ABSTRACT
To understand the rights and obligations of the buyer and the execution office and the purpose thereof within the scope of the sale of immovable properties by auction, it is necessary to examine the auction process. For the sale of immovable properties by auction, the execution office commences the preparations for the auction upon receiving the sale request. There are many procedures to be executed by the execution office to conduct the process wholesomely, such as the preparation of the auction announcement, auction terms, and list of incumbrances and the valuation. Subsequent to the end of preparation procedure, the first auction and if necessary, the second auction will be carried out by the execution office. If the conditions are fulfilled at the end of the auction, the ownership of the immovable property will be transferred to the buyer and immediately afterwards, the amount of money acquired from the auction of the immovable property will be distributed among the creditors by the execution office. Within such process, there are obligations that should be fulfilled both by the parties and the execution office.
I. INTRODUCTION
The only way to liquidate immovable properties is the sale by auction to be carried out by the execution office. This sale by auction to be carried out by the execution office can be defined as a sales transaction to be carried out inter praesentes at a predetermined place and time according to predetermined conditions, executed with the highest bidder whose bid was determined by successive bids.
Ensuring the attendance of more people to the auction, informing the participants and executing the auction successfully are only possible through the procedures of preparation and auction; therefore the execution office should carefully carry out such procedures and the parties should fulfil their obligations.
In our study, preparation phase of the auction, conducting the auction, payment and distribution of the money, which are the phases of a sale of an immovable property by auction, will be explained along with the rights and obligations of the execution office and the buyer.
II. PREPARATION PHASE OF THE AUCTION
To conduct the tender process properly, there are certain phases to be gone through before the sale by auction of the immovable property. Preparation phase commences from the buyers’ request for sale of the seized immovable property and proceeds with the auction sale of the immovable property by the execution office within three months. It should be stated that this three month period, regulated by Article 123 of the Execution and Bankruptcy Code (the “EBC”), is not a limitation period but a regulatory period; hence even though the execution office manager conducts the sale after the end of such period, the sale will still be valid1.
The auction announcement serves the purpose of liquidating the immovable property for a higher price by drawing attention and informing the ones who have interest and benefit from acquiring this property about the conditions of the auction and when and how the auction will take place. Execution office should announce the relevant auction at least one month before the tender date. The auction announcement includes; information about the immovable property’s type, quality, important characteristics, estimated value, location; where the first and second auction will take place, and also a notice about the participants’ obligation of submitting a letter of guarantee issued by a national bank or deposit money in an amount equal to twenty percent of the estimated value of the immovable property and the instructions on how and where to learn other information. Also, the auction announcement should include information about the necessity to notify the execution office about the rights of the mortgagees and the other relevant persons, and especially their claims on interest and expenses within fifteen days along with related substitutive documents; otherwise, unless related persons’ rights are registered at the land registry, they will be excluded from the distribution of the money. This notice should also be sent to the persons who have a right of easement.
The execution office manager will decide on the type, place and date of the announcement and also whether an announcement will be made via newspaper while taking the interests of the related parties into consideration. It is regulated under article 114 of the EBC that this announcement should be made at least one month before the date of the first tender. Such announcement will also be made electronically.
Auction notices regarding immovable properties will be issued to registered addresses of the creditor, the debtor and registered persons at the land registry. In accordance with articles 127 and 134 of the EBC, in the case the execution office did not follow the obligation of issuing a notice and if the tender has been executed; the annulment of the tender can be requested by filing a complaint. In case the auction announcement is done in violation with the EBC, such as not sending a copy of the list of incumbrances to the creditors who have seizure or mortgage as per article 126 of the EBC, the annulment of the tender can be requested as well.
Another document which the execution office should prepare along with the auction announcement is the auction specifications. Under article 124 of the EBC, the auction specifications should primarily include notice about the participants’ obligation of submitting a letter of guarantee of a national bank or deposit money in an amount equal to twenty percent of the estimated value of the immovable property, necessity to provide a guarantee for the persons who will attend to the auction online and other aspects on how the electronical tender process will take place. These auction specifications should be available to the public at the execution office for at least ten days before the auction for everyone to see.
Along with the auction specifications, the execution office manager prepares a list of incumbrances that will show the incumbrances registered to the land registry or incumbrances based on formal deed by consulting to the land registrar. It should be stated that the execution office does not have the authority to examine the incumbrances which are notified by the land registrar nor the power of discretion on the same. Upon the auction announcement, the claims of those who stated their rights on the immovable property will also be included to the list of incumbrances2.
The list of incumbrances prepared in this manner will be issued to the creditors who have seizure pursuant to article 128 of the EBC and a period of three days will be granted to the creditors in order for them to raise their objections. In addition to the annulment reasons stated above, in the event that the list of incumbrances is not notified to the creditors who have seizure or the mortgage, the annulment of tender can be requested.
