Extinction of co-ownership is the disappearance of the common ownership of a certain asset by several persons. Co-ownership is the common ownership by several holders, in which property shares are assigned to each of them.
The most common cause for extinction of co-ownership is the owners' desire not to continue being part of this community. However, it is not the only one.
When extinction of co-ownership by mutual agreement is not possible and the asset is indivisible, the division of the asset will be carried out through an auction.
Causes of extinction of co-ownership:
The causes for extinction of co-ownership are established in the Civil Code in its articles 395 to 406.
The Civil Procedure Law must also be taken into account, in the event that the division of assets must be carried out by 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 the co-owners in favor of one of them.
Sale of the asset to a third party and distribution of the proceeds among the participants of the community.
Division of common property. 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 if the asset is indivisible. In this case, one of the owners retains ownership, and the others receive compensation according to their shares. Division by auction can also be reached 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 foreseen methods, either one of the owners acquiring the undivided shares of the others, or the one who wishes to withdraw from 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.
The co-owners who opt for an agreement must carry out a valuation of the asset they wish to divide and establish preliminary agreements on how the valuation will be carried out, and furthermore, a commitment to accept said valuation.
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 couple in the process of divorce or separation, the extinction of co-ownership must be included in the regulatory agreement.
If this agreement is approved by the Court, it becomes, along with the judgment, the deed of extinction of co-ownership. When done in this way, unlike a divorce before a notary, the Tax on Documented Legal Acts is also not paid.
Extinction of co-ownership through judicial means:
If the co-owners do not agree, either on the price or the method of dividing the asset, the only possible way is to resort to the Courts by filing a lawsuit for division of common property.
The action for division of common property involves requesting the court to extinguish co-ownership, either by awarding each of the owners their corresponding share if the property is divisible, or by selling and subsequently distributing the resulting money if it is indivisible.
In reality, no specific procedure exists in the laws to carry out the judgment of division of common property; rather, the idea is to achieve its execution in the most expeditious way 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 Civil Procedure Law, which establishes the auction or public sale of the asset.
Necessary documentation:
Property titles of the assets subject to the dissolution of the community.
D.N.I. of the co-owners. If any company is involved, current powers of attorney or administrator appointments.
For urban properties, a certificate from the community of owners 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 fees, Municipal Capital Gains Tax (if it concerns urban properties).