Real Estate Foreclosure: Risks, Procedure, and Buyer's Rights

Enforcement on real estate is a court procedure of forced sale of the debtor's real estate to satisfy the creditor's monetary claim, so the buyer does not buy from the owner, but in a procedure conducted by the court. The starting price is tied to the value determined by the court, but a lower price is not a guarantee of profitability: the buyer often cannot view the property, takes over the legal status as it is, and must respect the deadlines and conditions of sale. Before applying and paying the deposit, check the land registry status, conditions of sale, and financing plan, with the advice of a lawyer. Ownership is registered on the basis of a final decision on adjudication and a certificate of payment of the purchase price, so the buyer does not need a statement from the previous owner as in a regular sale.

Real estate sold in enforcement proceedings rarely looks like a standard advertised offer. Enforcement on real estate means a forced sale of property conducted by the court according to the Enforcement Law (NN 112/12, 25/13, 93/14, 55/16, 73/17, 131/20, 114/22 and 6/24), and the buyer does not negotiate with the owner about the price, deadlines, and conditions of handover, but accepts what the rules of the procedure and conditions of sale stipulate. Therefore, a purchase that would be simple in a regular sale requires different preparation in enforcement. From our experience working with buyers, properties in enforcement most often attract attention with the initial price, while the actual risks only become apparent after a detailed review of the documentation and conditions of sale. In this guide, we explain what the procedure looks like, where the risks actually lie, what a buyer in enforcement can expect, and how to prepare. We describe the regular course of buying in the guide on the real estate purchase process in Croatia, and here we deal with what is different in enforcement.

Contents

• What is real estate enforcement and how does it differ from a regular sale
• How real estate sale looks like in enforcement proceedings
• Risks for the buyer
• Buyer's rights during the procedure and after adjudication
• How to prepare before applying for the auction
• For whom is buying in enforcement suitable
• How Regent can help you
• Frequently Asked Questions

Key Insights

• Real estate enforcement is a forced sale conducted by the court, so the buyer does not buy from the previous owner.
• The regular method of sale is an electronic public auction via FINA, and the starting price does not have to be lower than the market price.
• The amount of the deposit, deadlines, and conditions are determined by the terms of sale, and the deadline for paying the purchase price cannot be longer than three months from the day of sale.
• Mortgages generally cease with adjudication, while real easements, real burdens, and building rights remain, and registered lease or tenancy may remain in force.
• Ownership is registered on the basis of a final decision on adjudication and a certificate of payment of the purchase price, without a statement from the previous owner.
• The biggest risks are the unknown condition of the property, burdens that remain, occupants in the property, and short deadlines.

What is real estate enforcement and how does it differ from a regular sale

Real estate enforcement is a court procedure in which the debtor's (enforced party's) real estate is sold to satisfy the monetary claim of the creditor (enforcing party) from the purchase price. The procedure is conducted according to the Enforcement Law, and the sale is led by the court, which significantly changes the buyer's position compared to a regular sale.

• No negotiations with the owner: the price, deadlines, and conditions are determined by the court, and the buyer applies to an already published sale.
• No sales contract in the usual sense: the basis for acquisition is the court's decision on adjudication.
• No statement from the previous owner for registration: the owner's consent, which is required in a regular sale through a *clausula intabulandi* (more in the guide on tabular instrument), is not needed here.
• No seller in the classic sense: therefore, the usual buyer protection, for example, rights due to hidden defects against the seller, should not be assumed.

What of the usual buyer's rights actually applies in an enforcement sale, assess with a lawyer before applying, not just when a problem arises.

Professional advice: View an enforcement purchase as buying from the court under predefined rules, not as an opportunity to negotiate. If an agreement with the seller is crucial for your security, an enforcement sale is usually not the right path.

How real estate sale looks like in enforcement proceedings

The sale of real estate in enforcement proceedings takes place in a series of steps determined by the court, and the buyer is involved only in a part of the procedure. The general flow is as follows:

1. The court determines the value of the real estate, most often with an expert appraisal, and this value serves as the starting point for the price.
2. The court issues a conclusion on the sale, and FINA publishes a call for participation in an electronic public auction (e-Dražba) with conditions of sale, starting price, deposit amount, and deadlines.
3. Interested parties apply and pay the deposit within the deadline and in the manner specified in the call.
4. An auction follows, and the most favorable bidder has priority.
5. The buyer pays the purchase price within the deadline specified in the conditions of sale, which cannot be longer than three months from the day of sale.
6. The court issues a decision on adjudication, and after it becomes final and the purchase price is paid, ownership is registered and the property is handed over to the buyer.

