In the previous article, we discussed the principle of proportionality and enforcement against real property, with particular emphasis on the application of the proportionality principle. In this article, we focus on the conditions under which real property may, or may not, be subject to enforcement in accordance with the provisions of the Law on Enforcement and Security.
Protection of the Debtor’s Sole Residential Property
Article 55 of the Law on Enforcement and Security, which we referred to in the previous article, provides that the sole real property owned exclusively by the enforcement debtor and serving to satisfy his or her housing needs may not be subject to enforcement for the collection of a monetary claim, under the conditions prescribed by law.
This statutory limitation is further elaborated in Article 151b of the Law on Enforcement and Security, which precisely defines the conditions under which the debtor’s sole residential property is protected from enforcement.
Conditions for Protection from Enforcement
Real property that is exclusively owned by the enforcement debtor and serves to satisfy his or her housing needs may not be subject to enforcement if the following conditions are met:
– the property is the debtor’s only real property; – the debtor has had registered residence at that address for at least five years prior to the filing of the motion for enforcement, provided that the address has not been deactivated; – the floor area of the property does not exceed 60 square meters; – the principal amount of the claim being enforced does not exceed one half of the market value of the property, determined in accordance with an act of the relevant local self-government unit; – within the three years preceding the filing of the motion for enforcement, the debtor has not sold or donated another property, waived inheritance rights to real property, or entered into a lifetime support agreement.
The foregoing demonstrates that the law seeks to strike a balance between the creditor’s right to satisfaction of its claim and the protection of the debtor’s fundamental right to housing and a minimum standard of subsistence.
However, certain shortcomings of these statutory conditions should not be overlooked. The solution raises a number of potential inconsistencies in practice. The size of the property is used as the sole criterion, without regard to the number of household members, which may place families with children or elderly persons at a disadvantage. There are also significant differences in the market value of properties of the same size depending on their location, resulting in unequal treatment of debtors across different regions.
It is also unclear how market value will be determined in practice and how potential abuses will be prevented. Furthermore, the requirement of five years of uninterrupted residence does not adequately reflect contemporary patterns of mobility and migration.
Exceptions to the Protection of the Sole Residential Property
Although the law provides a significant degree of protection for the debtor’s sole residential property, such protection is not absolute. Article 151d of the Law on Enforcement and Security sets out situations in which these limitations do not apply, meaning that the sole residential property may be subject to enforcement.
This will be the case:
– where the enforcement debtor has given consent, in the form of a notarial deed or another legally certified document, for enforcement to be conducted against that property; Note: In this context, the application of protection to properties subject to housing loans is particularly important. Although the Law on Enforcement and Security does not expressly provide that claims arising from housing loans are exempt from the protection of the debtor’s sole residential property, Article 151d stipulates that the protection does not apply where the debtor has consented to the enforcement of claims against that property. In practice, banks almost invariably include such consent clauses in housing loan agreements, which means that debtors are generally unable to successfully invoke this protection in such cases.
– where an enforceable extrajudicial mortgage has been registered in the real estate cadastre;
– where the claim being enforced arises from: a criminal offense, statutory maintenance obligations, compensation for damage caused by impairment of health, a monetary annuity due to total or partial incapacity for work, or maintenance annuities resulting from the death of a person who was legally obliged to provide support.
In these situations, the creditor’s interest and the nature of the claim take precedence over the protection of the debtor’s home, particularly where mortgage-backed claims or claims of special social and legal significance are concerned.
In addition to the protection of the debtor’s sole residential property, the Law on Enforcement and Security also provides specific limitations regarding enforcement against certain categories of real property. Article 164 of the Law stipulates that agricultural land owned by a farmer, with an area of up to 10 ares (1,000 square meters), may not be subject to enforcement. The purpose of this provision is to protect the minimum resources necessary for carrying out agricultural activities and ensuring the debtor’s livelihood. However, this protection does not apply where the monetary claim is secured by a contractual mortgage or a mortgage statement, in which case the interest of the secured creditor takes priority.
When initiating and conducting enforcement proceedings, it is of particular importance to carefully assess whether the statutory conditions for the protection of real property are satisfied and whether there are circumstances excluding the application of such protection.
A proper assessment of these circumstances may be crucial both for creditors, when selecting the appropriate means of enforcement, and for debtors, in safeguarding their rights during enforcement proceedings.
