Partition auction (Lexikon) of a property
The partition auction is a special form of compulsory auction under §§ 180–185 of the German Enforcement Act (ZVG), used to dissolve an owners’ community in a property when the co-owners cannot agree on a voluntary sale. Unlike the classic compulsory auction, this process is not about satisfying a creditor, but rather about the division of a fractional or inheritance community. The result: The property is auctioned by the local court, and the proceeds are distributed among the owners according to shares — often with significant financial losses compared to an orderly market sale. Estimates from practice show: About two-thirds of all applications end before the auction date through out-of-court agreement — the application therefore often functions more as a pressure tool than as an actual means of disposal.
When does a partition auction take place?
In practice, four typical scenarios exist in which a partition auction is requested. They all have in common that several people are legally co-owners of a property and at least one party wants to end the community, while another blocks it.
- Divorce — married couple with a shared house, one wants to sell
- Heir community — siblings inherit, agreement fails
- Co-ownership — joint purchase, dispute among investors
- Partnership dissolution — partners separate, property remains
Each co-owner can file the application at the competent court (enforcement court) — regardless of the size of their share. Even an heir with only a 10% share can trigger the auction of the entire property. This makes the instrument a powerful tool for pressure in deadlocked negotiations regarding the heir community, an inherited apartment or the classic family home.
Who is eligible to file an application?
Anyone who is a co-owner in a fractional ownership community, heir community, or joint ownership community is eligible to file an application. In the case of minor heirs, the family court must approve (§ 1643 BGB), and in the case of persons under guardianship, the guardianship court must approve. A registered exclusion agreement under § 1010 BGB in the land register can permanently block the application — although it is rarely used in practice because it also blocks one’s own exit.
Process: From Application to Award
The procedure follows a fixed scheme and usually takes between 9 and 18 months. Whoever knows the process can intervene strategically — for example, by selling freely before the auction date.
- Application — Enforcement court, advance payment of costs approximately 1,000–3,000 €
- Order decision — Entry in the land register (auction notation)
- Market value appraisal — Expert determines market value (3–6 months)
- Announcement — at least 6 weeks before the date in the official gazette
- Auction date — public, minimum bid 50 % (5/10 limit)
- Award — highest bidder becomes the new owner
- Distribution date — payment according to shares, usually 4–8 weeks after the award
Important: In the first auction, the bid may not be accepted if the highest bid is below 50% of the market value (§ 85a ZVG). From the second auction onward, this safety threshold no longer applies — and this is exactly where typical losses occur. The land register entry of the auction notice blocks any free sale from the time it is ordered that does not involve all co-owners.
Minimum bid, cash payment, remaining rights
Three terms determine the financial outcome — and are almost always underestimated by laypeople:
- Minimum bid — minimum amount covering existing rights (mortgages, right of residence, land charges)
- Cash payment — the part of the bid that must actually be paid in cash
- Remaining rights — not paid out, but taken over by the buyer
- Security deposit — 10% of the market value, immediately by Bundesbank check or bank transfer
Example: Market value 800,000 €, registered mortgage 300,000 €. The minimum bid is approximately 350,000 € (mortgage + procedural costs). If someone bids 600,000 €, 300,000 € must be paid in cash, and the 300,000 € mortgage remains. Whoever overlooks this does not buy for 600,000 €, but in fact for 900,000 €.
Practical example 1: Inheritance community with three siblings
An apartment building in Munich is inherited, three siblings inherit equal shares. Market value according to the appraisal: 1,200,000 €. Siblings A and B want to sell, C wants to keep it and blocks the sale. After 14 months of dispute, A applies for a partition auction.
| Scenario | Total proceeds | Share per heir (1/3) | Difference |
|---|---|---|---|
| Free sale | 1,200,000 € | 400,000 € | — |
| Partition auction 1st session | approx. 960,000 € (80 %) | 320,000 € | –80,000 € |
| Partition auction 2nd session | approx. 720,000 € (60 %) | 240,000 € | –160,000 € |
In addition, there are procedural costs of 2–4 % of the market value, the expert’s fee (1,500–4,000 €), as well as a possible real estate speculation tax, if the speculation period has not yet expired. The real estate inheritance tax remains independent of the auction result — the tax decision is based on the market value determination at the time of inheritance, not on the later auction proceeds. Those who instead want to sell the apartment building freely will find a clearly better alternative in the guide sell an apartment building.
