One method for a creditor to satisfy a receivable due from a debtor, assuming that the creditor has been awarded a final and conclusive execution, is the compulsory sale of the debtor's property. The sale of the property may take the form of an execution auction, a court auction, or a compulsory public auction.

Execution auctions and court auctions are conducted under the Civil Procedure Code, while compulsory public auctions are conducted under the provisions of the Public Auction Act.

Compulsory sale under the Public Auction Act is conducted upon the proposal of a creditor, i.e., a person whose receivable is secured by an encumbrance over the property to be sold and accorded upon an execution title which is most frequently awarded upon a court decision. The auction may be effectuated only on the basis of a written auction agreement. Subsequently, the auctioneer can issue an auction notification.

Creditors may register their receivables with the auctioneer within 15 days before the commencement of the auction. Every bidder must provide a security deposit not exceeding 30% of the lowest bid, the amount of which is specified in the auction notification. The lowest bid must amount to at least one-half of the estimated price of the subject of the auction. The security deposit should be returned after the conclusion of the auction. The price achieved through the auction must be paid by the successful bidder within 10 days of the conclusion of the auction, or within 30 days if the price achieved through the auction exceeds five million Czech crowns, or, as the case may be, within a different time-limit stipulated in an agreement. If the successful bidder settles the price within the defined time-limit, the respective ownership title will transfer to him or her at the moment of knock-down. This should be confirmed by a written confirmation issued to the successful bidder.

The gain from the auction should first be used to cover the costs of the auction. Subsequently, the auctioneer should satisfy the creditors within 10 days of the settlement of the price. The remaining part of the gain is to be remitted to the owner.

An execution auction is conducted based on a creditor's petition sent to any executor's office chosen at the creditor's own discretion. The executor's office subsequently forwards this petition to the competent court, which will issue an order. The court executor will then appoint an expert to determine the current price of the property, including its appurtenances and the respective rights and defects associated with it. Afterwards, the lowest bid is derived from this determined price. The starting price amounts to two-thirds of the price of the property determined by the expert opinion. The successful bidder is authorised to take over the property on the day following the knock-down, and at the same time is obligated to pay the highest bid made during the auction within a time-limit determined by the court executor, provided that the length of the time-limit does not exceed two months. After the knockdown resolution becomes effective and the highest bid is paid, the court executor will file an application for the registration of the change in the ownership title to the property. However, the successful bidder becomes the owner of the relevant property retroactively as of the auction date only after the effective date of the knock-down resolution and payment of the highest bid.

An auction conducted under the Public Auction Act is less costly than an execution auction. Another advantage of this type of auction is its speed; however, this applies only in the case of the "seamless course" of the auction; the ownership title to the subject of the auction may be contested by an action and the consequent judicial dispute may take several years. The ownership title to the subject of an auction may be contested by any person, unlike an appeal against a court executor's knock-down resolution, which may be lodged only by a limited group of persons defined by the law.

As far as the starting price is concerned, it amounts to one-third of the appraisal value according to the Public Auction Act, while in the case of an execution for properties, the starting price amounts to two-thirds of the appraisal value. The price achieved in the auction must be paid within ten days, but a longer time-limit may be stipulated in an agreement. The time-limit for the payment under an execution auction is set out in the knock-down resolution and may not be longer than two months.

Information concerning auctions under the Public Auction Act is available at the so-called central address at www.central-niadresa.cz and for execution auctions at www.portaldrazeb.cz.

Under the Public Auction Act, the rights of beneficiaries in respect of easements attached to the subject of the auction remain unaffected by the transfer of an ownership title resulting from the auction; only preemption rights associated with the property cease to exist. As for the execution auction, on the effective date of the resolution to distribute the estate, all mortgages, easements, and leases associated with the property cease to exist, with the exception of those for which an express decision on continuance has been adopted.

In conclusion, execution auctions may be slightly lengthier, but they clearly provide a higher degree of legal certainty to the creditor. In any case, the choice of a particular method is up to the creditor and his or her consideration of the respective advantages and disadvantages.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.