Judicial Liquidation: Who Authorises the Sale of a Building? The Judge- Commissioner, Not the Court

Imagine: in Arles, a small landlord, Mr Roux, learns that his tenant is in judicial liquidation (collective procedure aimed at paying creditors with the debtor's assets). The flat he rented is a valuable asset, but the liquidator (agent responsible for realising the assets) wants to sell it. How? By mortgage enforcement (judicial procedure of forced sale) or by private sale (voluntary sale by agreement)? The question every owner asks: who decides the method of sale? And can you change your mind along the way? The French Supreme Court, in a judgment of 11 April 1995, gives a clear answer: it is the judge-commissioner (magistrate who supervises the liquidation) who authorises the sale, and once authorised by way of enforcement, one cannot ask the High Court to convert it into a voluntary sale.

The facts: a story like many others

In June 1991, a debtor (individual or legal entity in judicial liquidation) had to sell a building. The liquidator, to realise this asset, sought authorisation from the judge-commissioner. This magistrate issued an order (decision of the judge-commissioner) authorising the sale "by way of mortgage enforcement following the prescribed forms in matters of mortgage enforcement in voluntary sale". In other words, the judge authorised a forced sale, but using certain forms of voluntary sale. Later, the liquidator changed his mind: he preferred a straightforward voluntary sale. He then asked the High Court (Tribunal de Grande Instance, TGI) to convert the forced sale into a voluntary sale, based on Articles 744 and 745 of the Code of Civil Procedure (texts allowing a switch from mortgage enforcement to a private sale). The TGI agreed, but the debtor and a creditor challenged: according to them, only the judge-commissioner had jurisdiction to authorise the sale, and the TGI could not modify that authorisation.

The reasoning of the court — analysed

The French Supreme Court (the highest French court) quashed the judgment of the Aix-en-Provence Court of Appeal which had validated the conversion. It recalled the applicable law: Article 154 of the Law of 25 January 1985 (now Article L. 642-18 of the Commercial Code) provides that "authorisation to sell a building of the debtor in judicial liquidation otherwise than by way of mortgage enforcement is given by the judge-commissioner". In clear terms, only the judge-commissioner may decide whether the sale is by enforcement or by agreement. Here, the judge-commissioner had authorised the sale by way of mortgage enforcement. Therefore, the liquidator cannot subsequently ask the TGI to convert this sale into a voluntary sale. Why? Because the TGI has no jurisdiction to modify a decision of the judge-commissioner. Articles 744 and 745 of the Code of Civil Procedure, which allow conversion, do not apply in matters of judicial liquidation, as the special law of collective proceedings prevails. The Supreme Court is strict: once the judge-commissioner has chosen the enforcement route, one cannot go back through another court.

What this means for you — practically

For a landlord, as in Vitrolles, if your tenant is in judicial liquidation and the liquidator wants to sell the building, you must know that the method of sale is chosen by the judge-commissioner. If the judge authorises a sale by mortgage enforcement, the sale will be forced (by auction), which may lower the price and deprive you of the opportunity to negotiate a private sale. If you are a creditor (e.g., a mortgage lender), you have an interest in the sale achieving the best price; a private sale is often more advantageous. But beware: once the judge-commissioner has made his decision, it is too late to ask the TGI to change it. If you are the debtor (the person in liquidation), you have no say on the method of sale, but you may challenge the judge-commissioner's order before the Court of Appeal (within 10 days of notification).

Four tips to avoid this type of dispute

• Anticipate upstream: if you are a creditor or owner, attend the hearing before the judge-commissioner to express your preference for a private rather than forced sale. You can present arguments on price and timing.
• Challenge quickly: if the judge-commissioner authorises a sale by enforcement, you have 10 days from notification to appeal to the Court of Appeal. Do not delay, as after this period the decision becomes final.
• Negotiate with the liquidator: before the judge-commissioner rules, contact the liquidator to propose a serious buyer or a minimum price. The liquidator can present a request for a private sale to the judge if it serves the creditors' interests.
• Engage a lawyer lawyer: collective proceedings are technical. A lawyer can advise you on the best strategy to protect your interests, whether you are a creditor, debtor or owner.

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Further reading: related case law and developments

This 1995 judgment is part of a consistent line of the Supreme Court affirming the central role of the judge-commissioner in sales of buildings in judicial liquidation. Before the 1985 law, the High Court had more powers in mortgage enforcement matters. But since then, the legislature intended to simplify and accelerate collective proceedings by entrusting the judge-commissioner with authorising sales. A later decision (Cass. com., 12 February 2008, No. 06-20.548) confirmed that even if the judge-commissioner authorises a private sale, he may set conditions (minimum price, deadlines) and the liquidator must comply. The trend is therefore caution: once the judge-commissioner has spoken, it is very difficult to go back, unless an error or change of circumstances is proved.

Summary and next steps

What to do if the judge-commissioner authorises a sale by mortgage enforcement:

1. Check the date of notification of the order.
2. If you want to challenge, file an appeal with the Court of Appeal within 10 days.
3. If an appeal is impossible, prepare for an auction: value the property, inform yourself about the enforcement procedure.
4. If you are a creditor, attend the sale to bid or monitor the price.

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