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What are the advantages and disadvantages of co-ownership?

Do you own an item jointly with someone else? What does co-ownership entail, what rights and obligations do you have in this relationship, what types of co-ownership are known and how can the common property be managed? That’s what we look at in this article.

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8 minutes of reading

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The concept of co-ownership

As the name implies, co-ownership is the ownership of more than one person of one thing. Co-owners can be natural or legal persons and even the state. Often the co-owners are related, but they can also be business partners, friends, or even complete strangers. It should be stressed that if one of the co-owners is a legal entity, for example a limited liability company or a cooperative, this will not involve (co-)ownership by its members or partners, but indeed only by the legal entity itself.

Have you inherited a share in a house or cottage?

Do you own part of the land together with other siblings and are you thinking about settling the co-ownership? We will prepare a quick and efficient co-ownership settlement for you, so that it is as advantageous as possible for everyone involved, and especially for you.

Establishment of co-ownership

Probably the most common way of creating co-ownership is by inheritance. As an example, think of a parent who dies leaving behind his or her house as the sole asset. The heirs are his three children. They are then very likely to become co-owners of the house (depending, of course, on the existence of a will and other circumstances affecting the inheritance). Co-ownership by inheritance also occurs if the testator owned a share of the property subject to the inheritance.

Other ways in which co-ownership may arise are, for example, by virtue of a contract of sale or other contract, by a court decision or by inheritance.

When it comes to co-ownership of immovable property, we must not forget that ownership of immovable property does not arise from the effectiveness of a contract or other legal act, but only at the moment of registration of the ownership right in the Land Register.

Tip: We will help you with the drafting of the application for entry into the Land Registry so that everything is in order the first time and you do not miss important deadlines or lose money.

Types of co-ownership

Czech law distinguishes between co-ownership:

  • shareless – where each of the co-owners is the owner of the whole thing. In our law, it exists in the form of community of property, which can only arise during the existence of a marriage.
  • shared – the co-owner is assigned a share of ownership. However, this does not mean a specific part of the thing in question.

Legal theory further distinguishes co-ownership:

  • ideal – in which the co-owner does not own any specific part. The principle of co-ownership under Czech law is the idea that the co-owners own the thing together, thus they have rights to the whole thing and each of them has an ideal share in the thing.
  • real – each co-owner has ownership rights to a specific part of the thing. In Czech law, however, this concept of ownership does not exist.

Tip: What are the disadvantages of co-ownership and how to proceed if you are considering splitting the co-ownership? We have addressed this in our separate article.

Rights and obligations arising from co-ownership

Each co-owner has, in particular, the right to dispose of the subject of co-ownership freely. He may therefore hold, use and dispose of the common property. He may take the fruits and benefits thereof. If he has the consent of the other co-owners, he may even destroy the thing. However, his rights are limited by the rights of the other co-owners.

All co-owners are jointly and severally entitled and obliged to third parties in respect of a legal act concerning the common property as a whole.

Each of the co-owners shall have the right to participate in the management of the common property or to entrust this activity to an administrator. If they decide on the matter, there should be a unanimous majority for a normal decision. In the case of a significant change (e.g. a change in the purpose of the thing or a change in the type of floor to be added to the house), the consent of two thirds of the co-owners is necessary. And in the case of a substantial restriction on the use of the thing (creation of a lien), the consent of all co-owners is needed. If the relevant majority is not reached, an application can be made to the court for it to rule on the matter.

In the case of legal transactions, the so-called principle of solidarity, the equivalent of which was also professed by the Three Musketeers, applies here. This is the famous “one for all, all for one“. In practice, therefore, the person who did not give his consent is bound by the acts voted on by the others. Where one of the co-owners is called upon to perform a particular act, it is up to him to provide it, and he can reclaim it from the others. They shall again pay the debt according to the size of their shares, unless they have concluded another agreement.

Example: an apartment house is owned by siblings Helena with half share, Václav with a quarter share and Marta also with a quarter share. There are six residential units in the house, which are rented out. The total profit from the rent is CZK 90 000 per month. Helena therefore receives CZK 45 000 per month and Václav and Marta CZK 22 500 each. It follows that the share of the fruits and benefits is divided between the co-owners according to the proportions of the co-ownership shares.

The façade of the house will cost CZK 500 000. Helena plans to contribute CZK 250 000 and Marta and Václav CZK 125 000 each. When the construction company asks Mr Václav to pay the invoice, he will pay it and can then demand payment of the respective amounts from his sisters.

Protection of co-ownership

The co-owners may use the same means of protection as the sole owner against third parties who wish to interfere in any way with their rights.

If the right of ownership is interfered with in any way (for example, in the case of a property by excessive noise or other immissions), it is sufficient for one of the co-owners to bring any action. This is even if the other co-owners do not feel that their right has been interfered with.

Co-ownership share

As mentioned above, we cannot imagine that a co-ownership share means, for example, that each of the co-owners of a house has a floor which they own. The Czech legislation is based on ideal co-ownership, where the individual co-owners are the owners of ideal shares in the whole thing. So what do individual shares mean in practice if, in a way, everyone owns everything? Shares determine the degree of participation in the rights and obligations arising from co-ownership, not the specific part of the thing.

Example: a garden is owned jointly by two brothers, each with a half share. In practice, they may have agreed that Waldemar would manage the southern part, where he grows tomatoes, pumpkins and herbs. Karel is then in charge of the northern part, where he has planted fruit trees. However, it is still the law that each of the brothers has (co-)ownership of the entire garden. Therefore, Waldemar cannot decide to sell “his” southern part to his neighbour. He can either sell his ideal share, or he can dissolve and settle the co-ownership and effectively divide the garden into a southern and a northern part. However, the court decides if the brothers do not reach an agreement and so there is a risk of a division into a western and an eastern part.

Theco-owners may dispose of the shares as they wish. However, they may not cause damage to the rights of the other co-owners. The shares shall be deemed to be equal unless the co-owners have agreed otherwise.

Right of pre-emption

Under the former legislation, the right of pre-emption of the other co-owners was established for the sale of a share in the property. Nowadays, this right exists only in the case where the co-ownership has been created by inheritance or by some other event in which the co-owners could not influence their rights and obligations from the outset. It is essential to limit this right to a period of six months from the date of the creation of the co-ownership. After that period, it shall cease to exist.

If, within that period, one of the co-owners wishes to transfer his share to another person, he must first offer it for purchase to the others. The only exception is if the co-owner offers the share to another co-owner or to a close relative (spouse, sibling, child, parent, grandparent or grandchild).

Are you solving a similar problem?

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Division of joint ownership of real estate

Have you inherited a share in a house or cottage? Do you own a piece of land together with the rest of the family? Or have you bought a share of a property at auction and are thinking about settling co-ownership? We will prepare them for you so that everything goes to the satisfaction of all parties involved and you in particular.

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Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

Education
  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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