If this three-day period granted for raising objections is passed without any objections or if there is no lawsuit filed within seven days after an objection is raised, then the list of incumbrances will become final. Appraisal report will be issued to the addresses on the land registry of the debtor, creditors who have seizure and other mortgagees. Execution office will also appraise the value of any property that was given an incentive to which constitutes an extension to the immovable property that is being sold. This appraisal will be notified to the relevant persons. It should be stated that in accordance with article 128/a of the EBC, relevant persons that this appraisal is notified to can raise their objections to the appraisal by filing a complaint to the enforcement court that had the appraisal report prepared within seven days after receiving it. Further in the said article it is stated that the appraisal report may be subject to another expert examining if the related expenses and charges have been paid and if not, this complaint will be declined ex officio. Therefore, the appraisal will become final if necessary expenses are not paid within seven days and this appraisal value will be included in the auction specifications and will also be presented in the auction announcement.
Since the list of incumbrances is a part of the auction specifications and have the force of land registry for such auction3. the buyer will acquire the real property only with incumbrances included in the list. As it is stated in Prof. Dr. Ramazan Aslan, Prof. Dr. Ejder Yılmaz and Prof. Dr. Sema Taşpınar Ayvaz’s book titled “İcra ve İflas Hukuku”:
“The one who buys the immovable property at the auction (buyer) will acquire it as in the auction specifications. The incumbrances (encumbrance) that are not stated in the auction specifications will not be transferred to the buyer. In other words, the auction specifications have the force of land registry4.”
Since the list of incumbrances is a part of the tender specifications, they have the force of land registry and also it is an order of priority since it shows how the distribution of sale value will be made. In fact, it is stated in the 12th Civil Chamber of Supreme Court’s verdict dated June 29, 1976 and numbered 5894 E, 8067 K. that in case the list of incumbrances does not include any in cumbrances then the buyer will acquire the immovable property free from any incumbrance. In this respect, the order of priority should include all of the incumbrances on the relevant immovable property and any incumbrances that are not mentioned in the list cannot be transferred to the buyer. It is sufficient for buyer to examine the specifications and the list of incumbrances which is a part of the specifications and there is not an obligation to examine the land registry as well.
III. AUCTION PHASE
The first and second auctions to be carried out for the sale of the immovable property are commenced by the execution office manager from the highest bid made electronically and on the date and at the time stated in the announcement. The bids to be submitted electronically cannot be less than fifty percent of the immovable property’s estimated value, and also it is obligatory to provide a guarantee equal to twenty percent of the immovable property’s estimated value.
In order to duly execute the auction process, a crier should be assigned by the municipality to attend the auction5. If there is no crier assigned by the municipality, the execution office manager may appoint one of the officers as the crier for that specific auction by writing this information to the record of auction6.
It should be stated that since the auction is a public procedure, anyone with the capacity to act can participate to the auction7. After crier’s holler for three times and also considering the highest bid given electronically, the immovable property is awarded to the person who made the highest bid. To award the immovable property, the auction value should be at least fifty percent of the immovable property’s estimated value and it also should be higher than the sum of the receivables that have priority against the receivable of the creditor who sought the sale and the sale and distribution expenses.
If the auction value satisfies these conditions, the immovable property will be awarded to the highest bidder and this information will be written to the record of auction. If the auction value does not satisfy such conditions, then the execution officer will adjourn the auction, and the second auction will take place at the place, date and time specified in the auction announcement. If no one bids at the second auction or the relevant conditions are not fulfilled, liquidation request will become ineffective. The second auction will also commence by the execution office manager from the highest bid electronically made. Auction conditions will be same as the first auction.
In case of collusion in the tender, pursuant to article 134 of the EBC, the annulment of tender can be requested. In this context, paying the bidders to leave the auction, not following the EBC provisions during bidding, such as awarding the tender without crier hollering for three times, executing the auction at a place other than the one stated in the auction announcement, awarding the tender even though the auction value does not meet the amount stated in the EBC; deceiving the buyer regarding the essential features of the immovable property, such as the immovable property being expropriated prior to the auction may be some of the reasons to request the annulment of the tender.
In addition to these reasons, the slightest suspicious interference can also cause the annulment of the tender. For instance; 12th Civil Chamber of Supreme Court stated in one of its verdicts that; to make a moral suggestion such as “There will not come any benefit to the laughing one from the weeping one’s property.” will be considered as collusion on tender and therefore annulment of the tender can be requested in such situation8.
