A judgement in the case on procedural guarantees of debtors in case of sale of a pledged immovable property has been adopted
The Constitutional Court has adopted a judgment in the case No. 2010-08-01 “On Compliance of the Words “or the Pledgee Who has the Right to Sell the Pledge on the Open Market” of Section 396 (1) and the Words “but if the Application has been Submitted by a Pledgee – Also a True Copy of the Pledge Agreement, Evidence Regarding Warning of the Debtor, Unless it Does not Follow from the Document Itself or the Law that such Warning is Required”, the Words „without Notifying the Applicant and the Debtor thereof” of Section 397 (1) and the Words „or by a Debtor of a Pledgee and the Pledgee has the Right to sell the Immovable Property on the Open Market” of Section 397 (2) Indent 1 of the Civil Procedure Law with Article 92 of the Satversme of the Republic of Latvia”.
The contested norms regulate procedure, according to which a court reviews applications on voluntary sale of immovable property on the open market provided that the application is submitted by a pledgee, for instance, a bank. The Applicants maintain that the contested norms do not comply with the right to a fair court established in the Satversme because the norms do not establish any procedural guarantees to the debtor.
The Constitutional Court found that the regulatory framework establishing a possibility not to include, into an agreement, the clause on warning of the debtor on auctioning of immovable property is unconstitutional. It has been indicated in the judgement that a debtor cannot defend the rights if he or she is not warned on the intention of a pledgee to submit an application regarding voluntary auctioning of the immovable property.
The Constitutional Court concluded that all other contested norms are constitutional by indicating that the Law provides several means of protecting the rights of a debtor in case of auctioning of his or her immovable property (for instance, a possibility to address a court in accordance with the procedures for court proceedings by way of action). Likewise, a judge, when adopting a decision whether to permit auctioning of immovable property, has to verify whether there are any legal obstacles preventing the sale of immovable property, for instance, setting in of conditions established in the pledge agreement (delayed payment, etc.)
The Judgment of the Constitutional Court is final and not subject to appeal. It has already taken effect. The Judgment will be published in the newspaper “Latvijas Vēstnesis”.
Linked case: 2010-08-01