Communities of heirs are regularly faced with the challenge of agreeing on the use or sale of an inherited property. If no consensual solution is reached and the inheritance dispute extends over a longer period, German inheritance law offers the possibility of a compulsory auction. This instrument allows any co-heir to apply for the property to be auctioned, without the consent of the other heirs being required.
The legislature created this regulation to resolve stalemates within communities of heirs and to ensure their ability to act regarding the inherited assets. The compulsory auction leads to the conversion of tangible assets into monetary values, which can then be distributed among the co-heirs according to their inheritance shares. This often represents the only way out when an amicable agreement on a sale to third parties or acquisition by a co-heir fails.
Legal Basis and Procedure
The application for a compulsory auction is submitted to the competent local court. After reviewing the formal requirements and determining the market value of the property through an expert appraisal, the court sets an auction date. During this procedure, all co-heirs, as well as external interested parties, have the opportunity to bid on the property. The award is given to the highest bidder.
Although the compulsory auction represents a tried and tested solution for ending conflicts in communities of heirs, it also entails risks for the parties involved. Often, a lower sale price is achieved in such auction proceedings than would be the case with a private sale on the open market. This is partly due to the lack of opportunity to market the property comprehensively in advance or to utilise individual negotiation strategies.
Therefore, it is essential for co-heirs to carefully weigh the advantages and disadvantages of a compulsory auction and, if necessary, seek legal and real estate advice. Early mediation or the search for an out-of-court settlement can in many cases be more economically advantageous and maximise the value of the inheritance for all parties involved. The compulsory auction should primarily be regarded as a last resort for resolving entrenched conflicts.
