The extinction of co-ownership is the disappearance of joint ownership of a specific asset by several people. Co-ownership is the joint ownership by several owners, with each of them being assigned ownership shares.
The most common cause for the extinction of co-ownership is the decision of the co-owners not to continue being part of this community. However, it is not the only one.
When it is not possible to carry out the extinction of co-ownership by mutual agreement, and the asset is indivisible, its division will be carried out through an auction.
Causes of Extinction of Co-ownership:
The causes for the extinction of co-ownership are established in the Civil Code in articles 395 to 406.
It is also necessary to take into account the Law of Civil Procedure, in the event that the division of the common thing must be carried out through a judicial auction.
The causes for the extinction of co-ownership are, in principle, the same as those for the extinction of ownership, such as abandonment, destruction, or usurpation, among others.
Nevertheless, due to the conditions of co-ownership, the Civil Code establishes some specific causes:
Renunciation of the co-owners' rights in favor of one of them.
Sale of the asset to a third party and distribution of the profit among the participants in the community.
Division of the common thing. Any co-owner has the right to request the division of the common thing. This is a judicial procedure; the initiation of the division of a common thing declares the extinction of co-ownership. The result can be material division, constituting horizontal property, or economic division if the asset is indivisible. In this case, one of the owners retains ownership, and the others receive compensation according to their shares. It can also be divided through an auction if there is no agreement between the parties.
Extinction of Co-ownership by Mutual Agreement:
The extinction of co-ownership can be achieved by mutual agreement, opting for one of the prescribed methods, either by one of the co-owners acquiring the undivided shares of the others or by the one who wishes to leave the co-ownership receiving compensation.
It is also possible to sell the property and have the co-owners share the money according to their shares.
Co-owners who opt for an agreement must carry out an appraisal of the property they wish to divide and establish preliminary agreements on how the appraisal will be carried out, as well as a commitment to accept said appraisal.
The deed of extinction of co-ownership can be granted before a Notary, paying the corresponding tax.
In the case of a property that is the family home of a divorcing or separating couple, the extinction of co-ownership must be included in the regulatory agreement.
If said agreement is approved by the judge, it becomes the deed of extinction of co-ownership along with the sentence. By doing it this way, unlike a divorce before a notary, the Tax on Documented Legal Acts is also not paid.
Extinction of Co-ownership Through the Courts:
If the co-owners do not reach an agreement, either on the price or on the method of division of the asset, the only way is to resort to the courts by filing a lawsuit for the division of the common thing.
The action for the division of the common thing consists of requesting the judge to declare the extinction of co-ownership, either by adjudicating to each of the owners their corresponding share if the asset is divisible, or by proceeding to its sale and subsequent distribution of the resulting money if it is indivisible.
In reality, there is no specific legal procedure for carrying out the sentence for the division of the common thing, but the idea is to achieve it as agilely as possible without violating the rights of any of the parties.
Therefore, one of the most common procedures is that contemplated in article 670 of the Law of Civil Procedure, which establishes the auction or sale by public auction of the asset.
Required Documentation:
Proof of ownership of the assets subject to the dissolution of the community.
ID of the co-owners. If a company is involved, powers of attorney or appointment of current administrators.
In the case of urban properties, a certificate from the community of owners indicating that they are up to date with community expenses.
Cadastral reference of the assets (last receipt of the Property Tax).
Whether the assets are rented or not.
Value assigned to each asset.
Method by which the assets are awarded to the co-owners.
Method by which the costs of the operation are paid: Notary fees, municipal capital gains tax (if it concerns urban properties).