The regular method of selling real estate in enforcement proceedings is an electronic public auction via FINA, while the Enforcement Law under certain conditions also allows direct sale. Specific amounts and deadlines vary from case to case, so always read them from the call and conditions of sale, not from experience with another property.

Professional advice: Go through the conditions of sale sentence by sentence and extract all numbers and dates: deposit, application deadline, payment deadline, and auction date. This list is your calendar of obligations, and a missed deadline in enforcement usually cannot be compensated.

Risks for the buyer

Buying in enforcement is not a hidden opportunity without a price, and risks are grouped around several recurring issues.

• Burdens that remain: not all burdens cease with the sale. Registered mortgages generally cease with the finality of the adjudication decision (Art. 86), while real easements, real burdens, and building rights do not cease with the sale. In the case of personal easements, it is important when they were registered in relation to the right for whose satisfaction the enforcement is being carried out. Check the exact list of rights that remain in the land registry excerpt and the conditions of sale; how to read it, we explain in the guide on title deed, land registry, and cadastre.
• Lease and tenancy: specifically check if there is a lease or tenancy agreement on the property. Registered lease or tenancy under certain conditions remains in force even after the sale, and the buyer then takes the place of the previous lessor or landlord (Art. 88), which is important if you are buying an apartment as an investment.
• Condition of the property: the possibility of viewing should be checked in the conditions of sale, as the court in the conclusion on sale determines the viewing time and can ensure unobstructed access through a court enforcement officer. Actual access, however, may be difficult if the property is used by the enforced party or third parties. Defects, unregulated documentation, and unregistered alterations may only be discovered after adjudication.
• Occupant in the property: buying does not mean that the property is physically empty. After the finality of the adjudication decision and payment of the purchase price, the court issues a conclusion on handing over the property to the buyer, and if it is not handed over voluntarily, possession handover may require further action. The conditions of sale should contain information on whether the property is free of persons and things, so check it before bidding.
• Deadlines and deposit: the deadline for paying the purchase price is stated in the conditions of sale and cannot be longer than three months from the day of sale. If the buyer to whom the property has been adjudicated does not pay the purchase price within the deadline, the court declares the sale invalid and orders a new sale, and the deposited security may be used to cover the costs of the new sale and the difference between the price achieved in the first and new sale. The court decides on this, so the deposit is not automatically a lost deposit, but a real financial risk.
• Duration of the procedure: there is a right to appeal against the adjudication decision, so the finality of acquisition and handover of the property may be delayed.

Professional advice: Before applying for the auction, calculate the total cost, not just the bid price: add the cost of eventual eviction, renovation, and legal assistance. A lower initial price is often partially recouped through these items.

Buyer's rights during the procedure and after adjudication

A buyer in enforcement proceedings is not without protection, but their protection is structured differently than in a regular purchase. The central right is the strongest one: ownership is acquired regardless of whether the previous owner agrees. A final decision on adjudication is the basis for registering the buyer's ownership right, but for the registration to be carried out, the buyer must also pay the purchase price. The land registry court registers on the basis of a final decision on adjudication and a certificate from the enforcement court of payment of the purchase price (Art. 108), and thereafter the court issues a conclusion on handing over the property to the buyer. What registration is and how it proceeds, we describe in the guide on real estate registration in Croatia. Parties to the proceedings, i.e., the enforcing party and the enforced party, have the right to appeal against the adjudication decision, and in the case of a sale by auction, also persons who participated in the auction as bidders (Art. 105). The general deadline for appeal is eight days (Art. 11), with delivery rules prescribed by the Enforcement Law: the decision is considered delivered to persons to whom the conclusion on sale is delivered and to auction participants upon expiration of the third day from its publication on the court's bulletin board (Art. 103). Due to such a short deadline, a decision on appeal must be made immediately upon publication of the decision. The buyer also has the right for the sale to be conducted according to the conditions published in the call, under equal rules for all bidders. For legal steps and court communication, you need a lawyer, and an agency can help with property preparation and verification.

Professional advice: Ask your lawyer a specific question before paying the deposit: what exactly do I acquire by adjudication and what remains on the property? The answer should be based on the land registry status and case file, not on general experience.