Can the Fiduciary Creditor Be Held Liable for Defects in the Extrajudicial Auction of Real Property?

Can the fiduciary creditor be held liable for irregularities occurring in the extrajudicial auction of real property? Yes. Although the procedure is governed by Law No. 9.514/1997, the fiduciary creditor is not immune from liability when it fails to comply with legal, registry, or procedural duties.

The consolidation of ownership and the conduct of the extrajudicial auction require strict compliance with statutory procedures; otherwise, the acts may be declared null and the creditor may incur civil liability.

What are the fiduciary creditor’s legal duties in the extrajudicial procedure?

The fiduciary creditor is not a mere bystander. On the contrary, it bears objective legal duties, including, among others:

·         ensuring the proper service of notice on the fiduciary debtor;

·         strictly observing statutory deadlines;

·         ensuring adequate publicity of the auction;

·         respecting the sequence and form of the two auctions required by law;

·         acting with objective good faith and transparency.

Failure to comply with these duties undermines the validity of the procedure and authorizes judicial review of the acts performed.

Does the absence or irregularity of notice invalidate the auction?

Yes.

Notice to the fiduciary debtor is an essential prerequisite of the extrajudicial procedure. Its absence, irregularity, or formal defect taints all subsequent acts, including the consolidation of ownership and the auctions themselves.

Case law has recognized that notice must:

·         be personal, when legally required;

·         comply with the statutory form;

·         ensure unequivocal awareness by the debtor.

A mere presumption of knowledge or defective notice does not satisfy this requirement.

Can the fiduciary creditor be held liable even after the property is auctioned?

Yes, in certain circumstances.

The auction does not cure serious defects in the prior procedure. If a material irregularity is proven, it may result in:

·         annulment of the auction;

·         invalidity of the consolidation of ownership;

·         civil liability of the fiduciary creditor for losses and damages.

The good faith of the third-party purchaser may be assessed on a case-by-case basis, but it does not automatically exclude the creditor’s liability when the creditor caused the defect.

What are the main defects that lead to nullity of the extrajudicial auction?

Among the most recurrent defects are:

·         lack of valid notice to the debtor;

·         inadequate publication of the auction notice;

·         failure to observe the statutory interval between auctions;

·         sale at a grossly inadequate price without compliance with legal rules;

·         defects in the registration of the consolidation of ownership.

Such defects violate not only Law No. 9.514/1997, but also general principles of Civil Law, such as objective good faith and the social function of contracts.

Does the extrajudicial procedure exclude judicial review?

No.

The fact that the procedure takes place outside the courts does not preclude subsequent judicial control. Courts may be invoked to:

·         examine the legality of the acts;

·         declare nullities;

·         award damages;

·         restore the violated legal situation.

Judicial review serves as a safeguard of legality and balance, particularly in light of the asymmetry between creditor and debtor.

Conclusion: extrajudicial auctions require technical rigor and accountability

The fiduciary sale mechanism is a legitimate and effective tool, but it does not allow unlawful flexibility or procedural shortcuts.

The fiduciary creditor:

·         must strictly comply with the law;

·         is liable for material defects;

·         may incur civil liability;

·         and is not immune from judicial oversight.

In Real Estate Law, form is a guarantee.

And procedural rigor is a condition of validity.

If you are facing issues involving fiduciary conveyance, consolidation of ownership, or extrajudicial auctions, Ferreira Advocacia acts with technical rigor and consolidated experience in defending the rights at stake.