Abstract
To address the dual challenges of inactive sale of residential parking spaces under enforcement and unmet parking needs of homeowners, the court explored a new model for bulk disposal of residential parking spaces featuring “package auction, separate bidding, and price priority”. Through the disposal module of the model, parking spaces are packaged by batch to the auction system, ensuring interested homeowners can bid on individual spaces. Meanwhile, the model adopts a price priority rule, thus maximizing liquidation value of the listed spaces and achieving a win-win situation for all parties concerned.
Basic Facts
This enforcement case concerns a financial loan contract dispute filed by the party applying for enforcement (the “enforcing party”), namely an asset management company (AMC), against the parties subject to enforcement (the “enforced parties”), namely a group investment company, a group company, Pan XX and Chen XX. As the enforced parties all failed to perform their obligations by the deadline designated by the enforcement notice, valuation and auction procedures are proposed against the assets of the enforced parties. According to an asset search, the enforced party group investment company held 452 parking spaces (for residential or commercial office purposes), one commercial office building, and other real properties. These real properties were previously sealed up by another court and the judgment creditor in this case holds a mortgage on these properties, upon consultation with the court, the creditor was granted the right to dispose of them. According to information from the real estate registration authority, up to 50% of the above 452 parking spaces are designated for residential purpose. During the enforcement process, the Shanghai Financial Court (the Court) received applications from several homeowners for participation in the judicial auction of the parking spaces. After a complete understanding of the homeowners’ interest in the judicial auction through questionnaire surveys and face-to-face consultations, the Court organized a special auction exclusively open to homeowners in the community concerned.
Results
The Court adopted a new disposal model of “package auction, separate bidding, and price priority,” and organized a special auction exclusively for the community’s homeowners. All 83 homeowner bidders won their bids; 18 of them bought at the reserve price; another three bought at passed-in price upon their request. Proceeds from the auction totaled RMB 34.93 million. The parking spaces are selected and delivered following a price priority rule.
Subject Matter
The Court proposed an online judicial auction for the 452 parking spaces (for residential or commercial purposes), one commercial office building, and other real properties of the enforced party group investment company. The parking spaces and other real properties were previously sealed up by the court in a lawsuit involving the enforced party, a real property developer. And the enforcing party holds a mortgage on these properties. Therefore, the homeowners cannot buy parking spaces through normal sales channels. Upon knowledge of the online judicial auction covering the parking spaces, some homeowners inquired about how to bid in the auction. Under the existing disposal model, the above real properties are to be sold as a whole in a judicial auction, and their valued price exceeds RMB 2 billion. As a result, it is unrealistic for an individual homeowner to bid in the auction. To resolve the disposal issue, the Court set about investigation of homeowners’ willingness and psychological price for bidding in the auction through physical and virtual homeowner representatives’ meetings, on-site one-to-one inquiry and consultation, and online questionnaire surveys, which informed the determination of the final number of residential parking spaces listed for auction. Through cooperation with an online judicial auction platform, the Court developed a special module for judicial auction of identical goods, supporting package upload, single bidding, and batch transaction of identical goods, which are the same in all respects. In addition, drawing on experience from bulk stock disposal and license plate quota auction, the Court created a new model for disposal of residential parking spaces, featuring “package auction, separate bidding, and price priority”. This model is exclusively open to homeowners in the community concerned and enables precise matching between the listed parking spaces and prospective buyers. As such, it produces a win-win situation for all parties concerned by creating bid premium for listed parking spaces, ensuring satisfaction of the enforcing party’s claims, and addressing the homeowners’ purchase needs while reasonably protecting the enforced party’s interests. At last, all of the eight combined parking spaces and 76% of the ordinary parking spaces were sold at a premium, recording proceeds amounting to RMB 34.93 million. Due to precise matching between the bidding needs and the number of the listed parking spaces, the final auction closing rate exceeded 80%. The auctioned parking spaces have already delivered according to a ruling.
Significance
In practice, when disposing of a batch of residential parking spaces (as assets being enforced) in an auction sale, the court will generally adopt a wholesale auction mode due to high quantity of parking spaces and heavy workload, always facing a dilemma where the assets being enforced are difficult to sell by the court and to buy by homeowners. In this case, thanks to innovation in enforcement model and the digital reform, the Court has resolved a longstanding conflict between judicial efficiency and an individual’s bidding needs in the real estate bulk disposal process, exploring a new model for bulk assets disposal nationwide. This new model produces positive disposal effect, offering replicable experience for solving similar enforcement issues by courts citywide and nationwide.
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