Are you a co-owner of a property in Spain and looking for a solution to dissolve that ownership relationship? The termination of joint ownership in Spain is the appropriate legal mechanism for those who want to disassociate themselves from shared property. In this blog, Welex, your law firm in Marbella specializing in real estate law, explains what this process involves and how to carry it out effectively.

1. What is Joint Ownership (Condominio) in Spain?

Joint ownership in Spain is a legal figure referring to the shared ownership of a property among multiple individuals. This can include everything from a house to land, where each owner holds a proportional share of the property. If one or more co-owners wish to end this relationship, the termination of joint ownership comes into play.

1.1. Article 400 of the Spanish Civil Code: The Right to Division

Article 400 of the Spanish Civil Code states that co-owners have the right to leave the community of property at any time and may request the division of the shared property whenever they choose. The termination of joint ownership is the legal route that allows this division, facilitating the dissolution of co-ownership.

2. What is the Cessation of Joint Ownership in Spain?

The process of terminating joint ownership dissolves co-ownership of a property. One co-owner may receive the entire property, or the property may be sold, and the proceeds distributed among the co-owners. The method of termination varies based on the property’s nature and the co-owners’ interests.

2.1. Ways to Terminate Co-Ownership in Spain

Physical division of the property: This applies when the property can be divided into independent parts, such as a subdividable plot of land. Each co-owner receives a specific part, thus dissolving the co-ownership.

Sale of the property: If the property is indivisible, like a house, the most common option is to sell the property and divide the sale price according to the co-owners’ shares.

Allocation to one of the co-owners: In some cases, one co-owner may choose to buy out the shares of the others, taking full ownership of the property.

3. Tax Aspects of Liquidation of Co-Ownership in Spain

The tax aspect is crucial in the process of terminating joint ownership. Depending on how the dissolution of the co-ownership is carried out, different taxes may apply.

3.1. Stamp Duty (Impuesto de Actos Jurídicos Documentados – AJD)

The act of terminating joint ownership is subject to the Stamp Duty. The taxable amount will be the part of the property acquired anew, and the person who takes full ownership will be responsible for paying this tax. However, this act is exempt from the Property Transfer Tax (ITP). Learn more about Stamp Duty (AJD) taxes on our blog.

3.2. Personal Income Tax (IRPF)

If there is a patrimonial alteration due to the revaluation of the property, it may generate a capital gain subject to the IRPF. However, if the property’s value has not changed since its acquisition, resulting in no patrimonial alteration, the transaction generates no taxable gains or losses.

4. Partial Resolution of Co-Ownership

The termination of joint ownership can also be partial. This happens when one or more co-owners wish to exit the co-ownership, but the remaining co-owners decide to keep it. In this case, the seller allocates or sells only part of the property, while the others continue sharing the rest. It’s important to note that this type of termination is subject to Property Transfer Tax (ITP).

5. Legal and Tax Advice with Welex, Real Estate Lawyers in Marbella

At Welex, our law firm and team of economists in Marbella, we offer a multidisciplinary team specializing in real estate law and taxation. We provide comprehensive advice to make the termination of joint ownership in Spain as smooth and beneficial as possible. We divide the property, guide you through its sale or allocation, protect your rights at every step, and optimize the tax aspects.

6. Frequently Asked Questions (FAQs)

    1. Who pays the taxes in the termination of joint ownership?

      The person who acquires full ownership of the property is responsible for paying the Stamp Duty (AJD), while the process is exempt from the Property Transfer Tax (ITP)

    2. When is IRPF applied in the termination of joint ownership?

      We apply IRPF when the property’s value increases, resulting in a capital gain for the co-owner who receives compensation.

    3. Is it possible to physically divide a property in the termination of joint ownership?

      Yes, as long as the property can be divided without losing its functionality or value. In these cases, each co-owner receives a specific part of the property.

    4. What happens if the property cannot be physically divided?

      In this case, the most common approach is to sell the property and divide the sale proceeds among the co-owners.

    5. Can one of the co-owners keep the entire property?

      Yes, it is possible for one co-owner to purchase the shares of the others and take full ownership of the property.

7. Conclusion: Separation of Jointly Owned Assets, the Solution to Ending Co-Ownership in Spain

The termination of joint ownership in Spain is the ideal legal solution for those who wish to stop sharing ownership of a property. Whether through the division of the property, the sale, or the allocation to one of the co-owners, this process offers various alternatives suited to each situation. If you find yourself in this situation, don’t hesitate to contact Welex, your law firm specialized in Marbella, for personalized advice and to ensure a smooth process.