Everyone inevitably makes higher or lower financial commitments throughout their lives. However, due to economic instability, life circumstances or other unforeseen circumstances, commitments may simply no longer be fulfilled. It often happens that the non-performance or improper performance of a person’s financial commitments results in enforcement of debt (financial commitments) recovery proceedings initiated on the initiative of creditors with assistance of a bailiff, realizating the property belonging to a person who has financial commitments, in other words a debtor.
Despite the fact that the property that belongs to the debtor is enforced in a forced manner, there are specific rights and obligations of the debtor, which are specifically regulated in the Code of Civil Procedure of the Republic of Lithuania. One such right is the sale of property to a buyer offered by the debtor. This is one of the methods of enforcement provided for in the Code of Civil Procedure. Article 704 of the Code of Civil Procedure establishes the right of the debtor to find a buyer of the seized property at a price not lower than the value of the property specified in the seizure deed or a lower price sufficient to cover the arrears and enforcement costs in full.
However, the question arises – how to deal with situations where another potential buyer emerges in the enforcement process who offers a higher price for the property to be sold? The law does not directly regulate the situation in a bailiff’s case, how a bailiff have to deal when a potential buyer offers a higher price for the property to be, so it is clear that this non-typical situation is resolved in accordance with the principles of the enforcement process and the established precedents.
The essence of enforcement is the recovery of a debt, thus fulfilling the debtor’s obligation to the creditor. Therefore, in the interpretation and application of the rules governing enforcement proceedings, it must be ensured that the result of the application of the law is not contrary to the purpose. It should be noted that the rules established by law for the achievement of a certain purpose are established as optimal in the usual, most common cases provided by the legislature. In cases where there is a situation not regulated by the legislator, it is resolved by applying an analogy of law.
The case law of the Supreme Court of Lithuania states that in the process of reconciling the interests of the recovered and the debtor and seeking the balance of interests, it imperatively presupposes that that the compulsory realization process be organized in such a way that the creditor obtains satisfaction of his claims, while also safeguarding the interests of the debtor in the aspect that the assets are not sold at too low a price. Thus, the sale of the property at the highest possible price is the goal of enforced debt recovery, which clearly benefits both the creditor and the debtor. Therefore, in order to implement the essence of the enforcement process, there is a possibility to sell the property to another entity that has offered a higher price than the property to be sold in the enforcement process.
It is important that the buyer proposed by the debtor must transfer 10% of the amount for which the property is offered to the bailiff’s deposit account to ensure the reality of his intentions. However, Part 6 of the Article 704 of the Code of Civil Procedure indicates that the seized property is sold to the proposed purchaser of the debtor only if an act in the form prescribed in the Enforcement Order is drawn up, in other words – a document certifying the right of ownership.
Thus, the legal consequences of concluding a sale of property are not related with a payment of 10% of property value, but with an enumeration of a formed act prescribed in the Enforcement Order, therefore, the payment of a contribution to the bailiff’s deposit account does not confer on the purchaser proposed by the debtor an unconditional right to demand that the property be sold to him.
According to the case law of the Supreme Court of Lithuania, (Order of the Supreme Court of Lithuania of 22 May 2015 in civil case No. 3K-3-315-469/2015) the consent of the debtor to change his proposed purchaser is not required if the new offer is in all respects in the best interests of the parties to the enforcement proceedings. Thus, selling the property to the buyer proposed by the debtor without using the opportunity to sell it at a significantly higher price would violate the duties of a bailiff and the principles of the enforcement process established by law, and would therefore be illegal.
ARTICLE PREPARED BY:
Černiauskas and Partners Law Firm Advocate’s assistant Jokūbas Kūra.
