Foreclosure on the debtor's collateral with the determination of the initial sale price in the auction

In the proceedings of the District Court No.2 of the Auezovsky District Court of Almaty, civil case No. 7540-... dated 04/28/20... of the year on the claim of Bank CenterCredit JSC (hereinafter referred to as the Plaintiff/Bank) to the DOF (hereinafter referred to as the Defendant) on foreclosure of collateral. The Plaintiff motivated his claims by the fact that, in accordance with the Bank Loan Agreement No. F-822 dated 09/14/2009 (hereinafter referred to as the Loan Agreement) concluded between the Plaintiff and the Defendant, the latter was granted a loan in the amount of 49 190,000 tenge, for a period of 180 calendar months, at 17% per annum. In order to ensure the fulfillment of obligations under the Loan Agreement, mortgage agreement No. F-1131 dated 09/15/2009 was concluded, as well as Additional Agreements No. 1 dated 09/29/2009, under which non–residential premises, part of the LETTER office, with a total area of 359.0 sq.m., located at the address: Almaty, Auezovsky The period of obtaining the loan from the Plaintiff and the subsequent time were accompanied by difficult circumstances, which entailed a number of undesirable and unpleasant consequences for the Defendant, both financially and morally. As a result, the Respondent had difficulties fulfilling his obligations under the Loan Agreement. Due to financial difficulties, late payments of monthly payments under the Loan Agreement were made, after which the Bank decided to recover the loan amount in court.

On July 14, 2016, the District Court No. 2 of Almaly district of Almaty, Ospanova G.S., considered the civil case No.2-4699/..., on the claim of Bank CenterCredit JSC against DO.F. and ANT LLP for debt collection, the Judge decided: To satisfy the claim. To collect jointly with DO.F. and ANT LLP in favor of Bank CenterCredit JSC - 69 320 653 tenge, as well as a state fee in the amount of 2,079 619 tenge. Almalinsky district Court No. 2 Almaty issued writ of execution No. 2-46016 dated 12/30/2016, on the basis of which the Private Bailiff of the Regional Chamber of Private Bailiffs of Almaty, Sadykov M.N., (hereinafter referred to as CHSI) initiated enforcement proceedings No. 264/21–75-... dated 04/08/2021. The defendant purchased the loan as a mortgage loan dated 09/15/2009, as evidenced by the relevant agreements. Thanks to the support and foresight of our Nation's Leader. Nursultan Nazarbayev, the guarantor of statehood and defender of all citizens of the Republic of Kazakhstan, was instructed to adopt a program for refinancing mortgage housing loans/mortgage loans for his compatriots in need. In order to implement the instructions of the Head of State. The Government and the National Bank of the Republic of Kazakhstan adopted Resolution No. 69 of the Board of the National Bank of the Republic of Kazakhstan dated April 24, 2015, the program for refinancing mortgage housing loans/mortgage loans, taking into account the changes made (regarding the refinancing of mortgage housing loans issued in foreign currency), approved by the Resolution of the Board of the National Bank of the Republic of Kazakhstan dated December 23, 2019. This Program assumes that state support will be provided to citizens who received mortgage housing loans/mortgage loans in the period from 2004 to 2009 in the amount of no more than KZT 50,000, 000.00, to secure their only housing, including borrowers belonging to socially vulnerable segments of the population in accordance with Article 68 of the Law of the Republic of Kazakhstan "On Housing Relations".

However, he refused our request to the Bank regarding the refinancing of the loan under the housing mortgage loan refinancing program. To date, we have filed a Complaint with the commission for reviewing borrower complaints regarding refusals to refinance residential mortgage loans under the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market. We consider the Plaintiff's claim for foreclosure on the pledged property to be groundless and illegitimate, since initially the loan to the debtor was issued as a Mortgage loan. According to art . 5 of the Civil Code of the Republic of Kazakhstan, where in cases where the relations provided for in paragraphs 1 and 2 of Article 1 of this Code are not directly regulated by legislation or agreement of the parties and there are no customs applicable to them, the norms of civil legislation governing similar relations (analogy of the law) apply to such relations, since this does not contradict their essence. If it is impossible to use the analogy of law in these cases, the rights and obligations of the parties are determined based on the general principles and meaning of civil legislation and the requirements of good faith, reasonableness and fairness (analogy of law). Also in the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan dated March 31, 2017 No. 1. "On the application by courts of certain norms of legislation on enforcement proceedings", in paragraph 10. The issue of foreclosure on property that is security for the obligation of a mortgage housing loan, as well as on the subject of collateral belonging to a third party (the real surety), is subject to consideration by the court in a separate lawsuit on the claim of the mortgagee for foreclosure on the mortgaged property in accordance with the requirements of Article 21 of the Law of the Republic of Kazakhstan dated December 23, 1995. No. 2723 "On mortgage of real estate". In Article 317 of the Civil Code of the Republic of Kazakhstan.  It is indicated that foreclosure on the pledged property may be refused if the violation of the obligation secured by the pledge committed by the debtor is extremely insignificant and the amount of the claims of the pledgee as a result is clearly disproportionate to the value of the pledged property. The violation is extremely insignificant and the amount of the pledgee's claims is clearly disproportionate to the value of the pledged property, while the following conditions are met: the amount of the unfulfilled obligation (excluding penalties (fines, penalties) is less than ten percent of the value of the property.

