Communal ownership. It is a common occurrence. Sometimes it is a conscious choice, for example when two partners buy a house. Sometimes we are forced into such a situation, for example when settling an estate. In practice, we have to deal with cases where joint ownership causes problems. This is the case, for example, with divorced couples who share a house, or with heirs who have just been given inherited goods and cannot work out a division.
It is good to know that every co-owner has the right to cancel the communal ownership at any time.
The Spanish Civil Code has a solution to these situations, allowing the parties to end the communal ownership in a fair and equitable way. Here is a small summary of how the co-ownership can be ended.
- The procedure can be initiated as a result of agreement between the interested parties, by order of arbitrators or mediators, or by a request from one of the parties to the court. In the former case, the parties will therefore seek a solution jointly and voluntarily; in the latter, the court will impose a forced settlement.
- The starting point is that in the procedure, one of the owners will receive the part from the others, who will be compensated. This compensation will be based on a survey, or on a valuation that is acceptable to all concerned.
- If the parties cannot reach an agreement, it may be decided to sell the property or even to auction it and divide the price between all co-owners. This sale or auction may be subject to further conditions, such as the minimum price.
- Finally, the dissolution of the co-ownership must be formalised at the notary’s office by means of a public deed or the distribution will be laid down in a court order.
During the procedure and until there is an agreement or a court decision, each owner can dispose of the part that belongs to him/her. It can be sold, transferred or mortgaged.
For outsiders, the cancellation of ownership does not have much effect. Cancelling the joint ownership does not affect the rights in rem prior to the partition. The mortgaged bank will not have lesser rights. The co-owner who is bought out will not be relieved of the mortgage debt. If there is an easement in favour of the neighbours, this will continue to exist.
Please note that the dissolution of co-ownership has tax implications. If a married couple divorces, there is an exemption, but this does not apply to co-owners who are not married to each other, for example heirs, friends or unmarried life partners. They pay provincial surcharges of 1% to 2% of the total value.
If there are more than two co-owners, for example three, and the third co-owner wants to terminate the co-ownership and transfer his/her share to the other two, the change of co-ownership is no longer considered a termination of co-ownership but a transfer and transfer tax is due.
For all of the above applies: leave this matter in the hands of experts!
Camila Lizarazo Gonzalez