About two years ago we had dealt with the issue of purchasing properties at auctions by the banks' REO companies .
Now, however, the issue is not only theoretical; already for a few months some first court decisions have begun to be issued by regional courts of first instance, while a few weeks ago we had the first appellate decision from the Court of Appeal of Western Macedonia and a few days ago the first from the Court of First Instance of Athens. For those who have not followed the issue, we summarize the concern:
According to the law on the transfer of "red loans" and their management, "Debt and Credit Management Companies (i.e. Servicers) are not permitted to acquire, through transfer, assignment or voluntary disposal or through auction, real estate connected with the credits they manage" (art. 5 para. 5 law 5072/2023).
This provision introduces an explicit prohibition on the acquisition of ownership by Servicers over properties connected with the claims they manage. Through this prohibition, Servicers are indirectly encouraged to favor the solution of debt settlement over forced execution/auction. Since, when the Servicer does not have as an "easy" solution the acquisition by itself of the mortgaged property, it may proceed to solutions of long-term settlement, thus also helping the financially weak debtor.
And this is where the issue lies: due to the difficulty of disposing of properties through auctions to private individuals (for many reasons but mainly because of the inability to inspect the interior of the property), Servicers together with the Funds have for a few years now adopted the tactic of purchasing the properties through REO companies whose shareholders are the banks, but which are in practice controlled by the Servicers. They acquire the properties at auctions and after proceeding with any renovations etc., they place them on the market through their own platforms and brokers.
The three largest Servicers, however, appear affiliated (within the meaning of IFRS and IAS) with the banking groups. Therefore, while, based on the above legislative provision, the Servicer is not entitled to bid and acquire properties at auction, it appears in principle that an REO Co may bid, that is, a company of the same group as the Servicer which is in practice managed by the latter.
Indeed, the board members of these companies (REO Co) are quite often also board members of the Servicers, while their share capital amounts to the minimum possible, i.e. 25,000 euros.
These issues were brought before the Court of Appeal of Western Macedonia which a few weeks ago, with its decision no. 75/2026, accepted, among other things, the following: "However, in practice the above prohibition is circumvented by the establishment of Real Estate Owned companies (hereinafter also REO Co), which constitute a subsidiary or affiliated entity of the group to which the claims management company (Servicer) initiating the auction belongs.
However, the acquisition of an auctioned property by a Real Estate Owned company constitutes circumvention of the law. This is because the formal distinction of legal personality between the claims management company (Servicer) and the property acquisition company (REO Co) is used as a pretext to circumvent the above prohibitive provision, since economic control and the ultimate benefit remain within the same center of business interests.
In these cases, the claims management company (Servicer), having full control of the execution process and of the information regarding the debtor's financial situation, directs the affiliated company to acquire the property at a price below the real one, with the aim of its further speculative resale, depriving the debtor of the possibility of a more favorable settlement or liquidation at a fair price".
And the problem for the Servicers has already intensified, as relevant decisions have begun to be published also by the Court of First Instance of Athens (in whose district the overwhelmingly largest part of the auctions takes place).
A few days ago decision no. 3242/2026 was published, where in addition to the above considerations the following highly important points were also stated: "...while at the same time showing unwillingness to negotiate seriously and substantively, so that it is concluded that the 1st respondent appeared and participated in all of its negotiations entirely as a pretext and without any intention of avoiding the auction; on the contrary, it sought its conduct, a stance that can readily be causally attributed to its certainty that it would be successful due to the participation and bidding in it of the 2nd respondent, a fact that would allow it to recover the disputed debt, for the satisfaction of which it was initiated, expecting the corresponding remuneration and thus increasing its profits much more quickly than if it waited for the claim to be deemed collected after a long-term settlement, while the property would be acquired by a company affiliated with it within 7 months, so that it had no incentive to settle the disputed debt and consequently prevent the adverse consequences to the appellant, a finding that confirms the purpose of the legislative provision of the above prohibition."
Indeed, in the above decision the following was also significant: "It was subsequently proven that the above highest bidder - 2nd respondent is a 100% subsidiary of the previous beneficiary of the claim, Bank ...., which is in fact also its sole shareholder with a 100% stake, from which it leases office space with the lease commencing on 22-10-2021 and with a monthly rent of €96, while at the same time it has no employees or branches, yet it has at least €12 million in real estate assets".
That is, exactly what we had written 2 years ago in our above article on Euro2day.gr.
At this point we should point out the following:
- This issue obviously concerns the Servicers and the Funds and is already creating legal problems for the tactic they have adopted over the past few years. Hundreds of properties have passed into the hands of these companies from debtors and these transfers are now legally precarious, provided of course that the time limit for challenging them has not expired. Indeed, if the auction has already been challenged for any other reason, this specific ground may also be added, with an additional ground of objection that must be filed within 2026, within the framework of the new platform for expediting objections adopted by the Government.
- The Servicers will of course not remain inactive, but will try to change the way they participate in auctions, establishing new companies without the participation of Servicers' employees, etc. Apart from this, for the auctions that have already taken place, they will bring the issue before the Supreme Court in an effort to stem the flow of decisions that seems to be beginning to form.
- The above court decisions prove the following: the system of Servicers and Funds often underestimates debtors. However, it cannot control Justice and especially a Court of Appeal judge in Macedonia or a first instance judge among the hundreds at the Court of First Instance of Athens. What is often heard from some debtors, that there is no point in confronting the "system," is not true; there cannot be a centrally controlled "system" with regard to the issuance of court decisions. But even when the issue reaches the Supreme Court, there is no predetermined decision, as was recently proven also with the issue of the Katseli law (with Plenary Supreme Court 6/2026, where the borrowers were vindicated).
- I leave for the end a real fact: about four years ago we had written again here on Euro2day.gr, the article on appellate decisions regarding the ability of Servicers to initiate enforcement acts. One day after publication, I had met with a lawyer collaborating with the Servicers, who characteristically told me: "with what you published you have set them running..." They knew nothing about the flow of decisions and obviously could not know, because they do not have real-time information on all the decisions issued in all the Courts of Appeal of the Country. This is so that the borrower understands that before Justice there is no "system."
* Giorgos Psarakis, MSc, LL.M. (LSE), PgCert, is an Athens lawyer, partner at the law firm "PSARAKIS KEFALAS" (www.psarakislegal.com).
The views expressed in a signed opinion article belong to the author and do not necessarily represent, in part or in whole, the views of Euro2day.gr.