By order of the Bank, Global Capital LLP was appointed a specialist to conduct an assessment of real estate located at ...., ...., Almaty. According to report No. 50/6 dated 12/07/2020 by the Global Capital LLP appraisal company, the market value of the debtor's collateral amounted to 79,027,166 tenge. We did not agree with the assessment of the Appraisal Companies of Global Capital LLP, as the market value of collateral real estate indicated in the Global Capital LLP report was estimated incorrectly and unreliably, as well as unfairly underestimated, since each property located in this area is individual and requires a detailed approach, and not as according to the report No. 50/6 dated 07.12.2020. Thus, having studied the provided copy of the collateral assessment report, we came to the following conclusion. According to clause 18. art. 1 of the Law of the Republic of Kazakhstan "On Valuation Activities", where the market value is the estimated amount of money for which an asset would be exchanged on the valuation date between an interested party and a seller as a result of a commercial transaction after proper marketing, in which each of the parties would act being knowledgeable, prudent and without coercion. It has been established that when an appraiser determines the market value of a property, only the comparative method and cost methods are used, and the revenue method is not used. The report consists of information provided to us indicating in the final part of the report the total value of the property in the amount of, according to report No. 50/6 dated 12/07/2020, the debtor's collateral amounted to 79,027,166 tenge. According to paragraph 21, paragraph 2 of the Valuation Standard "Valuation of real estate", approved by the Decree of the Government of the Republic of Kazakhstan dated February 12, 2013 No. 124, the comparative approach provides for the following sequence of valuation procedures: 1) collecting and analyzing information on the sale or offer of similar real estate and determining the objects of comparison; 2) choosing a method for calculating the value of the object of assessment, taking into account the volume and reliability of the available information; 3) comparison of the object of evaluation with the objects of comparison with subsequent adjustment of the sale price or the offer price of the objects of comparison; 4) determination of the value of the object of evaluation by taking into account the amount of corrective adjustments to the value of the objects of comparison; 5) coordination of the calculation results. At the same time, in the analyzed report, as part of the cost calculation using the comparative approach, there is no justification for the applied adjustments (amendments) with the objects of comparison. In addition, in accordance with the requirements of the Valuation Standard, the report does not provide a detailed calculation of the value of the object, limiting itself to the data indicated in the calculation table of the report, which is a violation of the requirements of the valuation standard. When deducing the total cost, there is no justification for giving weight coefficients to the results obtained by the comparative method, and the hierarchy analysis method recommended in the methodological literature has not been used.

Foreclosure on the debtor's collateral with the determination of the initial sale price in the auction

According to paragraph 20 of the Valuation Standard, it is stated that the amount of accumulated depreciation of real estate is equal to the totality of physical, functional and external (economic) depreciation. When deducing the total cost, the appraiser did not specify the percentage of depreciation of the premises, since when evaluating property with physical wear and tear, the appraiser is obliged to take note of the specified coefficient. In connection with the above, we believe that in this case there is a poor-quality and biased assessment. The main principles of evaluation activities are objectivity and reliability, which is not respected during the evaluation. These violations affect the interests of the Debtor, since the valuation is carried out on the property by right of ownership for the purposes of court bidding, which implies possible alienation at market prices. In accordance with Article 257 of the CPC, upon termination of ownership, property is assessed based on its market value. Thus, the main comments to the report No. 50/6 dated 12/07/2020 made by the appraiser of Global Capital LLP are: Page 3. Section 1 "General information about the report"

Determining the base and type of cost to be set (there must be a base and type)

There is no definition of the base and type of fixed cost

There is a list of appraisers who did not participate in the calculations and preparation of the assessment report.

Page 4.

In the list of used documents of the IUCN 2011, at the time of the assessment, the IUCN 2020 is in force.

Page 6. Section 2 "General information and description of the evaluation object"

There is no general description and condition of the evaluation object (required according to Section 2 "Requirements for the form and content of Report No. 501 dated 05/03/2018).

Page 7.

Analytical review of secondary housing in Almaty for 2018. (the object of the assessment is non-residential premises and the assessment is carried out at the end of 2020)

Page 9. Section 3 "Calculation part of the report"

Incomplete valuation methodology (reference to the valuation standard "Valuation of real estate No. 519 dated 05.05.2018)

In paragraph 3.2. there is no justification for choosing one or more approaches used in conducting an assessment, however, it is available in paragraph 3.3, which is inconsistent with the valuation standard "Valuation of Real Estate No. 519 dated 05.05.2018.

Page 14.

