Dissolution of Joint Property Ownership in Spain

Do you own your property jointly with your spouse, friend, partner or anyone and wish to terminate this situation? Read below and find out how can you save thousands of Euros by avoiding the higher taxes of selling and buying the share of the outgoing joint owner.

-----

A Deed of Dissolution of Joint Ownership allows joint owners to re-arrange their share on any property in a tax-efficient manner as it enables the outgoing joint owner to transfer his share to the existing joint owner legally avoiding the extreme 7% Transfer Tax plus the complications of having to allow the buyer to make a retention on the value of the share transferred for Capital Gains Tax which is only recoverable many months after the deeds are signed.

The only tax involved under this arrangement is of 1% of the declared value of the property, plus the ordinary notary, land registry and legal fees.

This legal procedure is most suitable in a number of cases involving joint property ownership:

• The most common scenario occurs when couples owning property in joint names whose relationship has come to an end decide that one of them will assume full ownership.
  
• In many case beneficiaries of an inheritance who have effectively inherited a share in a property may decide to transfer it to another joint-owner.
  
• Also, friends who are joint-owners of property may simply opt out for unspecified reasons.
  
• If you are fiscal resident in Spain you can deduct the legal costs of this procedure on filing your Spanish Income tax as long as the dwelling is regarded legally as your primary residence (“residencia habitual”).
  

What happens with the Mortgage?

If the property was subject to a mortgage which is intended to continue after the transfer of the share it will be necessary to obtain the permission of the lender to discharge the outgoing joint owner, who obviously will not be willing to continue guaranteeing the loan. Alternatively, some borrowers may use this opportunity to arrange a new mortgage with a different lender often at a substantially lower cost. Your lawyer should also be able to help you with this.

One of the co-owners refusing to sell?

There are times in which one of the joint-owners may decide he needs to sell the property and the others refuse to buy it from him, either because they don’t have the money to buy his share or simply because they refuse to sell the property all together. In these cases a dissolution of joint-ownership may be enforced by a law court (arts 406 and 1062 Civil Code). The drawback is that the asset will be sold in a public auction which will fetch a price far below the market value. This is only advisable as a last resort where there is a serious disagreement, as all joint owners stand to lose.

Arrangement

This process can be arranged in a few days without any need for you to come over to Spain by means of granting your lawyer a specific power of attorney. Your lawyer should be able to undertake the necessary preparations, sign the deed and register the new ownership with the Land Registry.

----

Should you be interested in this service, or if you need more information, please visit the Dissolution of Joint Property Ownership service page at the Lawbird site.