and Mortgage

Important tip: The valuation can be used for twelve months from the date on which it is produced, and beyond this period only if the valuer confirms that it is valid (the ”revision clause”).

A debtor may also thwart the procedure with regard to the valuation by contesting the determined value of the property. The most common mistake made by surveyors is understating the value of real estate. Consideration of the complaint by the court, and then re-evaluation if the complaint is valid, will result in postponement of the auction date, thus giving the debtor time to repay their debts and prevent the loss of the property, or find a buyer for the real estate on their own.

Change of entries in the land and mortgage register

Although ownership title is acquired and the encumbrances on the property expire by operation of law from the moment the adjudication becomes final, in general the new legal status is registered in the land and mortgage register at the request of the buyer (once an enforcement clause for the adjudication has been obtained).

The application must include a plan for the distribution of the proceeds from the sale, and this is produced after the final adjudication of ownership title. In practice, this prolongs the process of changing entries in the land and mortgage register.

Orders deregistering respective rights may be contested , which can also prolong the process.

Important tip: When deciding to acquire real estate at a repossessed property auction, although this may be attractive in terms of price, the investor should make allowance in the transaction schedule for possible obstruction of the proceedings by an active debtor, and thus the financial cost over time.