Partition auction among the heirs
Dividing an estate can be difficult and fraught with conflict. Disagreements often arise, especially when multiple heirs are involved, regarding the handling of real estate or other valuable assets. Before the actual division of the inheritance can take place, real estate must first be liquidated and all estate debts must be fully paid.
Legal order of estate settlement
The law stipulates that First, all indivisible assets of the estate, such as land, cars or furniture, must be converted into cash., Sections 2042 para. 2, 753 para. 1 of the German Civil Code (BGB) apply. The aim is to enable an equal distribution among the co-heirs. In principle, the realization of the assets is carried out according to the statutory rules governing the sale of pledged property (Sections 1233 et seq. BGB). If the assets are real estate, this is done through a so-called partition auction pursuant to Sections 180 et seq. of the German Law on Compulsory Auctions (ZVG).
Only once these assets have been liquidated can the further settlement of the estate take place.
Settlement of estate liabilities
In the second step, all liabilities of the estate must be settled, § 2046 para. 1 sentence 1 BGB. These include, for example, outstanding loans, tax debts or other obligations of the deceased.
Each co-heir can also demand that a public notice procedure be carried out before the distribution of the remaining surplus, § 2045 of the German Civil Code (BGB). This procedure allows unknown creditors of the estate to be requested to register their claims within a specific period. In this way, the heirs' liability can be limited, as unregistered claims can be excluded under certain conditions.
Distribution of the remaining estate
Only in the third step may the remaining surplus be distributed among the heirs, § 2047 para. 1 of the German Civil Code (BGB). Prior payment of foreseeable surpluses or any other partial settlement is generally not enforceable. The Federal Court of Justice (BGH) has clarified that there is no right to an early partial payment (BGH, judgment of March 14, 1984, case no. IVa ZR 87/82, NJW 1985, 51).
A partial settlement can therefore only take place if all heirs agree.
Deviations from the statutory procedure
The heirs can – provided they are in agreement – deviate from the legally prescribed procedure. For example, it is often more economically advantageous to jointly conduct a private sale of properties, possibly with the assistance of a real estate agent, rather than holding a forced auction. In practice, a private sale regularly achieves higher proceeds than a court-ordered auction.
Partition auction as a last resort
If the heirs cannot reach an agreement, the only remaining option is often a partition auction. Each heir has the right to request the auction of a property belonging to the estate. The consent of the other co-heirs is not required for this.
A partition auction therefore represents an effective means of exerting pressure within a divided community of heirs. At the same time, however, it can entail economic disadvantages, as auction proceeds are often below market value.
Conclusion on the partition auction
For many co-heirs in an estate, a partition auction is the last resort when no agreement can be reached on the sale of a property or house. Each co-owner can apply to the competent court for a forced auction. The procedure is governed by the regulations on compulsory auctions and begins with a court order and the determination of a market value by an expert.
At the subsequent auction, interested parties submit their bids. With the award of the bid, the court decides which bidder becomes the owner of the property. Existing encumbrances, such as a mortgage, generally remain registered in the land register unless they are discharged during the proceedings. The award of the bid ultimately replaces the notarized purchase agreement and effectes the transfer of ownership.
For those involved, the potential loss in value as well as the costs of the proceedings must be considered. Court fees, expert fees, and any other expenses reduce the proceeds. Since auctions often achieve a lower price than private sales, it should be carefully examined whether an amicable solution among the co-heirs is possible.
Partition auctions can be an effective means of exerting pressure, but they also carry economic risks. Early legal advice helps to realistically assess the opportunities and risks and to make a strategically sound decision between a private sale and a court-ordered auction.