In today’s world, the issue of property remains one of the most important in everyone’s life.
Whether it is an apartment, a house or a land plot, the form of property ownership can significantly affect your rights and obligations. Many people do not pay attention to the way their property rights are registered – jointly or partially, which can lead to numerous conflicts and misunderstandings in the future.
The lawyers of Repeshko & Partners Law Firm comment on the key differences between these two forms of ownership and their main legal risks, as well as provide practical advice on how to best protect your interests.
As our many years of practice show, there is nothing better than being the owner of a separate dwelling. Advice from a lawyer for all times – do not buy a house or apartment in which there is a co-owner! Even if the price is very attractive! It will later turn into big problems with real estate.
Joint ownership is property owned by two or more persons (co-owners), belonging to them on the right of joint ownership (common property). It is divided into:
– common joint ownership – ownership of two or more persons without determining the shares of each of them in the ownership right (for example, a privatised apartment);
– joint fractional ownership – ownership of two or more persons with the determination of shares (for example, property received by heirs in the order of inheritance).
How to determine what type of joint ownership exists in relation to a particular property?
To do this, you need to look at the documents of title: a sale and purchase agreement, a gift, a certificate of ownership of a dwelling, a certificate of inheritance, etc. It should be noted that such forms of ownership can be in respect of residential real estate – an apartment, a house, or a land plot.
There may be joint joint ownership:
- Clearly defined – the certificate of ownership of privatised housing lists all citizens who have ownership in the property.
- Unclear – property acquired by spouses during marriage may be registered in the name of one of the spouses, but legally it belongs to both.
Part 1 of Article 357 of the Civil Code stipulates that shares in the right of joint fractional ownership are considered equal, unless otherwise provided by agreement of the co-owners or by law. Thus, the equality of shares in the right of common shared ownership is a general rule. An exception to this rule must be specifically established either by agreement or by law.
As for joint fractional ownership, it is distinguished by the presence in the title documents of a clearly defined share of one or another co-owner, which is indicated in numerical terms: ½, 1/3; 19/200, 45/100 parts. These figures express how many rights in a given property the person in question has and what share in the joint property he or she can actually claim. However, it should be remembered that co-owners of fractional ownership have a so-called ‘perfect share’ in the property right. That is, this share is not tied to specific premises in residential real estate.
Here we see the following possibility: a co-owner has the right to allocate a share in kind from the property held in joint ownership. If the allocation in kind of a share from joint property is not permitted by law or is impossible ( Article 183 (2) of the Civil Code of Ukraine), a co-owner who wishes to allocate a share has the right to receive from other co-owners monetary or other material compensation for the value of his or her share at market prices. Compensation to a co-owner may be granted only with his or her consent. When a share is allocated from the property held in common joint ownership, an agreement on the allocation in kind of a share from immovable joint property shall be concluded in writing and subject to notarisation. If the co-owners do not reach an agreement on the allocation of a share from the property, the case is resolved by the court at the suit of a co-owner.
It should be noted that, as a rule, the allocation of a share in kind from property takes place in court and concerns either an apartment (which is less common) or a residential building. In the latter case, simultaneously with the allocation of a share in a house, the issue of allocation of a land plot (if the land plot is owned by co-owners) or the issue of determining the procedure for using the land plot (if the co-owners do not have title documents to the land) is resolved.
This is a rather complicated category of court cases, as it largely depends on the conclusion of a forensic construction expert on the possibility of allocating a co-owner’s share of the property with maximum isolation. In this case, unauthorised extensions and alterations are not taken into account by the expert.
If it is possible to register joint ownership, which is better – joint or partial?
Both options have their pros and cons.
With the right of joint joint ownership:
Co-owners are unable to dispose of their shares until they determine them (transfer them to the status of joint fractional ownership). This is good as there are risks that a co-owner may pledge his share, give it as a gift (when the co-owner is unreliable and abuses drugs or alcohol) and in general it is a kind of control over the property by other co-owners, that transfer to fractional ownership cannot take place without the knowledge of other co-owners (this is a plus).
Real estate tax – the taxpayer is one of these co-owners. This is the case when the total amount of the area owned by a person is subject to this tax. In the case of joint ownership, the tax authorities decide who should be registered as a taxpayer for all of them, and therefore, if a person owns 1/3 of a 20 sq m apartment and is a co-owner of a privatised apartment without determining the shares of 60 sq m, the tax authorities will tax this owner among others (this is a minus).
