The compulsory auction procedure serves the purpose of forcibly selling real property or fractions of real property, residential property, building property and rights equivalent to real property (heritable building rights) in order to satisfy the parties involved from the proceeds of a compulsory auction. As part of the compulsory execution, the compulsory auction is an exercise of sovereign powers. Compulsory enforcement against immovable property is carried out on account of a monetary claim due under a personal and real debt instrument. The conditions and limits of the enforcement action are, with certain exceptions, not subject to the agreement of the parties.
The compulsory sale procedure is initially governed by the general provisions of § 1-14 ZVG (Law on Compulsory Sale and Compulsory Administration). These regulate the general provisions for forced sale and forced administration of real property by way of compulsory execution (sections 1 - 161 ZVG). The compulsory sale of a property is ordered by the enforcement law upon application. Upon issuing the order, the court shall request the land registry to enter the notice of forced sale (section 19 (1) ZVG). Pursuant to section 20 ZVG, the order is deemed to be a seizure of the property in favour of the creditor.
The seizure also includes those objects to which the mortgage on the real property extends (section 20 (2) ZVG). The seizure does not include the claims for rent and leasehold interest and also not the claims from a right to recurring benefits connected with the ownership of the real estate. Pursuant to section 24 ZVG, the administration and use of the property remains with the debtor within the limits of proper business even after seizure. If the creditor also wants access to these claims, he must additionally apply for forced administration. The seizure becomes effective upon service of the order on the debtor. It also becomes effective at the time the request for entry of the compulsory note is received by the land registry, provided the entry is forthcoming (section 22 ZVG). The seizure has the effect of a prohibition of sale (section 23 ZVG). The compulsory sale proceedings may be cancelled or discontinued (sections 28 - 34 ZVG). Pursuant to section 28 ZVG, the compulsory auction proceedings are cancelled if the enforcement court becomes aware of a right in the land register that precludes the compulsory auction or the continuation of the proceedings. The compulsory auction proceedings shall also be discontinued if the creditor withdraws the application for auction (section 29 ZVG). It shall be temporarily discontinued if the creditor so consents (section 30 ZVG).
The auction takes place in a public hearing (sections 35, 36 and 66 ZVG) after the expiry of certain time limits and the completion of certain summonses, notices, announcements and service as well as after the procurement of certain documents (section 19 ZVG), etc. In principle, a strict formal procedure must be followed. Pursuant to section 44 ZVG, only such a bid is admitted at the auction which covers the rights which take precedence over the creditor's claim as well as the costs of the proceedings to be taken from the proceeds of the auction (lowest bid). The purchaser must pay in cash (section 49 ZVG) (cash bid), namely that part of the lowest bid which is intended to cover the costs, etc..