Refusal to use a profitable approach to the land plot (the assessed object is a non-residential building)

Page 17.

The calculations used unreasonably high adjustments for bidding (-15%) and technical condition (-20%).

Description of the total area adjustment for residential buildings

Description of the adjustment for the number of floors for apartments

In the description of the adjustment for the service life, the appraiser justified the refusal to apply it, however, it is applied in the calculations (p. 16).

In the agreement on the results obtained, there is detailed information on the use of the cost approach in calculations, but there is a rejection of its use in paragraph 3.3.

Page 36. Inspection report.

The date of the inspection is not submitted.

The signature of the owner/customer is missing, and there is no note about the denial of access or signature.

In this case, we believe that a poor-quality and biased assessment affects the interests of the Defendant, since repayment of the loan debt at the expense of the existing premises is of primary importance to the plaintiff, while using the right to repay the debt in full at the expense of collateral. In this regard, on May 06, 2021, We sent an application to the CSI within the established time frame for the adoption of an alternative report on the valuation of real estate No. 6/2021 dated February 05, 2021, carried out by IP Kalinin &Partners Appraisal and Consulting Company, which determined the market value of collateral in the amount of 156,482 000 tenge, considered it reliable and fair, the market value indicated in it - corresponding to the real value of the collateral property, since an individual approach was applied in this assessment. And they considered it possible to adopt the CSI Assessment Report No. 6/2021 dated February 05, 2021, carried out by IP “Kalinin &Partners Valuation and Consulting Company“, which determined the market value of collateral in the amount of 156,482,000 tenge, as the basis for establishing the market value of collateral located at the address: Almaty, St....., D..... it would be fair to take as the current market value for collateral real estate. However, on May 12, 2021, CHSI Sadykov M.N., having considered our application, decided: - To dismiss O.F. Danilchenko, on the acceptance of assessment No. 6/2021 dated February 05, 2021 in enforcement proceedings. Accordingly, in accordance with Article 250 of the CPC of the Republic of Kazakhstan, we filed a Complaint with the District Court No. -2 of Almaly district of Almaty against the action of a Private Bailiff to refuse to accept an alternative assessment report, where, on the basis of the above, they asked to declare illegal the Decision of the Private Bailiff Sadykov M.N., dated 05/12/2021, on the refusal to accept the assessment report No.6/2021 dated February 05, 2021, executed by the Appraisal Company IP “Kalinin & Partners Appraisal and Consulting Company“, where the market value of the collateral property is 156,482,000 tenge. In accordance with Article 8 of the CPC RK, everyone has the right to apply to the court for protection of violated or disputed constitutional rights, freedoms or protected interests. In accordance with Article 15 of the Civil Procedure Code of the Republic of Kazakhstan, the parties choose their position, ways and means of defending it independently and independently of the court, other bodies and persons during civil proceedings. 166 of the Civil Procedure Code of the Republic of Kazakhstan, where the defendant submits to the court a response to the Statement of Claim with attached documents that refute the arguments regarding the claim, as well as copies of the response and the documents attached to it. Based on the above and in accordance with art. 166 of the CPC RK, the Court was asked:  

The claim of Bank Center Credit JSC for foreclosure on collateral in the form of non–residential premises located at the address: Almaty, Auezovsky district, ul...., d....- partially satisfy;

Claims regarding the determination of the initial sale price of collateral for real estate property during its sale, determine the amount of 156,482,000 tenge performed by IP “Kalinin & Partners Valuation and Consulting Company“;

According to the Assessment Report No. 50/6 dated 12/07/2020, the project carried out by Global Capital LLP in the amount of 79,027,166 tenge should be declared invalid.;

To enable Borrowers to comply with the court's decision voluntarily.

 District Court No. -2 of the Auezovsky district of the mountains. Almaty, as part of the presiding judge, Judge Zhirenchin A.K., with secretary Kenzhegazina S., having considered the civil case in open court, Taking into account the above, the court considers that when foreclosing, the report of the defendant D.O.F. should be taken as the basis, since the recommended six-month validity period for property valuation provided by the plaintiff to Bank CenterCredit JSC has expired. In addition, when the appraiser of Global Capital LLP determined the market value of the property, only the comparative method and cost methods were used, and the revenue method was not used. Based on the above arguments, the court decided: To partially satisfy the claim of Bank CenterCredit JSC against DOF, Limited Liability Company ANT for foreclosure on collateral. Foreclose on non-residential premises, part of the Letter A office, with a total area of 359.0 sq.m., located at the address: gor.Almaty, Auezovsky district, ul...., house .... owned by the DOF on account of the execution of the decision of the district court No. -2 of Almaly district of Almaty dated July 14, 2016. Determine the initial sale price of a non-residential building, part of the Letter A office, with a total area of 359.0 sq.m., located at the address: gor.Almaty, Auezovsky district, ul...., house ... with its sale in the amount of 156,482,000 (one hundred and fifty-six million four hundred and eighty-two thousand) tenge.

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