Notarial vs judicial auctions in Spain

What is a notarial auction?

It is an auction held before a notary rather than a court. The Notaries Act regulates it in articles 72 to 77, added by Act 15/2015 on Voluntary Jurisdiction. It covers very different cases: auctions required by law, those ordered by a court or administrative decision, those arising from a contract clause or a will, those enforcing an arbitral award or a mediation agreement, and voluntary ones by an owner who simply wants to sell that way (article 72.1).

The auction is electronic and held on the auction portal of the Spanish Official State Gazette (BOE). The notary authorises the record of the result and, where applicable, the deed of sale (article 73.1). That is why, when you look for non-judicial auctions, you find them on the same portal as judicial ones, with a different authority in charge.

Notarial mortgage auction: the out-of-court sale

The notarial mortgage auction is the case that matters most to anyone looking for discounted property. Article 129 of the Mortgage Act gives the creditor two routes to enforce a mortgage: direct judicial enforcement under the Civil Procedure Act, or the out-of-court sale of the mortgaged asset before a notary. The second is only possible if it was agreed in the mortgage deed, and only for non-payment of capital or interest.

• The agreement must appear separately from the other clauses of the deed and state expressly whether the mortgaged home is a main residence or not (article 129.2.b). If the deed says it is, it is presumed to still be one at the time of sale, unless proven otherwise.
• The appraisal value used as the auction reference cannot differ from the one set for judicial enforcement, nor be lower than the appraisal made under Act 2/1981 on the mortgage market (article 129.2.a).
• It only applies to mortgages securing obligations whose amount was determined from the outset (article 129.2.c).
• The sale takes place through a single electronic auction on the BOE auction portal, and its reference values and conditions are, in all cases, those of the Civil Procedure Act (article 129.2.d).
• If the notary sees a clause that may be unfair, they inform the parties, and suspend the sale when either of them shows they have raised it before a judge (article 129.2.f).

The BOE auction portal help pages recall where this comes from: Act 1/2013 introduced the single electronic form for the notarial auction arising from an out-of-court forced sale. That is why a notarial mortgage auction is now found, bid on and followed on the same portal as a judicial one, with the notary acting as the managing authority.

How is it similar to a judicial auction?

More than the name suggests. Both are electronic and held on the same BOE auction portal. Both open at least twenty-four hours after the notice appears in the BOE (article 75.1, rule 2, of the Notaries Act; article 648, rule 2, of the Civil Procedure Act). And in both, if the auction is suspended for more than fifteen days, deposits are released and it has to be announced again (article 76.4 of the Notaries Act; article 649.2 of the Civil Procedure Act).

In a notarial auction, the notary also requests the certificate of ownership and charges from the Land Registry, and the portal makes it available and reports any change in ownership or charges while the auction runs (articles 73.4 and 74.1 of the Notaries Act). The portal notice sets out the general and specific conditions and, where possible, whether the property can be viewed.

How is it different?

The differences lie in who runs it, how much you deposit, whether you can see other bids and how long you have to pay. This table compares the general regime for notarial auctions, under the Notaries Act, with a judicial auction of real estate under the Civil Procedure Act.

The main residence

In an out-of-court sale, the deed must state whether the mortgaged home is a main residence, and that is presumed at the time of sale if so stated (article 129.2.b of the Mortgage Act). In a judicial auction, the Civil Procedure Act does not approve the sale of the debtor's main residence for less than 70 per cent of its auction value, unless it covers everything owed to the creditor, and even then never below 60 (article 670.3). Whether the flat is a main residence changes the floor of the deal, so it is the first thing to check in the notice.

Possession

In an out-of-court sale, the buyer can ask the court of first instance where the property is located for possession (article 236-m of the Mortgage Regulations). In other words, the notary sells, but if someone is living there you will have to go to court. Budget that time and cost just as you would at a judicial auction.

How much does a notarial auction cost?

For a bidder, what the law sets is the deposit, not a fee. Under the general regime of the Notaries Act you lodge 5 per cent of the value of the assets electronically to obtain accreditation (article 75.1, rule 4), and the BOE auction portal help pages state that deposits are made only through the portal, from an account you hold or are authorised on. Those same help pages mention no fee for bidding: the only payment they describe is the deposit.

• If you do not win, the deposit is returned in the entries the notary records after the auction (article 75.3 of the Notaries Act).
• If you asked for bid reservation, it is not returned until the winner has paid the full price, because you stay in line in case they do not pay (article 75.3).
• If you win and do not pay the balance within ten working days, you lose what you lodged and the award passes to the next bidder with a reservation (article 75.3).
• If the auction is suspended for more than fifteen days, deposits are released (article 76.4).

Articles 72 to 77 of the Notaries Act do not set the notary's fees or say who pays them, so we give no figure. They do say that, where the valuation was not agreed or supplied by the applicant, it is set by an expert appointed by the notary, and that valuation is the auction reference with no bids accepted below it (article 74.3). Once you are awarded the asset, the taxes and costs of any auction purchase follow.

What to check before bidding at a notarial auction

• Who calls it and why: an out-of-court mortgage sale is not the same as a voluntary auction, where the applicant can raise, lower or remove the deposit in the specific conditions (article 77 of the Notaries Act).
• The deposit and rules published in the notice, not the ones you remember.
• The certificate of charges on the portal and its updates: the deed cancels the enforced mortgage and later entries (article 236-l of the Mortgage Regulations), so what ranks ahead of that mortgage is what you need to read closely.
• Whether the home is recorded as a main residence in the deed.
• The occupancy status and, if the notice allows it, a viewing.
• Whether the debtor has raised an unfair clause before a judge, because the sale is suspended (article 129.2.f of the Mortgage Act).
• That you have the rest of the price ready to pay within the deadline of that auction.

Bidding at an auction, notarial or judicial, carries risk: undetected charges, occupancy, deadlines and an uncertain exit value. This guide is for information only, reflects the wording of the rules at the date of its update and does not replace professional advice on a specific deal.