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Notarial sale of real estate suspended


The latest amendments to the Financial Collateral Act (ZFZ-C) have introduced the possibility of out-of-court sale of real estate encumbered with the notarial mortgage (i.e. which is entered based on a directly enforceable notarial deed) performed by a notary public upon request from the mortgagee, subject to the conditions determined by law (notarial sale). The Act entered into force on the day after its publication in the Official Gazette of the Republic of Slovenia and applied to all mortgagees and debtors regardless of the date of entry of the notarial mortgage. The mortgage debtor or mortgagor is not a party to this proceeding or person who could be involved in the proceeding; therefore, the only possibility to halt the notarial sale is to pay the amount of the secured claim, topped by the notarial sale costs incurred, to an escrow account held by the notary public. Repayment can be carried out before a sales contract is concluded with the best bidder or adoption of the unilateral legal transaction resulting in acquisition of real estate in the process of notarial sale.

A petition was brought before the Constitutional Court of the Republic of Slovenia challenging the constitutionality of the regulation of notarial sale. The petitioner claims that the regulation, insofar as it refers to notarial mortgages established before the Amending Act entered into force, breaches the prohibition of retroactive application, the principle of legitimate expectation and the principle of equality before the law.

The Constitutional Court decided in the process of examining the petition regarding the constitutionality of the amendments to the Financial Collateral Act to suspend the articles (15.a to 15.t) governing the notarial sales until the Court's final ruling on the constitutionality. No new notarial sale can be initiated by notaries public during the suspension. If a notarial sale has been initiated before the suspension of the challenged provisions but no sales contract or acquisition of title has been concluded, the mortgage creditor may withdraw from the notarial sale and file for a writ of execution to the competent court or choose to proceed with the notarial sale. Should the creditor withdraw from the notarial sale, the notary public shall proceed in accordance with the provisions to halt a notarial sale. If the creditor insists to proceed with the notarial sale, the deadlines for actions in accordance with the Financial Collateral Act will be suspended and the bidders may withdraw their bids. The notary public must return the paid security deposits to the mortgage creditor or bidder in case the sale is cancelled.