You have obtained a judgment. The court has awarded your claim and the opposing party has been ordered to pay. But the debtor does not pay. If they own a property, a forced sale of that property may be a route to still collect your claim. This is called an executory sale (executoriale verkoop). The road to a successful enforcement, however, is long, costly and uncertain. In this article we explain how the process works and which risks you, as a creditor, face along the way.
The enforceable title: the starting point
Enforcement against a property always begins with an enforceable title (executoriale titel). This is a document on the basis of which the law permits enforcement. The most common title is a court judgment, but a notarial deed or a court order can also serve as a title. The judgment must be declared provisionally enforceable, or the period for appeal must have expired. Without a valid enforceable title, enforcement cannot begin.
Service and order to pay
Before any attachment can be levied, the bailiff must formally serve the judgment on the debtor — that is, deliver it officially. The bailiff then issues an order to pay. Under Article 439 of the Dutch Code of Civil Procedure (Rv), the debtor is given at least two days to pay voluntarily after all. Only once that period expires without payment may the actual enforcement commence.
This step is not a mere formality. If service is defective or the order is not issued correctly, the debtor can challenge the enforcement. It is therefore essential that the bailiff carries out the work meticulously.
Executory attachment on the property
After the payment period has expired, the bailiff levies an executory attachment on the property. This attachment is registered in the public registers of the Land Registry (Kadaster) (Article 505 Rv). From that moment on, the attachment is visible to third parties and the property is legally encumbered. In principle, the debtor may no longer sell the property or burden it with new rights. If they do so anyway, the buyer or new limited rightholder cannot rely on that transaction vis-à-vis the attaching creditor.
The bailiff notifies the debtor and any mortgagees of the attachment. Mortgagees have the right to take enforcement into their own hands — more on this later.
The public auction
The main rule is that an executory sale takes place via a public auction (Article 514 Rv et seq.). The auction is organised by a civil-law notary, who also draws up the auction terms. The property is announced in advance through public registers and usually via specialised auction platforms. The notary handles the publicity, compiles the information documents and conducts the auction itself.
On the day of the auction, interested parties can bid. The property is awarded to the highest bidder, after which the notary draws up the purchase agreement. The purchase price must generally be paid within a few weeks. After payment, transfer takes place by way of a notarial deed of executory sale, which is likewise registered in the Land Registry.
Private sale as an alternative
In addition to the public auction, Article 3:268(2) of the Dutch Civil Code (BW) offers the possibility of a private sale. This requires the permission of the preliminary relief judge, which is requested by the debtor or the mortgagee — not by the attaching creditor itself. The judge grants that permission if it is plausible that a private sale will yield a higher return than an auction.
In practice this route is increasingly taken, particularly when all creditors involved agree to it. A private sale generally proceeds more smoothly, fetches a higher price and saves on auction costs. For the creditor, it is in many cases sensible to actively think along about this option.
What if the debtor is not the sole owner?
In practice the debtor is often not the sole owner of the property. A common situation is two co-owners who each hold an equal, undivided half-share — for example partners who bought a house together. This has significant consequences for the enforcement.
An attaching creditor of one co-owner can in principle only levy attachment on and sell that debtor’s undivided share in the property, not the property as a whole (Article 3:175 of the Dutch Civil Code, BW). The share of the other co-owner falls outside the scope of the enforcement, because that person is not liable for the debt. The creditor therefore cannot simply have the entire house auctioned off.
The difficulty is that an undivided half-share is very hard to sell. Hardly any buyer is willing to acquire a fractional interest and become co-owner alongside a stranger, with all the practical complications that entails. At a public auction such a share will, if it sells at all, fetch only a fraction of its proportional value.
For that reason a creditor will usually want the community to be partitioned. Under Article 3:180 BW a creditor who has attached a co-owner’s share may demand partition of the community (verdeling), even against the wishes of the other co-owner. Through partition the whole property can be sold and the net proceeds divided between the co-owners according to their shares. The creditor can then recover from the debtor’s portion of the proceeds, while the share of the other co-owner is paid out to that person and remains beyond the creditor’s reach.
A different situation arises where the co-owners are married in a community of property (gemeenschap van goederen) and the debt is a community debt. In that case the whole community — including the entire property — can in principle serve as recourse, because both spouses are liable. The same applies to other debts for which both owners are jointly liable, such as a joint loan. Where, however, only one of the owners is the debtor of a private debt, the limitation to that person’s share applies.
For the creditor it is therefore essential to check, before levying attachment, who the registered owners of the property are and on what basis they hold it. The Land Registry (Kadaster) shows the ownership position. Whether the whole property or only an undivided share can be enforced against largely determines the prospects of recovery — as well as the costs and the time the route will require.
Distribution of the proceeds: the ranking arrangement
Once the property has been sold and the purchase price received, the proceeds must be distributed. If there are several creditors — which is usually the case with property enforcement — a ranking arrangement (rangregeling) takes place (Article 551 Rv et seq.). The notary or the supervisory judge determines which creditors are paid and in what order.
