What is a joint ownership?

What is a joint ownership: differences with a condominium

A joint ownership is a status recognized by law, referring to goods that have more than one owner in common, so none of the parties has total rights over the property. This concept is also known as condominium, co-ownership, or community of goods.

However, it is important to highlight some differences with condominium ownership. This term refers to properties that can be easily divided, like land. In the case of an apartment or a home, one holds a percentage, and the division is more complicated. In this case, we are talking about a joint ownership.

The most common joint ownerships usually involve real estate and are often generated in situations such as divorces, separations, or inheritances. These situations are the ones that tend to lead to more legal disputes.

Rights of a co-owner of a joint ownership

If you hold a joint ownership, you should know that you are a co-owner of a portion of the property, and you are entitled to certain rights, such as:

• Using and enjoying the property.

• Participating in the benefits and burdens of the common property, according to your share.

• Requesting the dissolution of the joint ownership.

Advantages and disadvantages of a joint ownership

Establishing or holding a joint ownership has some beneficial aspects, such as:

• Sharing the management of the property.

• The possibility of accessing properties of greater economic value.

• Protection against potential liens or seizures.

However, in some cases, having such co-ownership can lead to less favorable situations, such as:

• Co-owners with conflicting interests.

• A co-owner taking advantage or benefiting disproportionately from the property.

• Disagreements between co-owners.

• Lack of financial return from the joint ownership.

• This can lead to situations where one or more co-owners want to dissolve or sell the joint ownership to end the uncomfortable situation.

Dissolution of a joint ownership

But what happens if one co-owner wants to sell and the others don’t? This situation is common in inheritances, where one of the owners refuses to sell the common property, or when one of the co-owners wants to get rid of their share of the property, but the others don’t.

In these cases, where the property owners cannot reach an agreement, the legal route remains as an option. It is up to the judge to determine how the property in question should be divided.

When executing this, it is important to consider whether the property is divisible or indivisible.

Divisible joint ownership and Indivisible joint ownership

For example, in the case of agricultural land, the plot can simply be divided into the corresponding proportional parts. Alternatively, the land can be sold, and the profits divided as stipulated. In the case of a home, since it is indivisible, the situation becomes a bit more complicated.

The law establishes that no co-owner should be forced to remain in a joint ownership. Any of them has the right to request—whenever they wish—that the common property be divided.

In other words, they can demand that the property be sold, or that they be paid their corresponding share. If an agreement is not reached, legal actions may be taken to finalize the indivision.

Steps for dissolving a joint ownership

Here are the steps to dissolve a joint ownership according to the situation:

Sale of the property

It is possible that all co-owners sell their part to a third party, or one of them buys the shares of the other co-owners.

Appraisal of the property

When the co-owners cannot agree on the value of the property, or when one of the co-owners intending to buy the other parts does not agree with the price, it is recommended to request an official appraisal. This way, a reference price will be established for the sale.

Judicial procedure

Depending on the context of the indivision, one has the right to begin a division of inheritance process, a liquidation of marital property regime (in the case of separations with a common home), or a division of common property procedure.

Selling a joint ownership

Depending on the situation, the process for selling a joint ownership will be different:

Selling joint ownership with a mortgage

Selling a joint ownership is a straightforward operation when the co-owners agree to sell the entire property to a third party, as this effectively dissolves the joint ownership.

In this case, each co-owner receives an amount based on the percentage of the property they hold. Selling to a third party, in front of a notary, with a public deed, is a type of transaction that is carried out without issues.

If there is an outstanding mortgage on the joint ownership property, the debt can be paid off by the common owners or by the buyer, with an appropriate reduction in the sale price.

In this case, it is advisable to assign the transaction of the property to a real estate agent. This requires that each of the parties agrees and signs the sale document.

Selling joint ownership in inheritance

As mentioned earlier, joint ownerships arising from an inheritance (homes, in many cases) commonly result in each heir receiving a portion.

It is possible that one heir will receive a larger percentage of the property, but none will have the right to dispose of it entirely. They must come to an agreement with the other co-owners.

It’s important to note that the joint ownership in inheritance is not legally effective until it is registered in the Property Registry. It will only be registered once the inheritance has been adjudicated to the heirs with their corresponding shares, and they have accepted them.

At this point, some co-owners may prefer to keep it, while others may want to sell it, among other situations.

Of course, an agreement between the parties is always the ideal procedure. However, it is essential to highlight a nuance not mentioned earlier: one co-owner of a joint ownership can sell their share of the property independently to companies that specialize in buying them.

This is a legal operation, although it is important to remember that the amount received will always be lower than its actual value. Prior to this situation, heirs must have settled the inheritance tax and taken care of the fiscal liabilities involved in dissolving the co-ownership.

Joint ownership for rental

In a joint ownership for rental —such as a real estate investment— all owners must come to an agreement for this purpose. If the co-owners do not reach unanimous agreement about renting the co-property, the rental can still take place if the majority of the owners agree, even if one of them disagrees.

However, the Civil Code stipulates that, in the absence of unanimity, the lease cannot exceed a maximum period of six years. If the intention is to extend the rental beyond that period, an agreement must be reached by all the co-owners.

As you can see, having a joint ownership with other people and managing it can be a complicated task if you are not familiar with the procedures and the rights of each party. That’s why we recommend you work with a real estate agent to make the process easier. At Engel & Völkers, we’d be happy to assist you throughout this process.