IV. PAYMENT OF THE SALE PRICE PHASE
A. Buyer’s Payment of the Sale Price
After the tender, sale price should be paid in cash; other payment methods like check, bono, bank letter of guarantee or any other payment method other than cash are not acceptable9. Pursuant to article 130 of the EBC, payment should be made immediately. Nevertheless, the execution office manager may grant an additional period of time not exceeding ten days to the buyer. However, the execution office manager is not obliged to give additional time to the buyer unless the additional time is specified in the auction specifications10. The immovable property will be managed by the execution office until the payment is made, and at this period losses and expenses will be at buyer’s expense. Pursuant to article 131 of the EBC, even though the buyer acquires the ownership rights of the property immediately with the tender, it cannot actually receive the immovable property without paying the sale price to the execution office. If the buyer pays the sale price immediately or in the given period of time, execution office will send a notice to the land registry administration stating that the immovable property should be registered on behalf of the buyer and the immovable property will be transferred to the buyer.
If the immovable property is being occupied by the debtor or any third party, an evacuation order will be send for the occupant to evacuate the immovable property within fifteen days. If the occupant fails to evacuate the immovable property in such period, the occupant will be evicted by force and the immovable property will be transferred to the buyer.
B. Buyer’s Non – payment of the Sale Price
Pursuant to article 130 of the EBC, the buyer is obligated to pay the sale price immediately or in the given period. In the case the buyer does not pays the sale price immediately or within the maximum ten days period granted to the buyer, then the execution office manager is obliged to revoke the tender ex officio. If the execution office revokes the tender, the execution office will manage the immovable property not at the buyer’s expense but at the debtor’s and creditor’s expense . Under article 118 of the EBC, the responsibility of the buyer who caused the annulment of the tender and the responsibility of the buyer’s guarantors are regulated. According to this, the buyer and its guarantors are jointly and severally responsible from the amount equal to the difference between their bid and the final tender value, and also from other losses and default interest. Tender value and default interest are collected by the execution office without the necessity of any execution proceeding or judgment.
Even if the buyer finds the sale price asked by the execution office manager very high, the buyer is obliged to make the payment in the determined period to the execution office by reserving its right to file a complaint on this matter. If the buyer files a complaint without making payment and the payment period is over, the execution office manager will revoke the tender. Even though the buyer pays the tender price after the end of the given period, execution office manager is obliged to revoke the decision ex officio12. According to article 133 of the EBC, in the event where the tender decision is revoked because of non-payment of the sale price within the relevant period, then the execution office manager will offer the second highest bidder to buy the immovable property by paying the amount that it offered during the bidding. If such bidder declines this offer, the execution office will immediately carry out another auction for the sale of the immovable property
The transfer of the ownership rights of the property occurs at the time of the tender; the buyer who won the tender will acquire the immovable property’s ownership at the moment of tender. As a result to this, the loss and the benefit of the immovable property will also be transferred to the buyer simultaneous with the tender13. It is not obligatory for the buyer to register to the land register; but unless the immovable property is registered to the land register on behalf of the buyer, the buyer will not be able to perform an act of disposal over such immovable property. The execution office decides on the handling and safekeeping of the immovable property until the finalisation of the tender.
V. PHASE OF DISTRIBUTION OF THE MONEY
The last phase of the execution process of seizure is the payment of the money acquired from the sale of the immovable property to the creditor. Execution office manager will distribute the money acquired from the sale of the immovable property between the creditors ex officio. Distribution is possible only if the same property has been seized by more than one creditor. If there is only one creditor, there will not be a distribution.
The money acquired from the sale of all seized properties will be distributed among the creditors proportionally. Firstly, joint expenses such as sale and distribution expenses will be deducted from the sale price. Remaining amount of money will be distributed among the creditors proportionally. The execution office will make the payment from the execution office’s bank account to the bank account on creditor’s or its proxy’s name.
In case the sale price is not enough to satisfy all the creditors who participated to the seizure of the immovable property at the same level; the execution office will further carry out certain procedures before commencing the distribution. These are: executing completion seizures and establishing an order of priority.
Completion seizure can be defined as the seizures to be executed by the execution office manager ex officio, by seizing other properties of the debtor in case it is determined that the sale price is not enough to cover all debts14. If the sum of the value of the seized properties after the completion seizure and the value of the previously sold seized properties is enough to pay all debts, then the execution office will make all the payments along with the interest as explained above.
If the sum of all amounts does not cover all the receivables of the creditors, then the execution office manager should prepare an order of priority and wait for it to be finalised in order for distribution.
If the seizure has been made for only one creditor, then there will not be a distribution and the whole amount will be paid to such creditor. After deducting the amount corresponding to the receivables that have priority and the expenses regarding the seizure and sale, the receivable and its interest will be paid to the sole creditor. If the money is not enough to satisfy the receivable, completion seizure will be executed and if the money is still not enough, a proof of insolvency will be given to the creditor for the unpaid portion of its receivable.
