Extinguishment of the condominium of the family home

Condominium extinguishment of a family home is a complex process that can have significant legal and financial implications for the owners involved. In the following, we will explore this process in detail, including the legal requirements and tax implications it may have.

In Spain, the condominium of the family home is one of the most common forms of shared ownership. However, as personal and family situations change, so do the needs and desires of the owners of the property, which can lead to the termination of the condominium.

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What is a condominium extinguishment?

Condominium extinguishment refers to the dissolution of a property shared between two or more persons, in which each owner has a share of ownership in the same real estate, such as a house or land. In this dissolution process, the owners agree on the division of the property and the distribution of the assets and the obligations associated with it.

This can occur for a variety of reasons, such as the sale of shared ownership, the division of assets in cases of separation or divorce, the decision of one or more owners to abandon the property, or the termination of a temporary shared ownership agreement.

This is a process that involves the participation of lawyers and notaries at all times, to ensure that it reaches a satisfactory end for all parties involved.

What are the fiscal and financial implications of this process?

The extinction of the condominium may result in the following:

Mortgage cancellation expenses. If the shared dwelling has an outstanding mortgage, the dissolution of the condominium may involve the cancellation of the mortgage. This may generate cancellation costs that must be borne by the owners.
Taxes on capital gains. In some cases this process awards the property to one of the co-owners, generating a capital gain that must be taxed according to the IRPF. It also occurs if the price update is upward. If the price is maintained, this tax is not paid.
Tax on Documented Legal Acts (AJD). This is the common tax for acts of formalization of public deeds.
Distribution of expenses and debts. During the dissolution of the condominium, the owners must agree on how the expenses and debts associated with the shared property will be divided. This can lead to tensions and disagreements between owners.
Valuation of the property. In the event that the owners decide to sell the property to a third party after the extinction, it will be necessary to carry out an appraisal of the property to determine its sale price. This may generate additional appraisal costs for the owners.

What are the legal requirements?

The extinction of condominium is regulated by the Civil Code and by the Horizontal Property Law. The legal requirements for the extinction of the condominium are as follows:

Unanimous agreement of all owners. All owners must agree on the division of the property and the distribution of the assets and the obligations associated with it.
Public deed. The extinction of the condominium must be formalized by means of a public deed executed before a notary public. In this deed, the division of the property and the distribution of assets and obligations must be described in detail.
Payment of taxes. The dissolution of a condominium may be subject to the payment of taxes, as mentioned above.

Condominium extinguishment can be a difficult process for owners, especially if there are personal problems between the parties. Therefore, our recommendation is that you seek legal advice. At Carlos Baño León Abogados we can help you in matters related to Real Estate Law and Civil Law. Make your free online consultation!