The mortgagee ranks first. Next come any preferential creditors such as the Tax Authorities. After that, the costs of the enforcement itself are paid. Whatever then remains is distributed among the attaching creditors according to the rank of their attachment date: whoever attached earlier has a higher rank. Whatever is left after full distribution goes to the debtor.
Risk 1: the mortgagee takes priority
The most fundamental risk for the creditor is the order of ranking. A bank or other mortgagee holds a mortgage right over the property and therefore structurally ranks ahead of the attaching creditor. This means that the mortgage debt — including arrears of interest and ancillary costs — is paid first out of the sale proceeds. Only what then remains is available to the creditor.
For a property with a high mortgage debt relative to its market value, there may be virtually nothing left for the attaching creditor after the mortgage has been repaid — even if the property is sold at a reasonable price.
Risk 2: the enforcement proceeds are lower than expected
Properties sold via a public auction structurally fetch less than properties offered privately on the open market. Bidders know that they are buying a forced-sale property: they have limited opportunities to inspect, the condition of the property is not always fully known, and there is a chance that the former occupant will not leave voluntarily. All of this is reflected in a lower bid price.
In practice, enforcement proceeds are regularly 15 to 30 percent below the open-market value, sometimes more. A creditor who has based their calculations on the official tax value (WOZ) or an appraisal report may be in for an unpleasant surprise after the auction.
Risk 3: competing attaching creditors
The creditor is rarely the only one with an eye on the debtor’s property. Other creditors may also have levied attachment, and their rank is determined by the date their attachment was registered in the Land Registry. Whoever was earlier takes priority.
A creditor who comes into the picture late runs the risk of ending up at the back of the ranking arrangement, with the available proceeds exhausted by then. It is therefore advisable to proceed to attachment as quickly as possible after obtaining an enforceable title.
Risk 4: costs reduce the proceeds
Enforcement against a property involves considerable costs: bailiff’s fees for service and attachment, notary fees for the auction or private sale, Land Registry costs for registration, and possibly eviction costs if the debtor does not leave the property voluntarily. All these costs are deducted from the sale proceeds before the creditors are paid.
Although enforcement costs rank ahead of ordinary claims, they reduce the net proceeds available to the creditor. For properties of relatively low value or with a high mortgage debt, the costs can swallow up a significant part of any available surplus.
Risk 5: enforcement injunction proceedings
The debtor has the right to challenge the enforcement through enforcement injunction proceedings (executiekortgeding) before the preliminary relief judge (Article 438 Rv). They may claim that the enforcement be suspended, for example because they argue the claim has already been (partly) paid, that there is abuse of enforcement power, or that new circumstances have arisen that stand in the way of enforcement.
Mere inability to pay is in principle insufficient grounds for suspension. But injunction proceedings cost time and money, even if the creditor is ultimately proven right. The process can thereby be delayed for weeks, while costs mount.
Risk 6: summary enforcement by the mortgagee
Article 3:268 BW grants the mortgagee the right of summary enforcement (parate executie): they can sell the property without a court title being required and without the attaching creditor having to give permission. If the debtor also fails to meet their mortgage obligations, the bank will usually decide to proceed to enforcement itself.
In that case the attaching creditor loses control entirely. The bank determines the timing, the method of sale and the notary. The creditor can only wait to see whether anything remains for them after the mortgage debt and ancillary costs have been repaid.
Risk 7: bankruptcy of the debtor
If the debtor is declared bankrupt during the enforcement process, the trustee in bankruptcy steps into the debtor’s rights. The attachment on the property then becomes part of the bankruptcy estate and individual enforcement is in principle halted. The matter is from then on settled through the bankruptcy proceedings.
The trustee decides on the sale of the property and the proceeds are distributed in accordance with the Bankruptcy Act. For an unsecured creditor — without a mortgage or pledge — this means in most cases that they will be paid only a limited percentage of their claim, if anything at all.
Risk 8: the residual debt solves nothing
Even a successful enforcement need not mean that the claim is fully satisfied. If the sale proceeds, after deduction of the mortgage debt, costs and other claims, are insufficient to cover the entire claim, a residual debt remains. The debtor is personally liable for it.
But a debtor who has lost their home and may be in financial difficulty generally has little recoverable assets left. The creditor then formally holds a residual claim, but the chance of actually collecting it is limited in practice.
Risk 9: enforcing a first-instance judgment while you lose the appeal
A judgment given in the first instance is often declared provisionally enforceable. This means you are allowed to proceed with enforcement while the appeal is still pending and the judgment has therefore not yet become final. This may seem attractive because you do not have to wait, but it carries a considerable risk: if the appeal is decided against you and the judgment is set aside, the legal basis on which you enforced against the property falls away with retroactive effect.
