Shared ownership of real estate by multiple individuals and/or legal entities in Spain can become problematic, as the interests of co-owners may not align, resulting in a shared ownership scenario. The shared ownership may be intentional or arise from unforeseen circumstances (such as heirs inheriting a property). However, Article 400 et seq. of the Spanish Civil Code provide in these situations.
Right to Division of Common Assets
It’s important to note that according to the Civil Code, no co-owner is obligated to remain in the shared ownership arrangement. Each co-owner has the right to request the division of the assets at any time.
Considerations for Ending Real Estate Co-Ownership
When terminating real estate co-ownership, co-owners should consider the following aspects.
Temporary Indivisibility Agreements
Co-owners can enter into agreements to maintain the undivided ownership for a concrete period not exceeding ten years, extendable by mutual agreement. Such arrangements may prevent actions leading to the division of the property, although they can include provisions for the transfer of undivided shares.
Physical Partition of the Property
The division of real estate co-ownership should consider the physical reality of the property. If feasible, a physical division is possible by allocating one or more portions to co-owners wishing to exit the co-ownership. Doctrine and jurisprudence dictate that this division should not significantly diminish the value of resulting properties compared to the original property.
Division Procedures
Co-owners can undertake division procedures themselves or entrust them to third parties. While they have some freedom to reach agreements, the division should ensure proportional distribution of resulting properties based on each co-owners participation in the co-ownership, along with establishing necessary arrangements. In cases where third parties handle division procedures, they must prioritize an equitable distribution of the properties based on each co-owners participation, minimizing cash supplements to compensate disadvantaged co-owners.
Involvement of Creditors or Assignees
Creditors or assignees of co-owners may participate in division procedures to protect their interests. They can oppose division if denied the opportunity to verify it. Once a division is completed, it can only be challenged in cases of fraud or denial of participation under specified terms.
Indivisibility of the Property and Forced Sale
In cases where the property is indivisible or division significantly reduces the value of resulting properties compared to the original, and co-owners fail to reach an agreement for allocation and compensation, the property must be sold. The net proceeds from the sale are then distributed among co-owners according to their ownership percentage. In more contentious cases, where one or more owners obstruct division, this may lead to initiating civil proceedings for the judicial auction of the property.
Rights of Third Parties
Finally, the division of the property must not harm third parties holding rights or real guarantees on the property (such as easements and mortgages). Appropriate transfer acts preserve these rights and guarantees.
In light of the above, it’s preferable, whenever possible, for co-owners to reach agreements among themselves and with their creditors and assignees for a peaceful and orderly common assets division.
If you require further information regarding the common assets division in real estate co-ownership,
