A common enquiry received from our English-speaking clients who have decided to end their joint ownership of property in Spain is: what legal options do we have to terminate the co-ownership and what are the tax and legal consequences of doing so?
The most common situation is a co-ownership with two people owning 50% each, typically a couple, but there are also situations with more co-owners and varying percentages of ownership.
So what happens when a relationship comes to an end and one partner wishes to sell the property while the other does not, or at least is not making a sale simple?
Dissolution of joint property ownership in Spain: Legal Background
According to the Spanish Law, nobody can be obliged to continue a co-ownership against their will. There are specific proceedings in Court that function to provide the dissolution of joint property ownership in spain, and which will share and distribute proportionally the property and the proceeds of its sale. Besides that, pending debts between the owners can also be claimed and compensated from the proceeds of the sale, if the debts are related to the property (payments for the mortgage, community expenses, repairs?).
So, where one partner is refusing to sell, or is dragging their feet, the other partner may resort to legal proceedings to force the sale of the property. However, it is far from a perfect solution.
Firstly, since the result of these proceedings is that the property will be sold at a public auction by direction of the Court, a common problem is that there is always the risk that the property will be sold at a lower price than its real value -or even, in some cases, especially when there are mortgages or other charges in the property, that there is no bidder in the auction. (It is also worth noting here that the co-owners can also bid in the auction).
Accordingly, money can be lost as a result of the proceedings unless a reasonable offer is made at auction.
Another problem with this solutions is the associated cost – the proceedings in Court are quite expensive. Not only the solicitor’s fees will have to be paid, but also the fees of the Procurador (who is required by law to represent the plaintiff in the Court in these kind of proceedings), and the fees for the assessor that will value the property, fixing the price for the auction.
Therefore, by far the more preferable route to take to arrange the dissolution of joint property ownership in spain would be to reach an amicable agreement to sell the property and divide the proceeds between the co-owners, and avoid the lengthy legal proceedings and attendant expense.
This is the approach that we take and typically the partner that is reluctant to sell can see the benefit in taking this approach. That said, where the reluctant seller refuses to agree, there is at least an option that remains to force the sale and liquidate the co-ownership.
Feel free to read more about this subject here: Tax consequences of divorce and property distribution in Spain.