Auction of a divided estate

Partition Auction - A partition auction is a judicial proceeding under § 180 of the German Land Registry Act (ZVG) in which a property is sold at a compulsory auction to dissolve a co-ownership arrangement when the parties involved cannot agree on an amicable solution. It is a last resort for resolving disputes and generally results in significant financial losses compared to a private sale.

What is a partition auction and when is it used?

A partition auction becomes necessary when several people jointly own a property and this community cannot be voluntarily dissolved. The most common scenarios include communities of heirs where the co-heirs cannot agree on how to handle the inherited house, divorce cases where the former jointly owned property must be divided, and fractional co-ownerships where one of the co-owners wishes to sell their share.

Each individual co-owner has the right to file an application for a partition auction with the competent local court. Neither the consent of the other co-owners is required nor must there be a specific reason. The court merely verifies whether the applicant is indeed a co-owner and whether a current land registry extract is available. Unlike a regular foreclosure auction, no enforceable title is required-the status of co-owner alone legitimizes the application.

The process follows the rules of the Foreclosure Auction Act (ZVG): The court orders the auction, appoints an expert to determine the market value, sets an auction date, and publishes it publicly. Bidders submit their bids on the auction date. On the first date, the 5/10 threshold applies: the court may reject bids below 50 percent of the market value. If the highest bid is below 7/10 of the market value, a co-owner may file a motion to dismiss the auction. If no sufficient bid is submitted, a second date is scheduled, at which this protective threshold no longer applies-which increases the risk of a sale far below market value.

Protective Motions and Risks for Co-owners

The partition auction carries significant financial risks, as auction proceeds are often well below the property’s market value. Studies and practical experience show that, on average, only 60-80% of the market value is achieved-depending on the property and the mood of the bidders at the auction, it may be even less. However, co-owners who wish to protect themselves against the proceedings have various legal options.

An application for protection under Section 765a of the German Code of Civil Procedure (ZPO) may be filed if the auction would constitute an unreasonable hardship-for example, if minor children would lose their home or an elderly co-owner becomes seriously ill and is dependent on the residence. The court then weighs the interests of all parties involved and may temporarily suspend the auction or allow it to proceed under certain conditions. However, an application for protection requires a substantiated statement and, if necessary, medical certificates or other evidence of hardship.

Co-owners can bid themselves at the auction and purchase the property in its entirety at a favorable price-this makes strategic sense if one is interested in purchasing it anyway. An agreement during the ongoing proceedings is also possible at any time; the proceedings are then suspended upon the request of all parties involved. In practice, we find that the threat of a partition auction often leads to stalled negotiations getting back on track-so the application can also be used tactically.

Alternatives to Partition Auctions

Before it comes to an auction, there are always better alternatives that make more economic sense:

• Private sale: All co-owners agree to a joint sale. This typically yields 20-40% more than an auction.
• Buyout of a co-owner: One co-owner purchases the other co-owners’ shares at an agreed-upon price.
• Physical division: If the property is divisible (note the minimum size requirements under the Building Code of North Rhine-Westphalia (BauO NRW) or the Bavarian Building Code (BayBO)), it can be divided, and each owner can be allocated a separate plot of land.
• Mediation: In cases involving communities of heirs or divorce, a mediator can help resolve deadlocked positions.

We assist homeowners’ associations in the Nuremberg metropolitan region in finding an amicable solution and prepare market-based appraisals that serve as a basis for negotiations.

Practical Tip for the Nuremberg and Franconia Region

We recommend that owners in the Nuremberg metropolitan region avoid a partition auction whenever possible. The Franconian real estate market offers stable to rising market values in many neighborhoods of Nuremberg, Fürth, and Erlangen-a private sale generally yields significantly higher proceeds than an auction. At the same time, the court proceedings incur costs and time losses that further increase the financial damage.

The competent Nuremberg Local Court conducts partition auctions on-site. In Nuremberg, the proceedings typically take 8-14 months from the application to the final sale-during this time, the property is tied up, cannot be sold elsewhere, and may incur maintenance costs. We assist homeowners’ associations and communities of heirs in preparing a market-based valuation and professionally handling the sale before court proceedings become necessary.

Frequently Asked Questions

How long does a partition auction take?

It usually takes six to twelve months from the application to the final sale, and even longer in complex cases. The local court must first obtain a market value appraisal, schedule dates, and notify all parties involved as well as registered creditors. Delays often arise due to protective motions, objections to the appraisal, or missing documents. The length of the proceedings significantly increases the overall burden on all parties involved-for this reason alone, we recommend seeking an amicable solution early on, if necessary with professional support from a mediator or real estate agent.

Can any co-owner apply for a partition auction?

Yes, in principle, any co-owner can apply for the proceedings at the local court, regardless of the size of their share. A co-owner with a one-tenth share has the same right as one with a half share. The only exception is if the co-owners have contractually waived the right to partition-which can be agreed upon in partnership agreements or inheritance contracts-or if a partition auction has been excluded in a will or inheritance contract. Testators can exclude a partition auction for up to 30 years by drafting their wills accordingly, in order to prevent disputes within the community of heirs.

What are the costs associated with a partition auction?

The procedural costs include court fees (under the GNotKG), the expert appraisal to determine market value (usually 1,500-4,000 euros depending on the size of the property), and, if applicable, attorney’s fees. In total, applicants should expect procedural costs of 3,000-8,000 euros. These costs are deducted from the auction proceeds before the remainder is distributed among the co-owners. Added to this is the risk of low auction proceeds. A private sale through a regional real estate agent is, in most cases, significantly more cost-effective-even after deducting the agent’s commission.

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