OVERVIEW
In public executor proceedings, there are three parties: (i) debtor (owner), (ii) creditor (claimant) and (iii) buyer. Buyer does not pay any costs in public executor proceedings other than transfer tax, which is 3% of purchase price. The costs of the public executor are paid by the creditor and then reimbursed by the debtor (see a calculation example below).
There are two types of court forcible sales proceedings (done by Public executor) of mortgaged real estates: public sales and direct sales.
PUBLIC FORCIABLE SALES
The procedure of public sales is as follows:
1. Public executor delivers a ‘Decision on sales’ (which consists the market value of the real estate, date and time of sales etc.), and which must be published in daily newspaper and sales must be held within 15-30 days from the publication of the ‘Decision’ on sales.
2. The valuer is hired by a public executor to do the valuation of the real estate and provide market value of the real estate.
3. First public sales is held at the office of public executor, on the date specified in the ‘Decision on sales’. On first public sales, the property cannot be sold below its market value. Debtor and creditor can agree though to sell real estate on lower price than the market value.
4. Second public sales; if the real estate is not sold on first public sales, the second public sales is determined by public executor within 15-30 days, on which real estate cannot be sold below 50% of its market value.
5. Third public sales; if the real estate is not sold on second public sales, the third public sales is determined by public executor within 15-30 days. On this auction the real estate can be sold below 50% of its market value, however for the creditor specifically not less than the amount of their debt (it means that price can be higher than on second sales for the creditor, which depends on the amount of debt).
In order for the buyer to participate in the proceedings he must pay to public executor a bail in the amount of 10% of the market value of the real estate. The ‘winning’ bidder must pay the rest of the price within the deadline determined by the public executor, otherwise he loses the bail.
6. Once a price is fully paid, the public executor can, without any delay, forcibly evict the debtor from the real estate, if he is not willing to voluntarily move out. Regarding the out of court forcible proceedings of mortgaged real estates (done by trustee, mostly a lawyer) the procedure is the same as for the court proceedings. The only important difference is that in the case that debtor does not want to voluntarily move out from the real estate, eviction proceedings must be started at basic court, which trial can last for up to two years.
DIRECT SALES
If there is consent of the debtor, real estate can be sold in the procedure of direct sales. In these proceedings the debtor and creditor can agree on the price of sales, terms of sales, and the potential buyer (e.g. they can agree to sell the real estate to potential buyer for the agreed amount).
Regarding the out of court forcible proceedings of mortgaged real estates (done by trustee, mostly a lawyer) the procedure is the same as for the court proceedings. The only important difference is that in the case that debtor is not willing to voluntarily move out from the real estate, eviction proceedings must be started at the basic court, which trial can last for up to two years.
WORKED EXAMPLES
COSTS PAYABLE BY THE BUYER
The amount of transfer tax, which is 3% in Montenegro. There are exceptions for the payment of transfer taxes, however it applies only for banks (under certain conditions) and for non-profit organizations.
Costs of any consultancy services required for the informed purchase of the claim; for example, real estate portfolio valuation.
COSTS PAYABLE BY THE CREDITOR AND REIMBURSABLE FROM THE DEBTOR
The costs of the public executor, which is payable by the creditor and then reimbursable from the debtor, based on value of the property, value of the claim and complexity of the proceedings.
For example, with a total €5,000 of claim, the costs have been as follows:
- Preparation of initial tasks of the executor: €96
- Public executor fee for three sales: €180 (€60 per case)
- Cost of newspaper advertisement: €270 (€90 per case)
- Success fee for the executor: €215
If the debtor cannot be found five additional newspaper adds shall be published, in the amount of €50 per newspaper add.
CONTACT US
Adam Ragab, MRICS
Managing Partner, SEE
adam.ragab@adriaticappraisal.com
M: +382 67 800003
T: +382 20 235319
Darko Bogetić, MRICS, d.i.g.
Partner, Head of Valuation and Building Surveying
darko.bogetic@adriaticappraisal.com
M: +382 67 670967
T: +382 20 235319
Prepared in collaboration with:
Filip Ćupić, LLM
Advocate, at AOD Ćupić
filip@akcupic.com
M: + 382 20 510146
For further information about the company, including our references, publications and the services that we offer contact us directly on one of the email addresses or phone numbers above.