Auction

What it means

An auction is a public sale of assets in which the item goes to whoever offers the highest price. Slovak law distinguishes voluntary auctions under the Voluntary Auctions Act, most often initiated by a secured creditor such as a bank when a borrower has stopped repaying, from auctions in enforcement proceedings or bankruptcy.

The auction is run by an auctioneer, who publishes a notice in advance with a description of the item, its valuation, the minimum bid, the auction deposit and the date. Bidders must lodge the deposit to take part and, if successful, pay the balance within the set period.

The winning bidder generally acquires ownership by paying the price, and for property the change of owner is entered in the land register on the basis of a certificate of the auction. Some rights attached to the item, such as easements, may pass to the new owner.

How it works in practice

Companies meet auctions from two sides. As buyers they can acquire property, machinery or vehicles on good terms; as debtors they can lose assets. When buying we recommend studying the title deed extract, encumbrances, the valuation report and the actual condition before the auction, as viewings are often limited.

In the accounts an asset bought at auction is recognised at acquisition cost, meaning the auction price plus fees and acquisition costs. For the debtor, an auction sale is a disposal of the asset; the proceeds pay down the debt and any surplus goes back to the owner.

When buying property from a VAT payer in enforcement or bankruptcy we also assess VAT. The supply of a building may be exempt or taxable, and in some auctions the reverse charge applies to the buyer, which changes the final cost.

What to watch out for

The biggest risk for a buyer is purchasing without knowing the real condition. The property may be occupied, neglected or burdened with rights that the auction does not extinguish. Getting it vacated after the auction can take months and require further court proceedings.

Debtors often underestimate how quickly an auction happens and at a price below market value. If financial problems are serious, it is usually better to sell voluntarily beforehand or negotiate instalments with the creditor. An auction can be challenged in court only in limited cases and within short deadlines.