The co-owner’s heirs will face the need to determine their share in the joint property, which often requires a court hearing (this is a disadvantage).
Shared responsibility for the maintenance and repair of real estate, as each co-owner is obliged to participate in financing and carrying out the necessary maintenance work (this is both a plus and a minus) On the one hand, the financial burden is distributed equally among all, but on the other hand, as they say, ‘what goes around comes around’.
If one of the co-owners actually lives in such real estate, he or she can legally use the entire property (the apartment has three co-owners, but only one lives there) (this is a plus).
In the case of joint partial ownership:
Co-owners have the right to dispose of their shares, the only condition is that if one co-owner sells such a share, he must offer in writing to purchase his share for a certain amount of money to the other co-owners through a notary. If the other co-owners do not agree to purchase this share, then the co-owner may sell it to a third party, but for the same amount as the one offered to the co-owners. If the amount of the sale changes, the procedure must be repeated (this is both a plus and a minus).
Real estate tax – each of the co-owners is liable for the tax for their respective share if they are subject to such tax (this is a plus).
If it is necessary to allocate a share of the property in kind, the procedure is a little easier, as the share to be allocated from the property is already determined (this is a plus).
A co-owner can dispose of his/her share in a certain way, which may go unnoticed by other co-owners (mortgage, gift, etc.) (this is a disadvantage).
Joint responsibility for the maintenance and repair of the property in accordance with the defined shares (this is rather a plus).
We started by pointing out the negative aspects of co-ownership of real estate.
What is wrong with joint ownership in general?
In cases where certain documents (e.g. privatisation of the land plot under the house, project documentation, etc.) require the consent or signature of all co-owners, this may not be possible for a number of reasons: the co-owner has died and the heirs are unknown (notarial secrecy), the co-owner refuses to give consent on principle, etc.
Preparation of a technical passport for real estate. This applies to real estate where the co-owners, without actual allocation in kind according to the existing use procedure, have made separate entrances to the building and do not allow the technician to enter their part of the building to conduct an inventory of the property. Without a technical passport, it is impossible to take a number of important legal actions, as well as to allocate one’s share in kind or determine one’s share in the property in general, which makes it problematic for any of the co-owners to use the property.
In order to receive compensation for real estate damaged during the war, it is necessary to obtain the consent of the co-owners of an apartment or house to receive compensation by the applicant.
The share of a co-owner who, with the consent of all other co-owners and in compliance with the established procedure for the use of common property, has improved it at his own expense, provided that the improvements made by him cannot be separated from the property, may be increased accordingly. In practice, this means that during the life of the co-owners of the property, it is necessary to periodically recalculate the shares in connection with additions and alterations, which is a rather complicated and expensive procedure.
There are many cases when a co-owner dies and the heirs are unknown, or even absent, or it is not known where the co-owner personally went. In this case, such a share in residential real estate becomes virtually ownerless, deteriorates and becomes a problem if it is a residential building with several entrances, because the internal adjacent walls between the premises of the co-owners are not designed to allow such a wall to suddenly become the outer wall of the building. And repairing the roof in such cases is not a joy.
Is it possible to deprive a co-owner of his share of property, and if so, how?
Pursuant to Article 365(1) of the Civil Code of Ukraine, a person’s right to a share in common property may be terminated by a court decision based on a claim by other co-owners if
- the share is insignificant and cannot be allocated in kind;
- the property is indivisible;
- joint ownership and use of the property is impossible;
- such termination will not cause significant harm to the interests of the co-owner and his family members.
In practice, the court is guided by two main points:
- The share must be insignificant. The law does not define what exactly is considered an ‘insignificant share’, but it is quite clear that an owner who owns even ¼ of the house owns a rather significant share. Here you need to look not only at the size of the share, but also at the size of the real estate itself, because 1/10th of a share in a 450 sq m residential building will not be considered insignificant, because it is actually equal to a one-room apartment. A 1/10th of a share in a 50 sq.m. house is another matter. Usually, a share equal to 5 sq.m. is considered insignificant, but once again, it is important to assess it depending on the specific situation.
- The court will never deprive a co-owner of a share of property if it is the only residential property owned by him/her, regardless of whether the share is insignificant or not.
So, joint ownership is a headache. We advise: if there is any possibility of getting rid of joint property, you should definitely do so in order not to spoil your life, neither for yourself nor for your heirs – children.
