Private sale in a property seizure: the enforcing creditor's strategy

A property seizure brought by a bank, a property company or any registered creditor does not necessarily end at auction. At the orientation hearing, the debtor may ask to sell the property itself, by private sale, under the supervision of the judge. For the enforcing creditor, this fork in the road is not neutral: it may improve the recovery rate by achieving a better price, but it lengthens the timetable and introduces an uncertainty that a court auction does not carry. This guide explains when the judge authorises a private sale rather than a forced sale, how the creditor weighs price, timing and risk, and how this route fits with the other creditors registered against the property.

Private sale and court auction: two outcomes of the orientation hearing

Property seizure proceedings are governed by Book III of the French Code of Civil Enforcement Procedures (code des procédures civiles d'exécution, CPCE). They begin with service of a payment order constituting attachment (commandement de payer valant saisie), published at the land registry (service de la publicité foncière), and continue to the orientation hearing before the enforcement judge (juge de l'exécution, JEX). The time limits for publication of that instrument and the grounds on which it lapses are set out in our article on the payment order constituting property attachment.

This hearing is the tipping point. Article L322-1 of the CPCE sets out the principle: "The sale of the property takes place either by private sale with court authorisation, or by auction." Two paths therefore open up:

• auction (adjudication), that is, forced sale by public auction, at the sale hearing;
• private sale with court authorisation, where the debtor sells the property itself to a buyer it has found, but under the supervision of the judge and on the conditions the judge sets.

Article R322-15 of the CPCE sets out the judge's role: at the orientation hearing, the judge rules on disputes, verifies that the conditions for the enforcement are met and determines how it is to proceed, "by authorising a private sale at the debtor's request or by ordering a forced sale". A key point for the creditor: a private sale in a property seizure cannot be imposed by the creditor or ordered of the court's own motion. It requires a request from the debtor. The enforcing creditor, for its part, files its observations and may argue for an auction if it considers the private route inappropriate.

What the judge considers before authorising

The JEX does not grant a private sale automatically. It checks that the sale can be completed on satisfactory terms having regard to the condition of the property, the local market and the interests of the parties. In practice, the judge takes account of whether or not there is a serious buyer in prospect, the valuation of the property, its state of occupation and the debtor's conduct during the proceedings. A debtor who has made repeated delaying manoeuvres, or whose property is manifestly unsaleable within the time allowed, will see its request refused in favour of a forced sale.

This is where the first part of the enforcing creditor's strategy is played out. At the hearing, it is not a spectator: it informs the judge of the economic reality of the case. Pointing out that no preliminary sale agreement has been produced, that the debtor's valuation is unrealistic or that the property is burdened with heavy easements may be enough to steer the decision towards an auction.

The conditions set by the judge to authorise a private sale

When authorising a private sale, the judge does not give a blank cheque. The judge frames the transaction with two essential safeguards: a reserve price and a strict timetable.

The reserve price, the creditor's safeguard

Article R322-21 of the CPCE requires the judge to fix, in the decision authorising the private sale, "the amount of the price below which the property may not be sold". This reserve price directly protects the interests of registered creditors: it prevents the debtor from selling the property off cheaply to a relative or a friendly buyer, which would empty the security of its substance.

The judge may also set particular conditions of sale, for example imposing certain terms of payment or of clearing of charges. For the enforcing creditor, the challenge is to secure a reserve price that is realistic but protective. A reserve set too low turns the private sale into a distress sale; set too high, it dooms the transaction to failure and costs several months. The creditor therefore has an interest in putting a solid valuation before the court (valuation opinion, expert report, comparable transactions) so as to set this threshold as close as possible to the true market value.

The time limits

The second safeguard is time. Again under Article R322-21 of the CPCE, the judge fixes the date of a follow-up hearing at which the case will be reviewed, within a period of not less than two months and not more than four months. During that period, the debtor must find a buyer and sign a preliminary agreement that respects the reserve price.

At the follow-up hearing, two scenarios arise. If a compliant preliminary sale agreement or promise has been signed, the judge may grant additional time to allow the sale to be completed by authentic deed and the price to be paid. If nothing has come of it, or if the conditions have not been met, the judge orders a forced sale: the proceedings then resume towards the auction. These time limits are a matter of public policy and hardly lend themselves to accommodating extensions, which reassures a creditor anxious not to see the proceedings stall indefinitely.

The enforcing creditor's assessment: price, timing, risk

The enforcing creditor does not simply endure the private sale: it assesses it, opposes it or supports it on the basis of a calculation of return. Three parameters structure this assessment.

