Court-ordered sale of joint property (licitation)

When co-owners in indivision (joint ownership) can neither divide a property between themselves nor agree that one of them should keep it against a soulte (equalising payment), the solution is to sell it and share the price. Licitation is that sale, made at auction. It may be private, when all the co-owners consent to it before a notaire (French civil-law notary), or court-ordered, when the court directs it as part of a partition; it then takes place at the court, through a lawyer, on the basis of a schedule of conditions of sale.

The sensitive point is the reserve price. Too low, and the co-owners risk a sale far below the value of the property, even though the right to overbid and the possibility of setting a realistic reserve limit that risk. Too high, and no bids are made, leading to a new sale at a reduced reserve. This is where the valuation matters.

Where the rule comes from

Article 1686 of the French Civil Code provides that, where a thing owned in common cannot be conveniently divided without loss, it is sold at auction and the price is shared between the co-owners. Article 1377 of the French Code of Civil Procedure provides that the court orders, on the terms it determines, the sale by auction of property that cannot easily be divided or allocated. Article 815-5-1 of the Civil Code opens another route: a private sale authorised by the court at the request of co-owners holding at least two thirds of the rights, where the refusal of the others endangers the common interest.

In a valuation report

I establish the market value of the property at the date closest to the sale, in its actual condition, occupied or vacant, with any defects, because that is the property that will be knocked down. I describe the factors that affect an auction sale: whether viewing is possible, occupation, condition, easements, statutory surveys. The report gives a range and a single figure, from which the parties or the judge set the reserve price, often below the value in order to attract bids. It states that the auction price, obtained in the particular conditions of a court auction, may differ from market value without calling that value into question: the Charte de l’expertise points out that there is no standard discount between a forced sale and market value.

Example

Three cousins jointly own an inherited longère (Breton farmhouse), unoccupied and in need of major works. None of them wants to take it on. The valuation concludes at a market value of €165,000 as it stands. The court orders a licitation with a reserve price of €120,000, as proposed by the parties. After bidding, the property is knocked down at €158,000, costs payable by the buyer in addition. The price, after deduction of the costs of the proceedings, is shared in thirds. A private sale, had the three cousins agreed, would probably have come close to the valuation figure while avoiding part of the costs.

Not to be confused with

Property foreclosure (saisie immobilière) is a forced sale at the initiative of a creditor. Preferential allocation (attribution préférentielle) allows one co-owner to keep the property against an equalising payment. The private sale under article 815-5-1 is not an auction.