Security deposit at a compulsory auction: 10%, deadlines and how to lodge it

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. 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.
• Bundesbank cheque or crossed cheque (Verrechnungsscheck) 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 (§ 107(3) ZVG) – so you only pay the difference.

In brief

1. 10% of the market value, ready in advance.
2. No cash – bank transfer (in good time!), cheque or bank guarantee.
3. 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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Sources

• § 67 ZVG – Security on demand
• § 68 ZVG – Amount of the security
• § 69 ZVG – Form of the security deposit
• § 49 ZVG – Cash bid
• § 107 ZVG – Set-off of the security
• zvg-portal.de – Information for bidders