The foreclosure procedure in France: A complete guide for co-owners and real estate professionals

Property seizure is a legal procedure enabling a creditor, usually a bank or property management company, to recover sums due by forcing the sale of a property. This process particularly concerns co-owners who fail to pay their charges, creating unpaid debts that undermine the collective management of a co-ownership. In this article, we take a closer look at the foreclosure procedure in France, the key stages, the rights of debtors and creditors, and preventive measures to avoid this situation.

Property seizure is an extreme measure taken by a creditor to recover a debtor's debts by obtaining the forced sale of his or her real estate. This procedure is generally used when the debtor is in a situation of insolvency or prolonged inability to repay debts, such as mortgage loans or unpaid condominium charges.

The players involved in a foreclosure procedure are :

The foreclosure procedure is governed by the French Code des procédures civiles d'exécution. It consists of several formal stages, which must be strictly adhered to in order to guarantee the legality of the forced sale.

The first step in a property seizure is for the creditor to send a formal notice to the debtor. If this formal notice remains unsuccessful, a summons to pay (commandement de payer) is issued . This document, issued by a bailiff, gives the debtor 8 days to rectify the situation.

Once the summons to pay has been served, it must be published at the Service de publicité foncière to be enforceable against third parties. This formality makes the seizure of the property official. The debtor retains use of the property, but can no longer dispose of it (i.e. sell or transfer it).

Once the summons has been published, an orientation hearing is scheduled. At this hearing, the enforcement judge assesses the situation. The debtor may propose a repayment solution, and the judge may order a postponement of the sale. However, if no solution is found, the judge authorizes the sale of the property.

Before the property is put up for sale, an appraisal is carried out to determine its value. This is a crucial step, as it enables us to set a reserve price for the forthcoming auction.

The forced sale of the property takes the form of apublic auction before the court. The starting price is that determined by the appraiser at the time of valuation. Once the sale has been concluded, the proceeds are used to settle creditors. If the amount obtained exceeds the debts, the surplus is returned to the debtor.

Although property seizure is a cumbersome procedure, the debtor has a number of options for contesting or delaying the sale.

The debtor can try to contest the amount or the very existence of the debt. This must be done before the orientation hearing, as recourse afterwards becomes very limited.

In certain situations, the debtor can negotiate with the creditor to obtain additional payment terms. This may temporarily halt the procedure, particularly if a repayment agreement is reached.

If the judge authorizes the sale of the property, the debtor can appeal this decision within 15 days. However, an appeal does not automatically suspend the sale, unless an express request is made to that effect.

The debtor can also apply to the Banque de France for an overindebtedness procedure. If this request is accepted, the seizure procedure can be temporarily suspended, giving the debtor time to find a solution.

Once the seized property has been sold at auction, the court proceeds to distribute the funds. This step is called distribution, and follows an order of priority established by law.

The first to be reimbursed are usually the mortgage holders (banks, credit institutions) who hold a security interest in the property. Legal fees and court costs are also reimbursed first.

Unsecured creditors, i.e. those who do not have a specific guarantee, are reimbursed only after priority creditors have recovered their due. If the proceeds of the sale are insufficient, these creditors may not be reimbursed in full.

If there are funds left over after the creditors have been paid, the debtor receives the surplus. In the opposite case, the debtor may remain liable for the difference between the amount of the debt and the proceeds of the sale.

In some cases, foreclosure can be avoided, thanks to amicable or legal solutions that enable the debtor to regularize his financial situation.

Even before seizure is triggered, it is often possible to negotiate with creditors to spread out payments or obtain an extension.

In some cases, the debtor can consider a credit repurchase to combine all his debts into a single loan, with lower monthly payments.

Rather than waiting for an auction, which is often less advantageous, the debtor can also choose to sell his property out of court. This enables them to control the sale price and settle their debts more proactively.

Finally, the overindebtedness procedure can be used to suspend seizure and restructure debts. However, this recourse is reserved for debtors considered to be in a seriously compromised financial situation.

Property seizure is a complex procedure with far-reaching consequences for co-owners and real estate professionals. While it is a last resort for creditors, it is essential for debtors to know their rights and to react quickly at the first sign of unpaid debts. By acting proactively, solutions can often be found to avoid the forced sale of a property.