How to divide the co-ownership?

Quick summary

• Joint ownership means a share in the whole thing, not a specific part of it.
• The settlement can be made by agreement or in court.
• There are 3 main ways of division.
• The most common problems arise when the co-owners disagree.
• The right procedure often saves time and money.

There are three basic ways of dividing the co-ownership: real division of the property, paying the co-owner or selling the property and dividing the proceeds. If the co-owners agree, the process is quick and efficient. If not, the court decides, which will usually prefer a real division if possible. The key is to choose the correct procedure according to the type of property and the relationship between the co-owners.

Need help with the division of joint ownership? We will prepare a solution proposal and complete legal documentation.

Co-ownership is when… everyone (co-)owns the whole thing

Although the Czech model of co-ownership may be harder to grasp for some, it is the case that each co-owner has a precisely defined share, but not a specific part of the property. Thus, if you inherit “half of a cottage” (or a half share in it), do not ask whether you own the attic or the ground floor. This is because you are part owner of the whole cottage, but you only have half the voting rights if decisions are made about it.

When can co-ownership be disadvantageous?

• Co-management – Co-ownership can be fine in some ways, namely when you and your sibling repair the cottage together and pay only half the cost. But there may also be disagreements about who will use the cottage and how, or one of you may want to renovate the cottage in some way, sell it, etc., while the other is happy with the status quo.
• Bank guarantee – in general, owning a property is often considered almost like winning the lottery. Often this may not be the case. Moreover, if you are a mere co-owner, you may have trouble getting a mortgage. In theory, you can guarantee the co-ownership share, but in practice banks often require the consent of the other co-owners or a mortgage on the entire property
• Foreclosure on a co-owner – if your sibling (or another co-owner of the property) has a failed business and has been foreclosed on, you should be careful to protect your belongings in the cottage. As a rule, the bailiff will not ask too many questions and will seize anything of value that he finds in the house. You can continue to claim your belongings, but this is not always successful. In any case, it is always worth keeping receipts, orders and other documents away from your belongings.

If you’ve already got co-ownership just enough

No one should be forced to own anything and the same principle applies to co-ownership. If you and the other co-owners are getting on with each other, you’re tired of managing the common property or maybe you just need money, you have a few options to deal with the situation.

It is often at this stage that it makes sense to contact a solicitor. In the case of a community property settlement, it is not just a question of how to divide the property, but also which option will be the most advantageous legally and financially. As part of our community property division service, we will help you design a course of action, prepare an agreement and, if necessary, represent you in court proceedings.

Options may include:

• Real division of the property.
• Transferring the share to one co-owner and paying the other(s) an adequate amount.
• Selling the property and distributing the proceeds of the sale according to the shares.

Real division of the property

If legally and factually possible, at the request of one co-owner, the object of co-ownership may be divided in such a way that the person concerned is entitled to a part of the object corresponding to the size of his share and the rest of the co-owners remain in the relationship.

This can be imagined, for example, if three siblings own together a field which is to be divided. One of the siblings keeps a specific part (one third of the land) and the other two continue to own half of the remaining two thirds of the original land. However, when dividing agricultural land, it is always necessary to take into account whether the other land will be capable of being farmed after the division.

However, this option is far from always possible. It is not conceivable, for example, in the case of assets which, after division, would no longer serve their original purpose or would be significantly reduced in value. It is therefore not just a question of whether the thing can in fact be divided. As an example, consider an antique piece of jewellery in the form of gold earrings with diamonds. If two sisters inherit it, they can certainly keep one earring each; this is physically possible, but the value of the jewellery is reduced to less than half of its original price and the jewellery loses its purpose. In many cases, even physical division is not possible, or only at the cost of considerable (structural) modifications. This applies to the vast majority of houses.

Conversely, there may be a situation where physical division of the item is generally possible, but not exactly according to the given proportions. This can be imagined, for example, in the case of a plot of land that is defined by various natural boundaries. It may make sense here to separate, for example, not one quarter but one fifth of the land. The shortfall in the share can then be made up in money. In these cases, various easements etc. can also be used.

Share transfer and co-owner redemption

This option has further modifications, e.g. in case of a higher number of co-owners – e.g. paying out only one co-owner and defining new shares among the others, etc.).

Sale of the property and distribution of the proceeds of the sale according to the shares

If the parties involved agree to this option, it usually brings the least conflict as to whether the distribution was fair.

Formally, there may be an agreement between the co-owners which regulates the method of settlement. For example, it will agree that the property will be physically divided and each of the former co-owners will be the new full owner of part of the property, or one of the other options listed above.

The agreement on the division of movable property may be oral. However, a written form can always be recommended. It is then necessary and prescribed by law for immovable property and in the case where the subject of co-ownership is a plant. If the co-ownership is dissolved only orally, the former co-owners may request that a confirmation of the method of settlement be sent.

If the co-owners fail to reach an agreement, the court will decide on the dissolution and settlement on the proposal of one of them. In such a case, court proceedings are initiated at the request of one of the co-owners. The court decides not only on the division of the co-ownership itself, but also on the method of property settlement. If possible, it should give priority to the division of the property.

From law practice

The situation can often become complicated if a stranger enters into a previously peaceful distribution of rights (for example, between relatives or long-standing business partners). In our office, we dealt with a complex situation in this way in a family home occupied by an extended family. There were four smaller apartments in the house, but they were not legally defined as residential units. The individual flats were therefore not assigned specific owners, as this had not yet been addressed with good family relations. At one point, however, a third share in the house was purchased by a stranger and it was necessary to clarify the relationship legally. The whole matter had to be resolved in court when no agreement could be reached, and we successfully represented the remaining family members, who regained the house and paid off the one-third share.

Summary

The division of co-ownership is particularly common in inherited properties. An agreement is the simplest, saving time and costs. However, if an agreement is not possible, a court solution comes into play. Each case is individual – it depends on the type of property, the relationship between the co-owners and the financial possibilities. The most common mistakes occur when the legal set-up is underestimated or the value of the share is wrongly estimated. Therefore: the sooner you start dealing with the situation systematically, the better your chances of a quick and favourable settlement.