Practical example 2: Divorce and equity
Couple in legal community property, shared single-family home, market value 650,000 €, remaining loan 220,000 €. After separation, the husband applies for partition auction because the wife neither wants to sell nor move out. Pitfall: The auction proceeds go into the division — but are assessed again separately in the equalization of gains.
| Position | Betrag | Note |
|---|---|---|
| Auction proceeds first round | 520,000 € | 80 % market value |
| minus remaining loan | –220,000 € | paid off from proceeds |
| minus prepayment compensation | –14,000 € | interest binding 7 years remaining term |
| minus procedural costs | –18,000 € | approx. 2.8 % market value |
| Net distribution proceeds | 268,000 € | 134,000 € per spouse |
If one of the spouses had paid the other — for example, through a continuation financing or new real estate financing — significantly higher amounts would have remained. The costs of
Differentiation: Partition Sale vs. Foreclosure
Both terms are often confused in everyday language, but they are fundamentally different in legal terms. Anyone acquiring a property through the district court should definitely know the difference — it determines risks, burdens, and opportunities.
| Feature | Foreclosure | Partition Sale |
|---|---|---|
| Legal basis | §§ 15 ff. ZVG | §§ 180–185 ZVG |
| Applicant | Creditor with enforceable title | Co-owners |
| Purpose | Debt repayment | Dissolution of joint ownership |
| Mortgages | extinguished upon auction | remain in place |
| Right of residence/Usufruct | often extinguished | remain in place |
| Bidding circle | anyone except the debtor | also co-owners |
| Proceeds go to | Creditor | all co-owners according to share |
| Market value protection | 5/10 and 7/10 limit | only 5/10 in first session |
The decisive practical difference lies in the liability situation: In the case of classic forced auction, registered land charges are extinguished with the bid, provided they are not taken into account in the minimum bid. In the case of partition auction, however, land charges generally remain and are transferred to the first buyer — a risk that bidders often underestimate. As described in the guide to Buy an apartment building, partition auctions are still attractive for experienced investors — the competition is lower than at classic auctions, and objects often sell for 15–25 % below market value.
Revenue distribution: Who gets what, when?
After the bid, the proceeds do not go directly to the co-owners, but are deposited with the local court. At the distribution date (4–8 weeks after the bid), the proceeds are distributed proportionally — provided all parties agree. If they do not, the proceeds remain on a deposit account until a civil court ruling clarifies the shares. This can take an additional 1–3 years.
- Prior — legal costs, appraisers, registered encumbrances
- Subordinate — remaining purchase price claims, personal loans
- Pro rata — distribution according to land register shares
- Disputed — deposit until clarification by civil court decision
Typical points of contention are claims for compensation among heirs (care services, previous gifts), claims for increase among spouses, and investments made by individual co-owners that have not been reimbursed. Those who carry out renovations without a written agreement often do not get reimbursement at the distribution stage.
Common mistakes and misunderstandings
Many co-owners underestimate what a partition auction means economically — and use it as a threat without knowing the consequences. These misconceptions can be especially costly:
- “I will get my share paid out” — wrong, the whole property is sold
- “My majority share protects me” — even 5 % is enough to file a request
- “I cannot bid” — yet, co-owners are entitled to bid
- “Tenants must move out” — purchase does not terminate the lease (§ 566 BGB)
- “Land charges disappear” — remain, unlike in forced auction
- “I can provide the security payment later” — no, it is due immediately in the appointment
- “Renovations will be reimbursed” — only with a written agreement
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