The consequences of this can be far-reaching. You will then have enforced without a valid title and are, in principle, liable for the loss the debtor has suffered as a result. Because the property has in the meantime been sold and transferred to a third party, you can generally no longer undo that sale: a buyer who acquired the property in good faith at an enforcement auction is protected. You will then have to repay the proceeds you received and, on top of that, compensate the additional loss, such as the difference between the enforcement value and the actual value of the property, moving costs and any consequential damage.
This liability is moreover a strict, risk-based liability: anyone who enforces a judgment that is later set aside acts at their own risk, even if they were entirely in good faith. Losing the appeal may therefore end up costing you more than the original claim. For that reason, always weigh how strong your case is, whether the other party offers recourse for any repayment, and whether it is wise to await the outcome of the appeal rather than enforce straight away.
What is the best course of action as a creditor?
Before proceeding to enforcement against a property, a careful assessment is in order. Ask yourself the following questions: what is the current market value of the property and how high is the mortgage debt? Are there other attaching creditors and what is their rank? Are there assets or income of the debtor against which enforcement is simpler and cheaper? And is an amicable settlement — whether or not under the threat of enforcement — a realistic option?
The threat of enforcement is sometimes more effective in practice than the enforcement itself. Debtors who know their home is at stake are often willing to accept a payment arrangement or settlement that they previously refused. A well-timed demand letter or notice of enforcement can deliver the desired result without the lengthy and costly enforcement process having to be fully completed.
Conclusion
An executory sale of a property is a powerful instrument in the hands of the creditor, but no guarantee of full collection of the claim. The process involves several legal, financial and procedural risks that require good preparation and strategic choices. The priority ranking of the mortgagee, the lower enforcement proceeds, the litigation costs, the possibility of injunction proceedings and the risk of bankruptcy make this a route that should not be embarked upon lightly.
Would you, as a creditor, like to have your options for recovery mapped out, or do you need advice on whether enforcement is the right step in your situation? The lawyers at Law & More are happy to assist you.
Frequently asked questions
What do I need in order to levy executory attachment on a property?
You need an enforceable title: usually a court judgment that has been declared provisionally enforceable, or whose appeal period has expired. On that basis a bailiff can serve the judgment, issue an order to pay, and then levy executory attachment on the debtor’s property.
How long does the process take from attachment to actual sale?
This varies, but you should reckon on a minimum of three to six months. The statutory announcement periods for an enforcement auction, the possibility of injunction proceedings by the debtor and any disputes over the ranking arrangement can extend the process further. A private sale via the preliminary relief judge can in some cases proceed more quickly.
Can the debtor stop the enforcement?
The debtor can bring enforcement injunction proceedings before the preliminary relief judge and seek suspension of the enforcement. This does not succeed easily: mere inability to pay is insufficient. The judge intervenes where there is abuse of power, new facts that block the enforcement, or a manifest error in the judgment. Injunction proceedings always delay the process, however, even if the debtor is ultimately unsuccessful.
What happens if the sale proceeds are lower than the debt?
If the enforcement proceeds are insufficient to satisfy the full claim, a residual debt remains. The debtor remains personally liable for it. In practice, however, collecting that residual debt is difficult: a debtor who has lost their home generally has little recoverable assets left. You can record the residual claim and later deploy enforcement measures again if the debtor acquires new assets.
Does the bank take priority over me as a creditor?
Yes. A mortgagee — usually the bank that provided the mortgage — holds a preferential position and is paid first out of the sale proceeds. Only what remains after the mortgage debt has been repaid goes to the attaching creditors, distributed according to the rank of their attachment date.
Can I, as a creditor, also bring about a private sale?
Not directly. The request for a private sale under Article 3:268(2) BW must be submitted by the debtor or the mortgagee, not by the attaching creditor. You can, however, actively think along and give your consent, which increases the chance that the preliminary relief judge will grant the request. A private sale generally yields a higher return than an auction, which is also in your interest.
What if the debtor owns the property together with someone else?
Then you can in principle only enforce against the debtor’s own undivided share, not against the share of the other owner, who is not liable for the debt. Because a fractional share is barely saleable, an attaching creditor can demand partition of the community under Article 3:180 BW, so that the whole property is sold and you recover from the debtor’s portion of the proceeds. This is different where both owners are liable, for instance spouses married in a community of property with a community debt; in that case the entire property can serve as recourse.
What happens if the debtor goes bankrupt during the enforcement?
On the debtor’s bankruptcy, the trustee steps into their rights and individual enforcement is in principle halted. The property becomes part of the bankruptcy estate. The trustee sells the property and distributes the proceeds in accordance with the Bankruptcy Act. As an unsecured creditor — without a security right — you then rank at the back of the queue and the chance of full collection is slim.
Is enforcing against a property always the best choice?
Not by definition. Enforcement against a property is a heavy and costly measure. In some cases other means of recovery — such as attachment of bank balances or wage garnishment — are quicker and cheaper. Moreover, the threat of enforcement may be enough to move a debtor towards an amicable arrangement. It is wise to consult a lawyer in advance who can assess the recovery options in your specific situation.