VI. CONCLUSION
Sale by auction is the only option for liquidation in the execution proceedings of immovable properties. Sale by auction consists of four main phases which are preparation phase for the auction, auction phase, and payment of the sale value and distribution of the money. Although there are many transactions to be carried out in the preparation phase, the main subjects are: sale request of the creditor, preparation of the auction specifications, preparation of the list of incumbrances and appraisal of the immovable property. All transactions take form around such main subjects. Preparation of the record of auction and, if the conditions are not met at the first one, how the second auction will be made are the significant aspects of the auction phase which is the second phase. Annulment reasons for the tender usually occur in this phase and annulment of tender can be requested if necessary conditions met. Third phase is the sale phase in which the regulations and periods regarding payment are of importance. Final phase is distribution of the money where the creditors are satisfied.
The main reason behind imposing certain obligations to the buyer and the execution office is protecting the parties and making a reliable sale. Thus, neither the trust to execution office will be diminished nor will the beneficiaries suspect that there is a breach with respect to their rights. An auction in a fair environment can only be conducted when these obligations are completely fulfilled by the responsible individuals.
BIBLIOGRAPHY
Elif Kısmet Aslan, İcra ve İflas Hukukunda Taşınmaz Malların Açık Artırma Yolu ile Paraya Çevrilmesi, Dokuz Eylül Üniversitesi Sosyal Bilimler Enstitüsü, Yüksek Lisans Tezi, 2004.
Osman Duran, İcra ve İflas Hukukunda Paraya Çevirme, Erciyes Üniversitesi Sosyal Bilimler Enstitüsü, Yüksek Lisans Tezi, 2013.
Timuçin Muşul, İcra ve İflas Hukuku Vol:1, 5th Ed. Ankara, 2013.
Alper Bulur, İcra ve İflas Hukukunda İhalenin Feshi Nedenleri, Başkent Üniversitesi Sosyal Bilimler Enstitüsü, Yüksek Lisans Tezi, 2006.
Baki Kuru, Ramazan Arslan ve Ejder Yılmaz, İcra ve İflas Hukuku Ders Kitabı, 28th Ed. Ankara, 2014.
Pınar Çiftçi, İcra Hukukunda Menfaat Dengesi, Dokuz Eylül Üniversitesi Sosyal Bilimler Enstitüsü, Yüksek Lisans Tezi, 2008.
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Sercan Taşgın, İcra İflas Kanununda Haciz ve Hacizde Şikayet Tezi, 2013, http://www.sercantasgin.com/makaleler/cra-flas-kanununda-haciz-ve-hacizdeikayet-tez
FOOTNOTE
1 Baki Kuru, Ramazan Arslan ve Ejder Yılmaz, İcra ve İflas Hukuku Ders Kitabı, 28th Ed. Ankara, 2014, p. 327.
2 Aslan, Elif Kısmet, İcra ve İflas Hukukunda Taşınmaz Malların Açık Artırma Yolu ile Paraya Çevrilmesi, İzmir 2004, p. 87.
3 Timuçin Muşul, İcra ve İflas Hukuku Vol:1, 5th Ed. Ankara, 2013, p. 729.
5th Ed. Ankara, 2013, p. 729. 4 Aslan, Yılmaz ve Taşpınar Ayvaz, “İcra ve İflas Hukuku”, Yetkin Yayınevi, 2016, Ankara, p. 319-320.
5 See. 12. HD. 21.02.1985 T.E: 1078, K:1548.
6 Aslan, Elif Kısmet, İcra ve İflas Hukukunda Taşınmaz Malların Açık Artırma Yolu ile Paraya Çevrilmesi Yüksek Lisans Tezi, Dokuz Eylül Üniversitesi, Sosyal Bilimler Enstitüsü, 2004, p. 114.
7 Osman Duran, İcra ve İflas Hukukunda Paraya Çevirme Yüksek Lisans Tezi, Erciyes Üniversitesi Sosyal Bilimler Enstitüsü, 2013, p. 90.
8 See. Yargıtay 12.HD. 24.09.1992 T.E: 3484, K:10790.
9 Pınar Çiftçi, İcra Hukukunda Menfaat Dengesi Yüksek Lisans Tezi, Dokuz Eylül Üniversitesi Sosyal Bilimler Enstitüsü, 2008, p. 368.
10 Duran, İcra ve İflas Hukukunda Paraya Çevirme, p. 115.
11 Muşul, İcra ve İflas Hukuku, p. 745.
12 Kuru, Arslan, Yılmaz, İcra ve İflas Hukuku Ders Kitabı, p. 338.
13 Muşul, İcra ve İflas Hukuku, p. 745.
14 Av. Sercan Taşgın,“İcra İflas Kanununda Haciz ve Hacizde Şikayet Tezi”, 2013, http://www.sercantasgin. com/makaleler/cra-flas-kanununda-haciz-ve-hacizdeikayet-tezi, (Last Access: 16.02.2017).
