Changes to the Law on Enforcement and Security Interest – Step Into a Digital Era and an Improvement of the Judgement Debtor Position

27
Dec 2019

This New Year holidays bring slightly different surprises than usual to the addressees of the applicable Serbian law, and those who will be particularly pleased are potential debtors. January 1 is getting closer, along with the beginning of the application of new provisions of the Law on Enforcement and Security Interest. Some of them aim to clarify the often-noticed issues in the present practice, while the others introduce complete novelties in the enforcement proceeding. The new provisions are numerous and extensive, so we will point out to those which are the most important for the participants of the enforcement process in order to exercise their rights at the right time and in the right way.

1. Impossibility of the Execution on the Sole Real Estate of the Judgment Debtor

When it comes to public services claims whose principal is not higher than 5.000 euros in dinars counter value, new provisions stipulate that the enforcement by the sale of the only immovable property owned by the enforcement debtor may not be imposed. This applies with no exceptions and results in a higher level of legal certainty for the debtors who failed to fulfill their obligations on time. The aforementioned amendment prevents the valuable assets of the judgment debtor from being monetized to settle bargain claims and contributes to one of the basic principles of enforcement proceedings – the principle of proportionality.

2. Wider Range of the Limitations of Enforcement

The new Law brings additional benefits for executive debtors from a social point of view, through new enforcement limitations.

First of all, incomes stemming from the law that regulates financial support for families with children are exempted from enforcement. So far, this solely applied to child support benefits, but the new legal regulations provide complete and more comprehensive protection of mothers on maternity leave and children, while respecting the principle of proportionality.

Furthermore, the imposed amounts of the execution within the incomes of the natural persons have been reduced. Hence, enforcement against wage or salary, compensation in lieu of wage or salary, may be carried out up to its half amount. If the amount of salary does not exceed the amount of average net earnings according to the latest information of the Statistical Office of the Republic of Serbia, the execution may be carried out only up to a third of the income amount. In those cases when the aforementioned incomes are equal or smaller than the minimum wage determined in accordance with the law, the enforcement may be carried out only to a quarter of their value.

When it comes to pension, enforcement against it may be carried out up to one third out the amount, except when it doesn’t exceed the amount of the average pension according to the last published data of the Republic’s Fund for Pension and Disability Insurance – in that case, the enforcement may be carried out up to one quarter of its amount. Enforcement against a pension whose amount is not bigger than the lowest prescribed amount of a pension may be carried out up to its tenth.

In order to settle the claims based on the statutory maintenance, the enforcement against the aforementioned incomes may be carried out up to one half of the income.

The judgment debtors whose incomes were the object of the enforcement contrary to the new regulations can protect their rights by filing an appeal against the writ of execution. In addition, legal certainty is significantly improved by present regulation, which prescribes severe disciplinary measures for those public enforcement officers who violate the new provisions.

If the public enforcement officer establishes that the enforcement had been implemented contrary to the aforementioned limitations, he is obliged to provide a refund of the in excess transferred funds to the account of the enforcement debtor, in order to establish the balance of the principle of equity.

3. Who Can(not) Be the Buyer of the Immovable Property

One of the amendments of the Law that is most significant in the practice is the limitation of the circle of potential buyers in enforcement proceeding, so this role cannot be entitled to public enforcement officers, their deputies or assistants or other person employed by the public enforcement officer – irrespective of the fact whether any of them acts in the proceeding itself. The same applies to their relatives – lineal blood relatives, collateral blood relatives up to the fourth degree of consanguinity, spouses, civil union partners, in-law relatives up to the second degree of consanguinity, guardians, wards, adoptive parents or adoptees, foster parents or foster children.

This amendment is expected to contribute to the protection of the proceedings’ integrity, as well as to repress the corruption, given that it prevents subjects related to executors from participating as buyers of immovable property, which can have a negative influence to the sale itself and often can lead to bad public reviews.

4. Multiple Claims Covered By One Proposal

The position of the judgment debtors in enforcement proceeding is additionally being improved by the provision on the costs of the proceeding, which prevents judgment creditors from misusing their position by collecting the proceedings’ costs multiple times from those debtors’ against whom they have multiple claims. Therefore, if the creditor demands the separate settlement of several claims that could have been settled in the same enforcement procedure, he will be entitled to compensation only for the costs that he would have incurred with a single motion. Otherwise, the debtor can file an objection to the court or the public enforcement officer, in order to protect himself from excessive costs.

