A distinction must be made between the various types of auctions that are always held through the intermediary of a notary.
Voluntary sale by public auction: as its name suggests, the owner or owners, often in relation to an inheritance, decide to sell real estate by public auction.
In this type of auction, only one auction session is held: unlike the case, for instance, in Belgium, multi-session auction sales are not customary in Luxembourg. Unless the or the sellers disagree with the price, the item of property is definitively sold at auction on the day of the auction. Higher bids – unless stipulated otherwise – CANNOT be submitted afterwards.
Court-ordered sale by auction of property owned in common: a public sale ordered by a court to bring an end to joint ownership of real estate, within the framework of a divorce or inheritance. Unless the parties unanimously agree otherwise, the property MUST be sold by means of the auction. Higher bids CANNOT be submitted afterwards.
Sale following the attachment of real estate: the sale takes places at the request of a creditor. The property is auctioned off to the highest bidder at the auction but a higher bid may be submitted afterwards. This means that the successful bidder at the auction becomes the “provisional” owner of the item on the date of the first auction, but within a timeframe of eight days another person can declare that he or she is “submitting a higher bid”, by offering one-sixth more (excluding fees). This means that a second auction will take place and the starting bid at it will be the amount of the higher bid, in other words the highest bid at the first auction plus one-sixth of that sum.
Bankruptcy sales: The principle is the same as hereinabove, except that the higher bid must only be one-tenth higher and the timeframe for making the higher bid is 15 days.
Fees: Please note: you are going to have to pay the price that you bid, plus the stipulated fees. Fees vary in line with the significance of the item of property, but are generally between 14% and 17%.
In addition to the cost of organising the auction and of the fees charged by the professionals who provide their services in relation to it, the fees also include the registration and administration duties that are payable to the Luxembourgish State, as follows: 6 + 1 % = 7%.
It is also for this reason that fees may be lower if you are a first-time buyer (under the Luxembourgish “Bëllegen Act” ) and that fees may be higher if you insert a resale clause (in this case fees will be 1.2% higher). If the real estate is located in Luxembourg City and if you stipulate that you are purchasing it for the purpose of reselling it, then fees will be 3% higher (this is a municipal surtax).
Payment timeframe: The list of requirements drawn up by the notary sets out the timeframes within which the sale price must be paid. These timeframes can vary. The usual situation is that you will have to pay half of the price and all of the fees within fifteen days, and the balance within two months.
Penalties: If the event of non-payment, interest at a high rate is levied. In addition, the sale may be cancelled and the property put back up for auction in accordance with the “folle enchère” system. You will be liable if the property does not fetch the same price at the second time of asking.
Auction procedure: Usually auctions take place in a bar, pub or restaurant, or at another venue that is open to the public.
The notary in charge of the sale reads the rules of the auction aloud (see above). Then the auctioneer asks for bids. The amount of the initial bid is of no importance.
If the auctioneer believes that the highest bid has been made for an item of property, then he or she will go and speak to the notary and/or to the vendor or vendors, in order to obtain their agreement to complete the auction. Usually the notary then announces that the item of property will or will not be auctioned at the current bid price. If the decision is positive, then the auctioneer can complete the auction, provided that no new bids are made. In Luxembourg, he or she announces this by counting “One, two, three” -- when the word “three” has been pronounced, the property has been auctioned to the highest bidder.
Guarantor: It is sometimes the case that a person who wants to purchase an item is not present at an auction, but authorises a representative to attend an auction on his or her behalf. When someone makes a purchase for a third party for whom he or she vouches, he or she is jointly and severally liable with that person and he or she is, in the event that the third party does not agree to pay the price bid, himself or herself deemed to be the successful bidder.
Command: “Command” is the term used in Luxembourg when a successful bidder states that he or she has made a purchase, but reserves the right to disclose the identity of the actual purchaser within a maximum timeframe of 24 hours. The identity of the actual purchaser is thus not specified in the property assignment document.
Déclaration de command: This is a declaration which takes place and which is notarised within 24 hours of the drafting and signature of the initial document. It reveals the identity of the person in question, the actual purchaser or successful bidder.
Bëllegen Act: The law provides that any and all physical persons, who are not yet the owners of real estate, at the time of entering into a notarised agreement and/or of a sale by auction that gives rise to the purchase of a home for the use of said physical person or persons, may avail of a tax credit of a maximum amount of €20,000. The tax credit is offset against the registration and administration fees that are usually payable. The tax credit is granted subject to actual occupation, by the physical person or persons in question, of the home that was purchased, within a timeframe of two years and for a period of two years, unless one of the waivers provided for apply. The beneficiaries, furthermore, are prohibited from renting out the home and from using it for other purposes, for a period of two years.
Resale clause: If the successful bidder states that he or she is purchasing property for the purpose of reselling it, then registration fees go up from 6% to 7.2%. But the purchaser will be issued with a refund of 6% in the event of a resale within two years, and with a refund of 4.8% in the event of a resale within four years.