A property belongs to several people jointly, yet no agreement about its future can be reached. Heirs with differing ideas. Spouses who are separating. In situations like these, the term partition auction (Teilungsversteigerung) is often heard. It is the statutory emergency exit when a community of co-owners or a community of heirs cannot settle their affairs in any other way. But it is rarely the best route. As an estate agency on Königsallee, we have been guiding families of property owners in Düsseldorf and throughout NRW for more than 60 years, particularly when the parties involved are at odds. This guide explains in plain terms what a partition auction is, how it proceeds, what risks it entails and why a well-prepared sale usually achieves more for everyone involved.
What is a partition auction? The legal basis
A partition auction is a special form of compulsory auction. Its purpose is not to recover debts but to dissolve a community of ownership in a property that cannot be divided. A house simply cannot be cut down the middle. So it is auctioned, and money, which can be distributed, takes the place of the property.
The right to bring such a community to an end is anchored in the German Civil Code (Bürgerliches Gesetzbuch, BGB):
- In the case of a community by fractional shares (Bruchteilsgemeinschaft), for instance where two partners are jointly entered in the land register, Section 749 BGB (§ 749 BGB) applies: any co-owner may demand the dissolution of the community at any time.
- Where the asset cannot be divided in kind, the dissolution is carried out by sale and distribution of the proceeds (Section 753 BGB (§ 753 BGB)).
- In the case of a community of heirs (Erbengemeinschaft, the group of co-heirs who jointly inherit an estate), each co-heir is entitled under Section 2042 BGB (§ 2042 BGB) to the division of the estate.
The procedure itself is governed not by the BGB but by the Act on Compulsory Auctions and Receivership (Zwangsversteigerungsgesetz, ZVG), specifically in Sections 180 et seq. ZVG (§§ 180 ff. ZVG). Section 180 ZVG expressly provides that a compulsory auction may also take place for the purpose of dissolving a community. A writ of execution, of the kind that would be required in an ordinary compulsory auction against a debtor, is not needed here.
When is a partition auction used?
A partition auction is always a measure of last resort. It comes into play where a jointly owned property is to be realised but the parties cannot reach agreement. In our daily work, we encounter above all two scenarios:
- The community of heirs. Several heirs become joint owners of a house. One wishes to sell, another wishes to move in, a third wishes to let it out. If no common line can be found, any individual co-heir may apply for a partition auction.
- Separation or divorce. Both spouses are entered in the land register as co-owners. If one no longer wishes to retain the shared house and no solution by way of a buy-out or sale can be reached, that party can set a partition auction in motion.
The unwelcome twist in the law is decisive: a single party can set the proceedings in motion, even against the will of the others. The consent of the remaining co-owners or co-heirs is, in principle, not required. This makes the partition auction a powerful means of applying pressure; it is often threatened rather than actually carried through. And this is precisely where the opportunity lies: to find a better solution in good time, before the court is brought in.
The course of a partition auction step by step
Anyone wishing to understand the procedure should be familiar with its individual stages. A partition auction proceeds essentially as follows:
- Application to the local court (Amtsgericht). The application is filed with the local court acting as the enforcement court for the district in which the property is located. As a rule, a current extract from the land register must be enclosed.
- Order of auction. The court examines whether the applicant does indeed belong to the community and then orders the auction. With the order, the property is seized.
- Market value appraisal. An expert appointed by the court determines the market value (Verkehrswert) of the property. On this basis, the court formally establishes the value.
- Setting of the lowest admissible bid. The court determines which rights entered in the land register are to remain in place and what minimum amount must at least be bid in order to cover the costs.
- Auction hearing. The hearing is announced publicly. At the hearing the conditions are read out, after which the bidding period begins.
- Award of the contract and distribution. The highest admissible bid is awarded the contract (Zuschlag). At the subsequent distribution hearing, the proceeds are paid out to the parties after deduction of costs.
Experience shows that many months pass between the filing of the application and the payout, not infrequently more than a year. Appraisals, the scheduling of hearings and possible objections from the parties draw the proceedings out.
The important special feature: weaker protection regarding the minimum price
In an ordinary compulsory auction, the law protects the owner against a sale at knock-down prices by means of two value thresholds. In a partition auction this protection is considerably weaker, and this is one of the greatest dangers of the procedure.
- The 7/10 threshold (Section 74a ZVG, § 74a ZVG), under which a party can prevent the award of the contract if the highest bid is below 70 per cent of the market value, does not apply in a partition auction. It presupposes a pursuing creditor, who does not exist here.
- The 5/10 threshold (Section 85a ZVG, § 85a ZVG), that is, protection against an award below 50 per cent of the market value, does in principle still apply at the first auction hearing. There, a bid below half the value leads, by virtue of the court's own authority, to refusal of the award.
- At the second hearing, however, even this threshold ceases to apply. The contract can then be awarded even where bids are far below half the market value.
In plain terms: anyone who relies on a partition auction risks the property going for considerably less than its actual worth. In the end this affects all co-owners, because the low proceeds are divided among them. Effective protection is offered above all by Section 180(2) ZVG: an affected party can apply for the temporary suspension of the proceedings for up to six months, where this is justified upon weighing the interests involved. This buys time, but it is not a permanent solution.
Costs, proceeds and risks at a glance
A partition auction costs money, time and often nerves too. You should weigh these points soberly before taking this route:
- Procedural costs. Court fees, the expert appraisal and the public announcements all arise. These costs are paid in advance out of the proceeds and reduce the amount that is ultimately available for distribution.
- Proceeds below market value. In practice, auctioned properties frequently achieve considerably less than they would in a sale on the open market. Many prospective buyers avoid auctions or factor in a hefty safety margin.
- Duration of the proceedings. Proceedings can drag on for many months and up to several years. For that whole time the situation remains in limbo for all parties.
- Existing rights. Encumbrances entered in the land register that affect the applicant's share, in principle, remain in place in a partition auction (Section 182 ZVG, § 182 ZVG). The purchaser takes them on, which can further dampen interest in bidding.
- Conflict instead of resolution. Even the co-owner who files the application has no guarantee. Each party may itself take part in the bidding, and the proceedings usually sharpen disputes within families rather than resolving them.
On balance, a partition auction is a procedure in which there are rarely any winners. It converts an asset into an often lower sum of money and not infrequently leaves shattered relationships behind.
The better alternative: a joint sale
Almost always there is a route that achieves more for everyone involved than an auction: the private sale (freihändiger Verkauf). By this is meant the perfectly ordinary sale on the market, accompanied by an experienced estate agent. The decisive advantage is obvious: a well-prepared and properly marketed sale as a rule achieves a higher price than a partition auction, in which the protective value thresholds are missing or cease to apply.
The higher proceeds benefit all co-owners, not just one. Instead of an auction result below value, the full market value is realised and distributed according to the respective shares. At the same time, the parties retain control over the timing, the conditions and the buyer, rather than relinquishing it.
The real hurdle is usually not the sale itself, but the lack of agreement. And this is precisely where one of our most valuable services lies: we also mediate between parties who are at odds and between communities of heirs. In more than 60 years we have learned to moderate matter-of-factly between the parties, to create a common, market-appropriate basis of value, and thus to bring about a workable solution with which, in the end, everyone can live better than with court proceedings. Through our network, grown over decades, with more than 20,000 contacts in Düsseldorf and NRW, we find the right buyer, often discreetly and away from the public portals. The legal particulars of your case are best clarified by your own solicitor; the marketing and the understanding between the owners we take care of.
