What happens if, after the division of assets in a inheritance, I do not wish to continue as co-owner of an asset, and therefore I don't want the joint ownership?
The Acceptance of an Inheritance This implies not only a declaration of acceptance of the property but also that the property be awarded in accordance with the will of the testator.
Distribution of Assets from an Estate
Very often, estates consist of a single piece of real property; therefore, the heirs must divide it among themselves in proportion to the share granted to them by the will, thereby becoming joint owners.
If the estate consists of multiple assets, Carlos Baño León’s estate planning attorneys in Alicante always recommend that assets be allocated on a per-person or per-heir basis so that, to the extent possible, the assets are not divided, and if there are differences among the heirs, these are settled with cash.
However, this is very often not possible, so either the property is put up for sale, or, if one of the heirs is interested in purchasing it, it is awarded to that heir in exchange for a cash payment.
But in many other cases, these assets remain in undivided co-ownership for a certain period of time, and it is only when one of the co-owners has an interest in them that the problem arises: what to do.
What is joint ownership of an estate?
Joint ownership is the legal situation in which several people own the same property, each in the proportion to which they are entitled under the inheritance. This is a common situation when an estate includes indivisible assets, such as an apartment, a single-family home, or a rural property.
As long as the property remains held in undivided co-ownership, all co-owners must reach unanimous decisions regarding the use, maintenance, or sale of the property. In practice, this leads to numerous conflicts, especially when there are conflicting interests or a lack of communication among the heirs.
Is it mandatory to remain in joint ownership?
No. Article 400 of the Civil Code provides that no co-owner is required to remain part of the co-ownership. Any co-owner may bring an action to divide the common property at any time, unless there is an agreement to maintain undivided co-ownership for a maximum of ten years, which may be extended if all parties agree.
This means that an heir who does not wish to remain a co-owner may force the division of the property—even if the others object—in order to recover their proportional share in cash.
Options for Resolving Joint Ownership
The best solution is always an amicable agreement. If the co-heirs have a good relationship, they can choose to have one of them buy out the others’ shares and compensate them with cash. They can also sell the property to a third party and divide the proceeds according to each person’s share.
However, when no agreement can be reached, the only option is to file a lawsuit to divide the jointly owned property, which may result in a forced sale through a public auction. This process is lengthy and incurs additional costs.
Private sale of the property
If both parties are willing to reach an agreement, the best approach is to work with a trusted real estate agency to set a fair market price and manage the sale. This method is usually more profitable than a judicial auction, as it allows you to maximize the sale price and avoid the discount that buyers typically apply at auctions.
Carlos Baño León's estate attorneys recommend agreeing on the terms of the sale from the outset: minimum price, payment schedule, proportional distribution, and method of payment. This helps prevent future conflicts.
Action to Partition Joint Property
When an agreement cannot be reached, the dissenting owner may file a lawsuit to divide the jointly owned property. The purpose of this action is to terminate the joint ownership by forcing the sale or division of the undivided property.
In the case of real estate, since it cannot be physically divided, the Civil Code establishes sale by judicial auction as the solution. The court ruling typically grants the co-owners a period of time to attempt to sell the property by mutual agreement, and if they are unable to do so, the property is sold at auction.
How Judicial Auctions Work
Judicial auctions are governed by the Civil Procedure Act. An appraiser will assess the property to establish a starting price, which will be published in the Official State Gazette (BOE) and on the Judicial Auctions Portal. Both co-owners and interested third parties may bid.
In many cases, one of the heirs takes advantage of the auction to acquire the property by paying the share owed to the others, but since the bidding is open, the outcome can be unpredictable.
Advantages of Reaching an Amicable Resolution
Our firm’s experience shows that it is always best to avoid litigation. An out-of-court settlement avoids attorney and court representative fees, waiting periods that can last several years, and uncertainty regarding the final auction price.
In addition, it helps preserve family relationships, which is essential when the heirs are siblings, parents, or children. A prolonged dispute over an inheritance can damage personal bonds that are difficult to repair later on.
Possible agreements on undivided ownership
In some families, an agreement is reached to maintain joint ownership temporarily so that one heir can use the property while compensating the others with rent or deferred payments. This is a valid option if everyone agrees, but it must be set forth in writing to avoid misunderstandings.
Tax Consequences of the Distribution of Assets
One issue that should not be overlooked is taxation. When accepting an inheritance, the co-heirs pay inheritance tax based on the appraised value. If they later sell the property, they must report the capital gain on their personal income tax return, unless they reinvest the proceeds in their primary residence.
When a division of jointly owned property is carried out, it is considered a termination of joint ownership, subject to AJD (Stamp Tax) rather than property transfer tax. It is important to plan this transaction carefully to minimize the tax burden.
Common Mistakes to Avoid
One of the most common mistakes is failing to properly formalize the sale or cash settlement. All transactions must be recorded in a notarized deed and properly reported to the tax authorities to avoid penalties or tax audits.
Another common mistake is to put off resolving the joint ownership issue indefinitely. The more time that passes, the harder it will be to reach agreements, and the more conflicts may arise.
Carlos Baño's Opinion
A clear solution for every situation
In Carlos Baño Law Firm We have been advising clients for decades on disputes arising from inheritances and jointly owned properties. We know that behind every case there are not only material assets, but also family relationships that deserve to be protected.
Our experience has shown us that the best approach is always negotiation and a mutually agreed-upon solution. To that end, we help our clients understand their rights, evaluate their various options, and anticipate the tax and legal consequences of each decision.
When there is no alternative but to pursue legal action, we act with the utmost determination to defend our client’s interests, but we always strive to exhaust all avenues for reaching a settlement first. An action to divide jointly owned property is a highly effective tool when handled strategically and with an understanding of the most recent case law.
In our opinion, every heir should know that they have the right to withdraw from the community of property whenever they wish and to receive their share in cash. No one is obligated to endure an unwanted co-ownership situation indefinitely.
If you are involved in a joint ownership situation and wish to resolve it with legal certainty, please contact our firm. We will review your case, recommend the most appropriate strategy, and guide you through the entire process, from the initial negotiations to a potential judicial auction, if necessary.
You can easily find us at Google Maps or through our website. Our assistance can be key to helping you regain your peace of mind and find the best possible solution.