The prospect of a better price

The central argument in favour of a private sale in a property seizure is price. Court auctions often conclude below market value: the discount reflects buyers' wariness of a property sold under compulsion, sometimes without a full internal viewing, with an occupant in place and a litigation risk. A private sale conducted by the debtor, with an ordinary buyer willing to view and negotiate normally, captures more of the real value.

For a first-ranking creditor whose claim is fully covered by the value of the property, this difference may seem secondary: it will be paid in full either way. But for a partly covered creditor, or for several registered creditors sharing the price, every slice of value recovered counts. The private sale then becomes the recovery-maximising option. A property company holding a residual claim behind a large first-ranking claim has every interest in supporting a private sale at the right price, failing which an auction in the courtroom risks leaving nothing for its rank.

The cost of time

The price advantage is paid for in time. Between the orientation hearing, the follow-up hearing fixed within a maximum of four months, and then the time needed for completion by notarial deed and consignment of the price, a private sale adds several months to the timetable compared with an auction scheduled directly. For an institutional creditor, that time has a cost: interest continues to run, but the claim is also tied up, accounting provisions are needed, and the outcome is uncertain.

The creditor must therefore weigh the expected price gain against the carrying cost. Where the claim is old, the debtor is acting in good faith and the property is of good quality, waiting is justified. Where the case has dragged on for years and the debtor keeps raising incidents, a prompt auction becomes preferable, even at the cost of a discount.

The risks of failure

The third parameter is uncertainty. A private sale depends on a buyer whom the creditor does not control: withdrawal within the statutory cooling-off period, refusal of the buyer's loan, a condition precedent not satisfied, or simply no offer at the reserve price. Each failure sends the matter back to the follow-up hearing, then to a forced sale, after months have been lost.

The enforcing creditor does, however, keep a safety valve: it retains procedural control of the seizure. If performance of the private sale goes off the rails, the switch to auction follows as of right. This reversibility limits the risk but does not remove it, because the time elapsed may erode the value of the property or the debtor's residual solvency. Hence the importance, for the creditor, of requiring tangible assurances at the hearing before agreeing to the private route: a preliminary sale agreement already signed, an identified buyer, confirmed financing.

The interplay with the other registered creditors

A seized property rarely carries a single registration. A contractual mortgage in favour of the lending bank, a lender's privilege (privilège de prêteur de deniers), a statutory mortgage in favour of the Public Treasury or social security bodies: several creditors may claim a share of the price. The enforcing creditor's strategy must take account of this plurality.

The clearing effect of a court-authorised private sale

A fundamental technical point distinguishes a private sale with court authorisation from an ordinary private sale. Article L322-14 of the CPCE provides that consignment of the price and payment of the costs of the sale clear the property by operation of law of every mortgage and privilege. In other words, the buyer receives a property free of its registered charges, exactly as after an auction.

This clearing effect is decisive for the attractiveness of the sale: without it, no serious buyer would purchase a property that remained encumbered. It also explains why the judge, before recording the sale, makes sure the price has actually been consigned. The price is not paid directly into the debtor's hands: it is consigned, then distributed among the creditors according to their rank.

The order of distribution of the price

Once the price has been consigned, the distribution procedure governed by Articles L331-1 et seq. of the CPCE begins. Registered creditors are paid in the order of their security and the rank of their registrations. An unsecured creditor (créancier chirographaire), with no security interest, comes only after the privileged and mortgage creditors, and often obtains only a remainder, or nothing. The position of the registered creditor, from notification to the filing of its claim, is analysed in our article on distribution of the price in a property seizure.

This hierarchy directly governs the assessment. The first-ranking creditor, certain of being paid, may prefer a swift auction if it has no need to optimise the price. The lower-ranking creditor, whose recovery depends on every additional euro, argues on the contrary for a private sale at the best price. The interests of registered creditors may therefore diverge within a single case, which results in opposing positions at the orientation hearing.

Coordination between creditors

The enforcing creditor has an interest in mapping, before the hearing, all the registrations encumbering the property, by consulting the mortgage statement issued by the land registry. This reading tells it whether the foreseeable proceeds of the sale cover its own claim and what margin separates the value of the property from the total of the prior registrations.

Where several institutions are concerned, informal consultation may take place to support or oppose the request for a private sale. Agreement on the valuation and on the desired reserve price strengthens the credibility of the observations before the JEX. Conversely, scattered positions weaken all the creditors and leave the judge a wider margin of discretion.

What to do when the private sale fails

The possibility of failure must be anticipated from the outset. If, at the follow-up hearing, no compliant preliminary sale agreement is produced, or if the proposed sale does not respect the reserve price or the conditions set, the judge orders a forced sale. The proceedings then resume their course towards the auction: fixing of the sale date, publicity, the conditions of sale document (cahier des conditions de vente), then the auction hearing. The effects of the auction judgment and the upset bid (surenchère) are dealt with separately in our article on securing the takeover of a property asset.

