Undivided co-ownership is common in estate planning and asset management. It typically arises in inheritances, jointly purchased homes, or shared investments among partners or friends. In Catalonia, this structure is regulated under Book V of the Catalan Civil Code, with articles 552-9 to 552-12 setting out the rules and procedures for dissolving co-ownership through the partition of the jointly owned asset.

The underlying principle is straightforward: no one can be compelled to remain in co-ownership. Any co-owner may request a partition at any time, without providing a specific reason, unless the parties have agreed to keep the property undivided. This agreement must be unanimous and may only last for up to ten years, although it can be renewed with the consent of all co-owners.

Partition procedure

If the parties cannot reach an agreement, any co-owner may petition the court for a judicial partition under article 552-11 CCC. The judge may:

  • Order a physical division of the asset, including applying a condominium or horizontal property structure —e.g., converting a building into separate units for each co-owner.
  • Allocate usufruct rights to some co-owners and full ownership (bare title) to others.
  • Award the property to the co-owner holding at least 80% of the shares, if they compensate the others financially.
  • If the asset cannot be divided or lose value if split, award it to the co-owner with the largest share; in the event of a tie, the judge may decide by drawing lots.
  • If no co-owner wishes to keep the property, order its sale and distribute the proceeds. If there is disagreement, the sale may be carried out through a public auction.
  • Case law confirms that the judge is not bound by the solution proposed by the petitioner.

Effects

  • Partition dissolves co-ownership and creates individual ownership rights; each party becomes the sole owner of the portion awarded to them.
  • Third-party rights remain unchanged, for example, any existing mortgage continues to apply, and the lender may pursue any former co-owner.
  • The lender’s consent is required to transfer or redistribute liability for any loans if new property units are created.
  • Existing rights of use held by third parties—such as tenants or minors under judicial protection—also remain unaffected.

Tax considerations

  • Stamp Duty (ITPAJD): Applies to indivisible assets where compensation is paid (1.5% in Catalonia).
  • Gift Tax: Applies if no compensation is exchanged.
  • Municipal capital gains tax: May apply if the allocation is high enough to be treated as a transfer.
  • Personal Income Tax: Triggered if the transfer results in a capital gain for the outgoing party.

In cases of divorce or termination of a stable couple, the transaction is exempt from both Stamp Duty and municipal capital gains tax.

Practical considerations

  • Prioritize a negotiated settlement to minimize costs and avoid loss of value.
  • Obtain an independent valuation to ensure objectivity.
  • Check planning and zoning rules before proceeding with physical division.
  • Assess the tax impact to determine the most efficient approach.
  • Avoid a judicial auction whenever possible, as it typically results in a lower sale price.

At addwill, our civil law experts are available to advise you further or address any specific questions you may have. Feel free to reach out to us here.