Karanovic & Partners had the opportunity to participate in AmCham's round table and hear first-hand about the Amendments to the Law on Enforcement and Security ("Law"), as well as to discuss with the members of the Working Group of the Serbian Ministry of Justice the problems occurring in practice and their possible solutions.
The novelties envisioned by the Law are numerous, however, special attention was given to:
Electronic Public Auction
This novelty should resolve the weakest link in the enforcement proceedings chain – the bidding procedure which is abused by some "participants". The Electronic Public Auction requires these further steps:
- A onetime registration on the e-Government website for a symbolic fee.
- The bidding could be done from any location, as long as the bidder is connected to the internet.
- During the bidding proceedings, none of the participants is to be familiar with the bidder's personal data, i.e. every bidder will be assigned a number, so that the bidding is conducted using those numbers and not the names of the participants. Personal data will be disclosed at the time that the Conclusion on Awarding Immovable Property is rendered. This should be a key measure for avoiding corruption and eliminating pressure on the bidders.
4. As for the bail which needs to be paid after the registration, but prior to the bidding proceedings, the Working Group has not yet determined its amount, but at least 25% of the assessed price of the estate was suggested. Furthermore, the bail should be deposited to the National Bank of Serbia's account. In addition, the bail will not be reimbursed to the bidder, in case of his inactivity during the course of the bidding proceedings or if the highest bidder withdraws from buying the estate.
To conclude, this novelty should alleviate pressure on the bidders and a public auction sale should become a place where bidders can contest against each other for the property until the highest price is reached.
The Working Group introduced the possibility of eliminating the three-stage decision-making process in the proceedings concerning the Credible Document.
The Resolution on Enforcement based on the Credible Document could be challenged only with a Complaint. If the Complaint is grounded, the proceedings will continue through litigation. If that is not the case, then the enforcement proceedings will continue.
Apart from this, one more reason for disputing the Resolution on Enforcement will be added – if the obligation from the Resolution on Enforcement has been fulfilled, which was stipulated in the previous Law. This is because case-law showed that one debt could be collected twice, due to some formal reasons or an unforeseen imperfection of the legal system.
New owner of the mortgaged property marked as an Enforcement Debtor
According to the current provisions of the Law, the Enforcement Debtor is a person who gave the Pledge Statement. When the Pledge Statement is recorded with the Cadastre, the property becomes mortgaged and the creditor is entitled to sell the property and settle the debt in case it becomes due.
Conducting enforcement proceedings was challenged if the mortgaged property changed its owner. Case-law showed that in some situations - in cases when the enforcement debtor is dead, or in bankruptcy or liquidated, the mortgaged property that changed its owner cannot be sold, or the enforcement proceeding itself cannot be initiated. In such cases, the enforcement debtor no longer has the legal capacity to be party to the enforcement proceedings, so the creditor cannot collect the debt by selling the mortgaged property.
This gap will be overcome by proscribing that the owner of the mortgaged property is to be marked as an enforcement debtor, instead of the person who gave a Pledge Statement. This solution is seen as justified and fair.
Lease of real-estate not recorded with the Cadastre
The proceedings were abused by debtors who ceased enforcement by presenting Lease Agreements on real estate – that is not recorded with the Cadastre, which is the subject of sale. The lease refers to a period of 25 years or more - in one case, the Lease Agreement was concluded for 99 years, which leads to a 99% drop of potential buyers.
The solution offered by the Working Group is that the Lease Agreement must be notarized before the Court renders the Resolution on Enforcement.
To conclusion is that the Working Group recognized the imperfections of the Law and presented appropriate solutions. It is seen as a promising fact that attorneys were consulted regarding the difficulties in practice and had the opportunity to participate in the round table before the proposal of the Law was delivered to the Parliament. Although this would be the third time in the past few years that the Law is amended, it seems that these changes should bring more certainty to enforcement proceedings.
The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.