Extinction of co-ownership is the disappearance of common ownership of a specific asset by several people. Co-ownership is the common ownership by several holders, where property shares are assigned to each of them.
The most common cause of extinction of co-ownership is the desire of the owners not to continue being part of this community. However, it is not the only one.
When it is not possible to achieve extinction of co-ownership by mutual agreement and the asset is indivisible, the division of the asset will be carried out through auction.
Causes of Extinction of Co-ownership:
The causes of extinction of co-ownership are established in the Civil Code in articles 395 to 406.
The Law of Civil Procedure must also be taken into account in cases where the division of assets must be carried out through judicial auction.
The causes of extinction of co-ownership are, in principle, the same as for the extinction of ownership, such as abandonment, destruction, or usurpation, among others.
However, due to the conditions of co-ownership, the Civil Code establishes some specific causes:
Renunciation of rights by co-owners in favor of one of them.
Sale of the asset to a third party and distribution of the proceeds among the community members.
Division of the common thing. Any co-owner has the right to request the division of assets. It is a judicial procedure; the initiation of the division of a common asset declares the extinction of co-ownership. The result can be material division, constituting horizontal property, or economic division if the asset is indivisible. In this case, one of the owners retains ownership, and the others receive compensation according to their shares. Division can also be reached through auction if there is no agreement between the parties.
Extinction of Co-ownership by Mutual Agreement:
Extinction of co-ownership can be achieved by mutual agreement, choosing one of the provided methods, either by one of the owners acquiring the undivided shares of the others, or by the one wishing to withdraw from the co-ownership receiving compensation.
Although it is also possible for the asset to be sold and the co-owners to distribute the money according to their shares.
Co-owners who opt for an agreement must carry out an appraisal of the asset they wish to divide and establish preliminary agreements on how the appraisal will be carried out, as well as a commitment to accept said appraisal.
The deed of extinction of co-ownership can be executed before a Notary, paying the corresponding tax.
In the case of a property that is the family home of a married couple undergoing divorce or separation, the extinction of co-ownership must be included in the regulatory agreement.
If this agreement is ratified by the Court, it becomes, along with the judgment, the deed of extinction of co-ownership. When done this way, unlike a divorce before a notary, the Stamp Duty on Documented Legal Acts tax is also not paid.
Extinction of Co-ownership by Judicial Means:
If the co-owners do not agree, either on the price or the method of dividing the asset, the only possible path is to resort to the Courts by filing a lawsuit for the division of the common thing.
The action for the division of the common thing involves requesting the court to extinguish the co-ownership, either by allocating each owner their corresponding share if the property is divisible, or by selling and subsequently distributing the resulting money, if it is indivisible.
In reality, the laws do not have a specific procedure to carry out the judgment for the division of the common thing; rather, the idea is to achieve its execution in the most expeditious manner possible, but without violating the rights of any of the parties.
For this reason, one of the most used procedures is that provided for in article 670 of the Law of Civil Procedure, which establishes the public sale or auction of the asset.
Necessary Documentation:
Title deeds of the assets subject to the dissolution of the community.
D.N.I. of the co-owners. If any company is involved, the powers of attorney or current appointments of administrators.
For urban properties, a certificate from the homeowners' association stating that all community fees are up to date.
Cadastral references of the assets (last IBI receipt).
Whether they are leased or not.
Value assigned to each asset.
How the assets are allocated to the co-owners.
How the costs of the operation are paid: Notary, Municipal Capital Gains Tax (if urban properties are involved).