Enforcement and insolvency affecting a property

Enforcement and insolvency affecting a property mean that debt enforcement (exekuce) or insolvency proceedings are under way against the owner and the property may be used to pay the owner's debts. What matters for a buyer is that the owner may no longer freely dispose of their assets, and a sale without the consent of the enforcement officer or insolvency court may be invalid or ineffective towards creditors.

How it shows on the title sheet

• A note on the owner as a person: notice of enforcement, an interim measure of the insolvency court, an insolvency decision or a declaration of bankruptcy (Section 25 of the Cadastral Act).
• A note on the property: an enforcement order to sell or administer the property, an order for execution of a decision, a filed application for an enforcement officer's lien or an auction notice (Section 23).
• An enforcement officer's or judicial lien in part C, entered on the basis of an enforcement order (Section 73a of the Enforcement Code).
• While an entry is being processed, the property shows a pending-change flag.

Notes are in part D of the title sheet (LV), liens in part C. The types of notes are described in detail under land register note.

What it means for a sale

• Once notified that enforcement has started, the debtor may not dispose of their assets, including real estate, subject to exceptions in the Enforcement Code. A legal act breaching this ban is invalid if the enforcement officer, the creditor or a registered creditor objects (Section 44a of the Enforcement Code).
• With the written consent of the enforcement officer, the creditor and all registered creditors, the debtor may sell the property themselves, for at least the usual price set by an expert valuation and with payment to the enforcement officer (Section 44a(4)).
• An enforcement officer's lien also binds anyone who acquired the property after the note on the application for it was entered (Section 73a(2)).
• From the start of insolvency proceedings, the debtor must refrain from substantial dealings with their assets, and acts breaching this are ineffective towards creditors (Section 111 of the Insolvency Act). After bankruptcy is declared, the insolvency administrator manages the assets (Section 246).

Where else to check

The land register only shows what a court, enforcement officer or insolvency administrator has reported to it. Insolvency proceedings are in the public insolvency register (ISIR) of the Ministry of Justice, which anyone may consult (Section 419 of the Insolvency Act). Enforcement cases are kept by the Chamber of Enforcement Officers in the central register of enforcements, which provides data for a fee (Section 125 of the Enforcement Code). Both registers are searched by person, not by property.

Frequently asked questions

Can you buy a property subject to enforcement?

Yes, but not just by agreement with the owner. The seller can deposit the enforced amount with costs at the enforcement officer, who then lifts the ban on disposing of assets (Section 44a(2)), or the sale can be approved in advance in writing by the enforcement officer, the creditor and the registered creditors (Section 44a(4)). Another route is buying at auction.

How to protect yourself if enforcement appears after signing?

It is worth checking the title sheet extract, ISIR and the central register of enforcements just before signing, and paying the price into escrow released only after the buyer is entered in the land register. A lawyer can advise on the procedure in a particular case.