What do I do with the house that I have in common with my ex-partner? EXTINTION OF CO-OWNERSHIPS: WHAT DOES IT CONSIST OF? What advantages does it have?

There are many cases in which two or more co-owners have a shared home and for some reason they decide to end with this condominium situation. The immediate legal consequence of this division is the extinction of co-ownerships regime, leaving the property in the name of only one of them.

Extinction of co-ownerships can occur in many assumptions but in this short article we are going to refer to the typical example that takes place in conflicts of divorce or separation between marriages, or simply between couples.

When we speak of extinction of co-ownerships we are referring to the possibility of dividing the common thing, that is, the division of those assets that we have in co-ownership with another person. Legally, the article 400 of the Civil Code defines it as the transfer of ownership of a property owned by more than one person.

Most couples have the house in joint ownership. Extinction of co-ownerships means the end of the referred regime so the house passes to belong only to one of the two. The person who is keeping the house must compensate the other with an agreed amount that corresponds to the value of half of the property. This is a simple solution for those cases in which there are assets in provision that can not be materially divided, that is, indivisible assets (for example a house).

How do you proceed with the extinction of co-ownerships?

When a couple decides to divide the common thing, that is, to proceed with the extinction of co-ownerships, this must be carried out through a contract or agreement between the parties, and the intervention of a Lawyer is required for good through an extrajudicial Agreement, either through a Mediator or through the judicial proceeding in Divorce cases. Such agreement will determine those assets subject to extinguishing, the value of the assets, the property right that each party has over the assets and the final awarded of these.

On the other hand, extinction of co-ownerships can be exploited by various legal channels:

1. a) By means of the awarding agreement to one of the parties to the property, the latter must indemnify the other according to their share of property and according to the agreed value of the real estate.
2. b) In the event that the friendly agreement does not prosper between the parties, the sale of the property will proceed, proportionally dividing the price obtained with the sale between the co-owners.

A very frequent problem occurs when the property in question is encumbered with a real right, that is, with a mortgage from which both owners are obliged to pay. In this case, it should not be forgotten that the objective pursued when the extinction of co-ownerships is that one of the spouses ceases to be the owner and at the same time ceases to be a mortgage debtor, transferring the property of the encumbered property to the other. In this way, the exclusive owner of the property will become the only debtor obliged to pay the remaining mortgage.

How is the extinction of co-ownerships agreement formalized?

In relation to the way that this transaction must be covered, for those cases in which a judicial intervention is not required, for example in cases of extrajudicial resolution or Mediation procedure, the corresponding Agreement must be carried out through the formalization before a Notary Public of a Deed of Extinction of co-ownerships, which will later be settled from the corresponding Tax (AJD) and finally it will be taken to the Land Registry for its definitive registration. For these procedures, the intervention of a lawyer is advisable to advise the parties of the legal and fiscal consequences of the operation.

What advantages does the extinction of co-ownerships have?

From a fiscal point of view, the extinction of co-ownerships has clear advantages over the sale of the shares of one to the other. Indeed, while the sale is taxed by ITP at 8% of the value, the condominium termination is taxed as AJD at 0.5%, that is, the taxes payable would be 0.5% of the value of the property.

Regarding the tax base to be taken into account for the purposes of this tax, recent jurisprudence of the Supreme Court has clarified that the AJD will only have to be taxed for the part that is acquired and not for the total property, that is, in the end the 0.5% will be paid for the value corresponding to half of the property for those cases in which the property belongs in co-ownership in 50% between both parties.

As always at ABOGADOS MAR CONSULTORES we are at your disposal to help resolve any doubts you may have regarding this and any other legal matter.

Maria José Arroyo Rodriguez – Lawyer and Family Mediator.