Security deposit at a compulsory auction: 10%, deadlines and how to lodge it
Diesen Ratgeber auf Deutsch lesenA party to the proceedings usually demands 10% of the market value as security. No cash: a timely bank transfer, bank cheque or bank guarantee is accepted.
Quick answers
How high is the security deposit (Sicherheitsleistung) at a compulsory auction?
As a rule, 10% of the market value set by the court (§ 68 ZVG), not of your bid. With a market value of €300,000, that is €30,000. Any party to the proceedings whose right would be impaired if your bid were not honoured can demand it, immediately after the bid (§ 67 ZVG). In practice, you should firmly expect it to be demanded. So have the security ready from your first bid onwards.
In what form can I provide the security deposit?
Cash is excluded. Permitted are a timely bank transfer to the account of the court treasury, made early enough for the amount to be credited before the hearing; a crossed cheque (Verrechnungsscheck) from a credit institution or the Bundesbank, issued no earlier than the third working day before the hearing; or an open-ended, unconditional, self-guaranteeing guarantee from a German credit institution (§ 69 ZVG).
What happens to the security deposit after the hearing?
If you receive the award (Zuschlag), a security paid by transfer is set off against the cash bid (§ 107(3) ZVG) and stays with the court until the distribution hearing. If you do not win, you get it back: a transfer is refunded by return transfer, which can take a few days; a cheque is usually handed back at the hearing itself.
If you bid at a compulsory auction, expect to provide a security deposit (Sicherheitsleistung): a party to the proceedings can demand it immediately after your bid (§ 67 ZVG), and in practice this usually happens. It is not an additional cost, but a pledge: if you win, a security paid by transfer is set off against the cash bid; if you do not win, you get it back. If you cannot provide a demanded security at once and in an accepted form, the court rejects your bid (§ 70 ZVG). 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 only secures your bid. 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, not your bid:
| Market value | Security deposit |
|---|---|
| €100,000 | €10,000 |
| €250,000 | €25,000 |
| €500,000 | €50,000 |
If you bid €130,000 on a market value of €250,000, your security is therefore €25,000. In individual cases a higher security can be demanded (§ 68 (2) and (3) ZVG): by a party whose right remains in place, or by the creditor where the debtor or a new owner bids.
Any party to the proceedings whose right would be impaired if the bid were not honoured can demand the security, immediately after the bid is made (§ 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.
- Crossed cheque (Verrechnungsscheck) from a credit institution in the institutions register or from the Bundesbank, payable in Germany and issued no earlier than the third working day before the hearing (§ 69 (2) ZVG). A cheque from your current account is not enough.
- Open-ended, unconditional, self-guaranteeing bank guarantee from such an institution (§ 69 (3) ZVG). It does not apply to bids by the debtor or a new owner.
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.
When do you get the security deposit back?
- You do not receive the award: the security goes back to you. A cheque is as a rule returned at the hearing, a transfer comes back by return transfer, which can take a few days.
- Yours stays the highest bid, but the court refuses the award: according to the notes of the Amtsgericht Dorsten, you get the security back only once the refusal is final.
- You receive the award (Zuschlag): a security paid by transfer is set off against the cash bid to be paid (§ 107(3) ZVG), so you only pay the difference by the distribution hearing.
- Your cash bid is below the security: the excess is released, and for a transfer the court orders the payment (§ 68 (1) ZVG).
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.
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