Term Explanation: ‘Bid, minimum’
The ‘minimum bid’ is a central term in German law, especially in connection with foreclosure proceedings (§ 44 ff. ZVG, Forced Sale Act). The minimum bid refers to the lowest amount at which a property or other auctioned asset may be awarded in the context of a foreclosure auction. It defines the lower threshold below which an award is not permitted. The minimum bid generally includes not only a cash amount, but regularly consists of the cash portion to be paid (cash bid) and specific liabilities to be assumed.
Legal Foundations
Statutory Provisions
The minimum bid is regulated in § 59 ZVG and the following provisions. This provides that the court determines and announces the minimum bid in advance during foreclosure proceedings. It forms a significant legal requirement for the award to the highest bidder.
Composition of the Minimum Bid
The minimum bid typically consists of two components:
- Cash portion: This part must be paid by the purchaser either in cash or by transfer to the court.
- Liabilities portion: These are rights and encumbrances that, according to the provisions of the ZVG, remain in place after the auction and must be assumed by the purchaser in addition (e.g., certain mortgages, land charges, or easements).
The precise structure of the minimum bid depends on the rights entered in the land register and any priority claims.
Function and Purpose of the Minimum Bid
The minimum bid serves to protect creditors and to maintain public order in the auction procedure. It is intended to ensure that the minimum bid at least covers enforceable and non-cancellable claims — such as certain public charges or continuing rights of third parties — as well as the costs of the procedure.
The Minimum Bid in Foreclosure Proceedings
Preparatory Determination
The competent local court determines the amount of the minimum bid in foreclosure proceedings (§ 44, § 59 ZVG). This determination is based on the rights recorded in the land register, the known creditor claims, and the costs of the proceedings.
Announcement at Auction Date
The minimum bid is announced by the auction court at the public auction appointment together with the value of the auctioned asset and the encumbrances to be assumed. This disclosure is intended to provide all interested parties with clarity regarding the minimum amount at which an award is legally possible.
Significance for Bidders and Creditors
For bidders, the minimum bid represents the lowest threshold, comprised of the cash bid and the encumbrances to be assumed, below which an acquisition is not possible. However, it does not necessarily represent a particularly low price, as additional liabilities must be assumed.
For creditors, the minimum bid is decisive as to which claims can be covered by a possible award during the proceedings.
Distinction: Minimum Bid and Market Value
The minimum bid is not to be confused with the market value. The market value is established in a separate valuation procedure (§ 74a ZVG) and corresponds to the actual market value of the asset. The minimum bid may lie below or above this value, depending on which encumbrances and claims must be taken into account.
Implications for the Foreclosure Process
Restrictions on the Award
The court may only issue an award if the highest bid submitted at least reaches the minimum bid (§ 81 para. 1 ZVG). Falling below this threshold necessarily results in the denial of the award.
Special Considerations for Encumbrances to Be Assumed
Not all encumbrances listed in the minimum bid can be assumed unconditionally by every interested party. Especially in the case of subordinate rights, a nuanced assessment is required regarding their continuation or deletion under property law.
Repeat Appointments and Reduction
In the event of unsuccessful auction appointments, the court may modify the minimum bid at a repeat appointment (§ 85a ZVG), for example, by reducing the cash portion or changing the encumbrances to be assumed, to enable an award.
Practical Relevance and Examples
Typical Situations in Practice
In practice, the minimum bid can vary significantly depending on the amount and composition of existing rights and claims. For example, the cash bid may be reduced to zero if existing encumbrances already exhaust the value of the asset.
Example of the Composition
A property is encumbered with a land charge of 50,000 euros and a higher-ranking public charge (hereditary building lease interest) of 5,000 euros. The minimum bid could then consist of the purchaser assuming the hereditary building lease interest and paying a cash amount to cover the procedural costs.
Legal Protection and Remedies
Decisions regarding the amount and composition of the minimum bid may be challenged by the parties to the proceedings using the permissible legal remedies. In particular, legal protection options are available in the event of procedural errors or errors in the consideration of encumbrances are available.