When the Republic of Serbia, autonomous province, a unit of the local government or an indirect beneficiary of the budget funds are indicated in the role of the enforcement debtor, the periods for voluntary compliance extend. Thus, the judgment creditor is obliged to notify the ministry competent for finances about the intention to file the motion for enforcement, at least 30 days before filing. This, above all, seeks to reduce the number of cases in which the state appears as an executive debtor. However, this provision protects the citizens – executive debtors, by preventing redundant costs which were often in so-called “budget” cases.

5. eAuction

The new Law takes a step into the latest global trends of digitalization by introducing the Electronic Public Bidding. Starting March 1st, an additional manner of enforcement by the sale of immovable property and movable assets will be available in the form of electronic public auction, besides the current, valid system of the public auction. The decision on the choice of the manner of the public auction will be made by public enforcement officer ex officio, or at the motion of a party. The choice itself will be possible only for a half of the year after the beginning of the application of new legal provisions, whereas electronic public auction will be obligatory starting September 1st, after the period of adjustment to the new, automatized proceeding of public auction.

Along with this one, there is another novelty – the creation of the electronic platform for the sale of immovable property and movable assets, where the eAuction will be performed. Interested subjects will participate under a code, without the revelation of their personal data, which will lead to total anonymity of bidders, since neither the public enforcement officer nor the court will be familiar with the potential buyers’ identity. This innovation will significantly contribute to the transparency of public enforcement officers’ work and will ultimately result in the elimination of often noticed irregularities.

The main requirement for the participation will be deposition of the security which amounts to 15% of the appraised value of the immovable property, which differs from the former amount of 10%. The security needs to be deposited into the account prescribed for payment of public revenue no later than two days before the public auction.

According to the most controversial new provision of the Law, the paid but unused amount of the security will be used for covering the costs of the auction and the rest will not be returned to the bidder but put into the budget of the Republic of Serbia. Undoubtfully, this will make every potential bidder reconsider placing the bid. Given that this provision significantly extends into the constitutional civil rights, it is questionable how the public will react to it.

After the auction, the immovable property will be awarded to the bidder who set the highest offer, and the public enforcement officers’ conclusion will be published on the electronic bulletin board of the Chamber.

6. Electronic Bulletin Board

The tendency of automatization of the enforcement procedure does not stop there but extends by introducing an electronic bulletin board on the website of every basic court and the court of special jurisdiction in Serbia. By inserting their personal information, every citizen will be able to disclose whether an act or a writ originates from an enforcement procedure addressed to him. The intention is to create a public register which will make information much more transparent and available to the participants of the procedure, so they can be informed without the need to go to the court.

7. Significant Extension of the Jurisdiction of the Public Enforcement Officer

Along with the abovementioned, there are multiple occasions when the new Law hands over the competence for the conduction of enforcement from court to public enforcement officers. As a result, there is a demarcation between the jurisdictions of these two authorities, which consequently leads to the extension of the public enforcement officer’s role and relieving the courts. Thus, public enforcement officers will have the exclusive jurisdiction for enforcement prescribed to be executed ex officio, as well as for the joint sale of immovable property and movable assets, which so far was in the exclusive jurisdiction of the court. Furthermore, the jurisdiction of public enforcement officers might be extended by separate laws, which will create a new legal ground for special procedures, such as the enforcement of the misdemeanor court’s decisions, to be performed by public enforcement officers instead of the court in the future.

Conclusion

Above all, the new Law on Enforcement and Security Interest attempts to eliminate certain irregularities which were an obvious threat to the equity and efficiency of the enforcement procedure. Moreover, newly introduced technology innovations, such as eAuction and electronic bulletin board, illustrate the aspiration to keep up with modern enforcement and security systems and the development of the technology in general, which is a great improvement for the domestic system.

The remaining question is: what will the results be like and will the innovations be successfully accepted? We will get the answer in the New year when the changes and novities begin with the application.

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