Security deposit at a compulsory auction: 10%, deadlines and how to lodge it
If you want to bid at a compulsory auction, you usually have to lodge 10% of the market value as security in advance, and not in cash. Here is how it works.
If you genuinely want to bid at a compulsory auction, you will, as a rule, have to provide a security deposit (Sicherheitsleistung) in advance. It is not an additional cost, but a pledge: if you win, it is set off against the purchase price; if you do not win, you get it back. Anyone who does not have it ready in time and in the correct form is effectively barred from bidding. Because a bank loan is only paid out after the award (Zuschlag), you have to provide the security from your own funds – more on this under Financing.
The security is merely your entry ticket to the hearing. It says nothing about whether the property is sound on the merits; for that you should check the survey reports and the risk class beforehand.
How high is the security deposit?
As a rule, 10% of the market value that the court has set (§ 68 (1) ZVG). What counts is the value stated in the scheduling order. On the application of a party, the security may be higher in individual cases (§ 68 (2) and (3) ZVG) – for instance where rights remain in place or where the debtor submits bids.
The security is required on the application of a party (§ 67 ZVG). In practice, you should firmly expect it to be required.
No cash – these forms are permitted
Cash payment has been excluded since 2007 (§ 69 ZVG). Permitted are:
- Bank transfer to the account of the competent court treasury. Important: the amount must be credited before the hearing – several courts recommend around ten days' lead time. You bring the proof of payment to the hearing.
- Bundesbank cheque or certified cheque from a credit institution authorised in Germany – issued no earlier than the third working day before the hearing.
- Open-ended, unconditional, self-guaranteeing bank guarantee (§ 69 (3) ZVG).
Note: the court sets the account and the deadline
The exact recipient account and the deadline are set bindingly in the official notice (scheduling order) of the competent local court and may differ from court to court. The law only requires that the security be credited before the hearing and proven at the hearing (§ 69 (4) ZVG) – the specific lead-time deadline is a matter for the respective court. When in doubt, ask the court.
What happens after the hearing?
- You do not win: the security is refunded to you.
- You receive the award (Zuschlag): the security is set off against the cash bid to be paid (§ 49 ZVG) – so you only pay the difference.
In brief
- 10% of the market value, ready in advance.
- No cash – bank transfer (in good time!), cheque or bank guarantee.
- Bring the proof, with the account/deadline taken from the official notice.
Note: This article is general guidance and is no substitute for legal advice. In an individual case, the court's official notice applies.