Literature and Sources
- Zwangsversteigerungsgesetz (ZVG), in particular §§ 44–85 ZVG
- Palandt, German Civil Code, current edition
- BGH, decisions on the interpretation of the minimum bid, among others BGHZ 47, 304
In summary the minimum bid in auction law refers to the minimum proceeds from the cash payment and encumbrances to be assumed, which must be achieved for an award in foreclosure proceedings. It is thus a central element for the process, legal certainty, and creditor protection in these proceedings.
Frequently Asked Questions
What legal requirements apply in determining the minimum bid in foreclosure proceedings?
The minimum bid in foreclosure proceedings is subject to detailed statutory requirements, which are essentially regulated in §§ 44 ff. ZVG (Law on Forced Sale and Administration). The minimum bid consists of the liens to be assumed (such as existing mortgages, land charges) and the procedural costs. The sum of these two items constitutes the lowest permissible bid that a bidder may submit in the course of the auction. The purpose of this regulation is to protect the creditors’ interest in the fullest possible satisfaction and to prevent an auction below value. The local court determines the exact amount of the minimum bid on the basis of all the claims recorded in the land register and the accrued costs. Undercutting this amount is legally inadmissible; bids below the established minimum bid are rejected as invalid.
Who can request a review of the determination of the minimum bid?
Both creditors and debtors are entitled to review or have the correctness of the determination of the minimum bid reviewed. If one of the parties has doubts about the correctness of the calculation or the composition of the minimum bid, it is possible to object to this with the competent local court before the auction appointment. For this, documentation or information can be obtained, particularly regarding the amount and rank of the encumbered liens. In case of disagreements about individual components of the minimum bid, the court decides after hearing all parties involved. The court may also correct its determination during the auction appointment if this is required for the legality of the procedure.
What are the consequences of a minimum bid set too low for the auction proceedings?
If the minimum bid is set incorrectly — for example, too low — this can have significant legal consequences. Firstly, an award decision based on too low a minimum bid may be subject to appeal. The affected creditors or the debtor may apply for a judicial review and, where appropriate, correction of the award by lodging an award complaint. In extreme cases, a grave error in calculation can even lead to the annulment and repetition of the entire auction proceedings to prevent financial disadvantages for the parties involved. The correct determination of the minimum bid is thus a central legal element for ensuring procedural fairness.
Can the components of the minimum bid be changed during the proceedings?
Yes, components of the minimum bid may change up to the auction date and under certain conditions even during the appointment. This is especially the case if, between the decision and the auction appointment, there are changes regarding the rights entered in the land register, the amounts of claims, or the procedural costs. An example is the complete discharge of a land charge that originally formed part of the minimum bid. Such changes must be reported to the court immediately, which will then redetermine the minimum bid. All parties are obliged to report any changes affecting the calculation basis in a timely manner to prevent an erroneous auction.
What role does the minimum bid play with regard to creditor satisfaction?
The minimum bid is crucial in ensuring adequate satisfaction of creditors. It guarantees that in the event of an auction, at least the preferential existing rights and the procedural costs are covered. Thus, it primarily protects the rights of those creditors whose claims are directly secured by the encumbrances to be assumed. If a higher amount is realized through the highest bid, subordinated creditors are also considered according to their ranking. The minimum bid thus functions as a kind of safeguard, securing the basic claims of preferential creditors in the auction proceedings.
What information obligations exist in connection with the minimum bid?
The minimum bid determined by the court must be clearly communicated to all parties involved and interested parties in the auction proceedings. This is done through the public announcement of the auction date, in which both the amount and composition of the minimum bid are detailed. Furthermore, the court is obliged to communicate any possible changes regarding rights to be assumed or procedural costs without delay. Information about the minimum bid is accessible to any interested party, often also through file inspection or information from the court registry.
Are there special provisions regarding the minimum bid for residential property or hereditary building rights?
Yes, for residential property and hereditary building rights, there are special legal aspects regarding the minimum bid. For residential property, for example, outstanding housing fee arrears may have to be included in the minimum bid if they are treated as preferential costs in accordance with § 10 para. 1 no. 2 ZVG. For hereditary building rights, outstanding hereditary building lease interest must regularly be included as a component of the minimum bid, as well as any further in rem encumbrances resting on the hereditary building right. Therefore, special care is required when determining and disclosing the relevant items for these special types of property to accurately reflect the legal positions of all parties involved.