For the creditor, this sequence offers a measure of security: the private route is never a dead end, it is always followed by the forced route. The drawback is the time lost and the risk that the market has turned in the meantime. A well-advised creditor therefore prepares the elements of the auction in parallel, so that the switch takes place without avoidable additional delay.

The debtor's conduct during the private sale phase must also be monitored. Some debtors request authorisation for a private sale for purely dilatory purposes, with no real intention to sell, in order to gain a few months. An enforcing creditor who detects this manoeuvre has an interest in documenting the absence of steps taken (no marketing, no viewings, refusal of serious offers) in order to obtain, at the follow-up hearing, an immediate switch to auction.

Strategic summary for the enforcing creditor

A private sale in a property seizure is neither a right of the debtor nor a threat to the creditor: it is a recovery tool whose suitability is assessed case by case. The right approach is to reason in terms of net recoverable value, weighing the expected price, the cost of delay and the probability of completion.

A few benchmarks guide this assessment:

• support the private route where the property is of good quality, the debtor presents a credible buyer and the creditor would not be fully covered by an auction in the courtroom;
• favour auction where the case is dragging on, the debtor is acting dilatorily or the first-ranking claim is covered whatever the outcome;
• systematically require a realistic reserve price, backed by a serious valuation, so as not to turn the private sale into a fire sale.

In all cases, control of the procedure remains in the hands of the enforcing creditor, which retains the ability to have a forced sale ordered if the private route fails.

Conclusion

A private sale with court authorisation is not a concession extracted by the debtor: it is a return variable that the enforcing creditor must actively manage. Well used, it captures the value premium that an auction often lets slip, which benefits first of all intermediate-ranking creditors whose recovery depends on every euro. Poorly supervised, it becomes a dilatory instrument that erodes the security. The dividing line rests on three controllable elements: a realistic reserve price, a buyer already identified and a timetable that is kept.

Before each orientation hearing, an enforcing creditor should obtain an independent valuation of the property and an up-to-date mortgage statement, then weigh explicitly the price gain expected from a private sale against the cost of the time it imposes. This assessment, carried out beforehand and documented, turns a mere procedural option into a genuine recovery strategy.

Frequently asked questions

Can the enforcing creditor impose a private sale? No. Under Article R322-15 of the French Code of Civil Enforcement Procedures, the enforcement judge authorises a private sale only at the debtor's request. The enforcing creditor can neither demand it nor obtain it of the court's own motion. It may, however, file observations at the orientation hearing to support or oppose the request, and argue for an auction if it considers the private route inappropriate.

How long is there to sell privately after the judge's authorisation? Article R322-21 of the CPCE requires the judge to fix a follow-up hearing within a period of between two and four months. The debtor must have signed a preliminary agreement compliant with the reserve price before that date. If a preliminary sale agreement has been signed, the judge may grant additional time for completion by authentic deed and consignment of the price. Failing completion, a forced sale is ordered.

Does a private sale clear the mortgages registered against the property? Yes, provided it is authorised by the judge. Article L322-14 of the CPCE provides that consignment of the price and payment of the costs of the sale clear the property by operation of law of every mortgage and privilege. This is what distinguishes a court-authorised private sale from an ordinary private sale and makes it attractive to a buyer, who receives a property free of its registered charges.

What happens if the private sale fails? At the follow-up hearing, if no compliant preliminary sale agreement has been signed or if the conditions set have not been met, the enforcement judge orders a forced sale. The proceedings resume towards a public auction. The private route is therefore never a dead end for the creditor, but failure costs several months and may erode the value of the property in the meantime.

Why does a private sale often yield more than an auction? Court auctions frequently suffer a discount linked to the context of compulsion, any occupation of the property and buyers' wariness. A private sale conducted with an ordinary buyer, willing to view and negotiate normally, captures more of the market value. For a partly covered or intermediate-ranking creditor, this additional price may make the difference between full recovery and a loss.

How is the reserve price set and why does it protect the creditor? The judge fixes, in the decision authorising the private sale, the amount below which the property may not be sold (Article R322-21 of the CPCE). This threshold prevents the property being transferred at a knockdown price, in particular to a friendly buyer, which would empty the creditors' security. The enforcing creditor has an interest in putting a serious valuation before the court so that the reserve price reflects the true market value.

How is the sale price shared between several registered creditors? The price is consigned and then distributed under the procedure in Articles L331-1 et seq. of the CPCE. Creditors are paid in the order of their security and the rank of their registrations: privileges and mortgages first, unsecured creditors afterwards. A lower-ranking creditor receives payment only after the priority ranks have been paid in full, which is why it has an interest in maximising the price through the private route.