Enforcement and Security Act (ZIZ), Article 197: Order of Payment from Sale Proceeds

In its decision dated 6 March 2025 (case no. U-I-103/22, Up-265/22), the Constitutional Court of the Republic of Slovenia reviewed the constitutionality of the third point of the first paragraph of Article 197 of the Enforcement and Security Act (ZIZ). This provision governs the order of payment from the proceeds of a forced sale of real estate in enforcement proceedings. According to the challenged provision, certain claims – including mandatory social security contributions due in the past year – are given priority over secured mortgage claims.

A mortgage creditor argued that such a rule infringes the constitutional right to private property under Article 33 of the Constitution, as it disregards the creditor’s expected priority based on the time of mortgage creation and the principle of priority (prior tempore potior iure).

Constitutional Protection of Mortgage Creditors’ Rights in Enforcement Proceedings

The Court confirmed that contractual and statutory mortgages, along with the secured monetary claims, enjoy constitutional protection under Article 33 of the Slovenian Constitution. This means that the expected priority of payment, established upon the mortgage’s registration, forms part of the constitutionally protected property right.

The Court acknowledged that the provision entails a vertical interference by the State (via the Financial Administration of the Republic of Slovenia) in the rights of mortgage creditors by legislating a priority rule between private and public claims.

Protecting the Social Security System as a Constitutionally Permissible Objective

The Constitutional Court emphasized that the legislature’s aim is to ensure the financial sustainability of the compulsory social security system, which forms the basis of the constitutional right to social security under Article 50. Social security contributions are essential for the operation of the system and for securing rights such as health care and pensions.

Therefore, the interference with the mortgage creditors’ rights is justified, as it pursues a legitimate public interestrecognized by the Constitution.

Proportionality Assessment: Temporally Limited Priority

The Court highlighted that the priority repayment applies only to contributions due in the year prior to the finality of the delivery order transferring the property to the buyer. This temporally limited scope significantly reduces the economic burden on mortgage creditors, while ensuring that public interests are effectively protected.

The Court further noted that similar preferential treatment exists for other specially protected claims, such as child support, reinforcing the systemic coherence of the legislation.

Conclusion: Constitutionally Compliant Regulation

The Constitutional Court found that the third point of the first paragraph of Article 197 of the ZIZ is not unconstitutional. It ruled that the protection of the social security system as a public interest justifies the temporary priority of certain claims, even at the cost of partially limiting the rights of mortgage creditors.

For legal practitioners, this decision is important as it confirms that mortgage creditors are not always first in line in enforcement proceedings involving real estate. They must take into account special legislative rules governing public claims, particularly those related to constitutionally protected interests such as social security.

* Finding yourself in need of legal services in Slovenia and looking for a law firm in Ljubljana, consider contacting us using our contact details as published on our web page. A qualified law firm can provide you with legal advice and representation – helping you navigate the complexities of Slovenian law and ensuring that your rights are protected. You can find more information on legal acts in Slovenia on the official pages of the Slovenian government. More legal topics can be found on our law firm publications page.

---