Auctions of jointly owned property: the essentials

This article explains the essentials of auctions of property or apartments jointly owned by several people. Experienced property lawyer Mag. Patrick Maydell, LL.M. offers practical tips and information.

Houses often belong to several people, and apartments to spouses or siblings. Siblings may have inherited a house together; spouses may have bought or built a property and wish to sell following divorce. If the co-owners cannot agree on a sale, a judicial auction may result.

1) How does a property auction work in detail?

A final judgment or binding court settlement, no longer open to appeal, is required. This typically follows a partition action in which the co-owners settled or the judge issued a judgment that was not challenged. For the conditions for a successful partition action, see Partition actions: 9 tips from a lawyer.

With a judgment or settlement, the auction is initiated by an enforcement application to the competent district court. Even if the partition proceedings took place in a regional court, the auction always takes place in the district court for the property's location.

Once enforcement is authorised, an expert values the property so the court can set a minimum bid. The court chooses and appoints the expert. Parties may comment, including raising reasons against the appointment, such as previous work for the other co-owner. The court may appoint someone else if appropriate.

The expert conducts an on-site inspection with the parties and their lawyers, takes photographs, examines the rooms and obtains necessary documents from the building authority.

The court sets the deadline for the report, usually four to eight weeks. Once submitted, the court sends it to the lawyers, who may comment and identify errors. The report also reveals the proposed minimum auction price.

2) What is the minimum price?

The minimum price is the market value. Contrary to popular belief, an auction following partition therefore does not normally involve a sale below market value, unlike an ordinary enforcement auction initiated by a bank for unpaid debt. Section 352a(3) EO sets the minimum bid at the appraised value, meaning market value.

In practice, properties auctioned after partition frequently sell above market value. Co-owners therefore need not suffer a financial disadvantage compared with a private sale.

If they disagree with the expert's figure, the co-owners can unanimously agree a higher minimum, or a lower one if they believe the valuation is too high to attract buyers. However, the minimum must not fall below three quarters of the expert's appraised value. Usually the expert's figure is retained because the owners cannot agree.

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3) What happens at the auction hearing?

The auction takes place at the district court, usually in a larger courtroom. Each prospective buyer shows identification, completes a form and presents a savings passbook containing at least the required security deposit, the Vadium. This prevents frivolous bidding without payment.

An existing co-owner may also bid. If a half-owner wishes to acquire the other half and succeeds, they need not pay the full purchase price for an interest they already own, but only the price attributable to the other half.

The judge awards the property to the highest bidder. The buyer then pays the purchase price into the court's escrow account. Once it has arrived in full, the court informs the co-owners' lawyers. The property is subsequently handed over, including the keys.

4) How are the proceeds distributed?

Before payment, the judge attempts to secure agreement between the parties. If they cannot agree, the court decides according to the relevant criteria.

Proceeds are generally distributed according to ownership shares; two equal co-owners each receive half. This can differ where one owner made investments or shares are unequally burdened by loans or mortgages, for example one unencumbered half and one mortgaged half.

5) What about investments by a co-owner?

An exception to distribution by registered shares applies to investments capable of increasing the property's value and benefiting the other owner.

For example, one owner builds a garage at their own expense with the other's consent. If it can increase the property's value and auction proceeds, the other owner would benefit without having contributed. The investing owner may ask the court to account for that investment and receive a larger amount.

It is not necessary to show that the particular buyer actually paid more because of the garage. What matters is whether the investment was objectively capable of increasing the auction proceeds.

Payments or claims arising from co-ownership but unrelated to the amount realised cannot be taken into account. For example, unpaid operating or repair costs owed by one owner to the other must be claimed in separate proceedings.

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6) How long does it take?

The time until auction depends on several factors, including how quickly the court authorises it, when it schedules the hearing and whether an opposing co-owner delays proceedings through applications. Normally, allow approximately six to nine months, and potentially longer.

7) What happens to loans and mortgages?

Mortgages generally remain after the auction. A new buyer could therefore face enforcement by the bank if the former owners fail to repay their loan.

To avoid this, the outstanding loan is often repaid to the bank from the auction proceeds and the bank issues a release for deletion of the mortgage. The buyer then acquires the property free of that mortgage, while the former owners benefit from repayment of their debt.

8) What does the auction cost?

The enforcement proceedings attract a one-off court fee calculated on the amount in dispute, often a few hundred euros depending on the case. Expert valuation fees vary with complexity, such as an apartment versus a multi-unit building, but are typically EUR 2,000–4,000 in total for all owners.

Lawyers' fees depend on work required, including submissions and hearings. They are often of a similar order to the expert fees but may vary.

Court and expert fees are shared according to ownership shares. With three equal co-owners, each pays a third. Unlike first-instance partition litigation, lawyers' fees in the enforcement proceedings are not reimbursed: each owner pays their own lawyer.

9) Do rights of residence or usufruct survive?

Yes. A right of residence or usufruct remains and must be accepted by the buyer. In practice, such a right may mean that no buyer is found.

10) Can a prohibition on sale and encumbrance prevent an auction?

A registered prohibition prevents an auction where it covers the entire property and its beneficiary does not consent. If it covers only one ownership share, for example one half but not the other, the property may nevertheless be auctioned.

11) What if the property does not sell?

If it is not sold at the first hearing, written bids may be submitted within a period of up to eight weeks afterwards. The court sets the precise deadline and publishes the details in the judicial notices database (Ediktsdatei).

Written bids may be up to 25% below the expert's appraised value. In my experience, failure to sell is uncommon, except where, for example, a right of residence burdens the property.

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For questions or assistance with partitioning houses, land or apartments, call for a free initial telephone assessment or email office@maydell-law.at.

Mag. Patrick Maydell, LL.M.
Attorney at Law
Neustiftgasse 17/1/9
1070 Vienna
Telephone: +43 1 2954251
office@maydell-law.at