How to get out of undivided ownership?
The absence of physical separation of the real estate you own is the particularity of the property right called undivided ownership. Each person has an undivided share expressed as a percentage of the entire property. This is a common situation in Canada, but it becomes problematic when the relationship between the co-owners becomes so complicated that a resident leaves. In this case, how can he or she get out of this regime?
What are the origins of undivided ownership?
Several reasons lead to this situation in co-ownership: a contract of union, a judgment or a succession.
Contractual undivided ownership
Contractualundivided ownership results from the commitment of two or more persons to become undivided co-owners of a property. These people may be common-law spouses, friends, colleagues or acquaintances.
In most cases, a couple who have signed a marriage contract acquire a property together. Their respective names appear on the deed of sale as owners. This is how they become co-owners in undivided ownership and are referred to as undivided co-owners.
The relational basis of the undivided co-owners is the reason for their decision to purchase a common property. Each co-owner assumes the expenses: the debts and the taxation of the undivided property, according to their share.
A disagreement or a change in the situation of an undivided co-owner (assignment, travel abroad…) is enough to disrupt the system and put an end to the undivided ownership.
Undivided property by succession
An undivided ownership is the consequence of a succession. After his death, the owner of a property bequeaths his property to several heirs (his descendants) in his will. These heirs become co-owners by undivided ownership and each gets a share and a right on the property according to the will.
The undivided ownership of the estate ends after the liquidation of the estate. However, the liquidation can take a long time depending on the difficulties and the context. The problem is quickly resolved if the heirs agree on the steps to be taken in order to achieve a fair liquidation. However, the situation of indivision persists if the heirs have identical rights to the property.
Indivision can also arise from a court judgment, but this situation is rare.
What are the consequences of undivided ownership on the property?
If adequate measures are not taken at the outset of the undivided ownership regime, the division of rights exposes the undivided owners to several risks.
The sale of a share to a third party
Since the undivided co-owners are the owners of the building, the Civil Code grants them the right to transfer their share to a third party by sale. The transaction requires the presence of a notary. Therefore, an undivided share of the real estate can be sold overnight to a stranger.
However, this privilege hides some conditions. It is limited to the seller’s share. The undivided co-owner must also respect the rights of the other co-owners, which could jeopardize the sale project. The co-owners have priority over the potential buyers and may provide for a right of pre-emption, according to article 815-14 of the Civil Code.
In addition, the prior signature of an indivision agreement (a contract signed by the undivided co-owners at the beginning of the indivision prescribing the terms and conditions of the regime) may impose restrictions on the sale of a share.
Furthermore, the determination of the market value of each share requires the intervention of a chartered appraiser, unless the undivided agreement provides for a specific division.
The provocation of partition
Article 1030 C.C.Q. emphasizes that: ” No one is bound to remain in indivision “. The co-owner may, at any time, force the partition of the shares, in the absence of a measure in the undivided agreement.
This public provision serves the interests of undivided co-owners who want to escape from the undivided situation without valid justification. It concerns all types of undivided ownership: contractual, inheritance or by judgment.
After provocation, the partition is carried out in kind. In other words, the undivided property is divided in kind. Each undivided co-owner will receive a share of the property equivalent to the value of his share. If the division in kind is impossible, a balance is paid to obtain the equality of the values of the property.
Equal shares are mandatory
The law requires equal shares of the undivided co-owners in the property. This legal provision means that in the event of the sale of the property, the co-owners will be entitled to half of the proceeds of the sale. This equal distribution is made regardless of the down payment. However, it may disadvantage the co-owner who invested a considerable amount of money in the purchase of the property.
Fortunately, this provision can be avoided by an undivided co-ownership agreement. The agreement must provide for a specific distribution of the undivided co-owners’ shares and specify the precise contribution of the co-owners to the purchase of the property.
What are the solutions for getting out of indivision?
The undivided co-owner wishing to leave the indivision must advise the other members and resort to one of these solutions.
Amicable sale
The best approach is to sell by mutual agreement. This measure is used if the members have found common ground concerning the terms and principles of the division of the undivided property. They then go to a notary to ask for the drafting of a liquidating act. The notary will then publish the sale at the land registry office. He can also act as an intermediary and carry out notarial auctions to determine the value of the property.
Furthermore, the legal situation must be notified to the buyer of the share, according to article 815-14 of the Civil Code.
The forced sale
The forced sale can be considered after the consent of the undivided co-owners who own 2/3 of the undivided rights. The procedure starts with a notary. The notary will notify the rest of the undivided co-owners (especially those who oppose the sale) of the applicant’s intention to sell. The notification takes place under the presence of a bailiff.
If the recalcitrant undivided co-owners give their consent, the sale goes ahead without a hitch. If they do not react or respond negatively, the notary initiates a procès-verbal de difficulté. He refers the matter to the judicial court, which may order the forced sale of the property. However, the judge will order the sale if it does not infringe on the rights of the recalcitrant undivided co-owners.
Redemption of shares
The redemption of shares comes into play if only one undivided co-owner wishes to put an end to the indivision. The other undivided co-owners can pay the plaintiff the value of his or her share of the undivided property, in accordance with article 1033 C.C.Q. This solution allows the other undivided co-owners to maintain the indivision regime.
However, if the undivided co-owners have difficulty agreeing on the value of the share to be taken from the plaintiff, they should request a real estate appraisal.
Sharing
Sharing occurs in an undivided estate. There is amicable sharing, judicial sharing and sharing by the guardianship judge. The amicable sharing starts after the consent of the undivided co-owners. It takes place after an evaluation of the undivided property leading to an equitable distribution.
Judicial partition follows the filing of a writ of summons by one of the undivided co-owners at the clerk’s office of the Tribunal de Grande Instance of the place of the estate. The judge will appoint a notary to proceed with the division. He will order an auction sale of the goods in case of opposition from an undivided co-owner.
The partition by the guardianship judge is necessary if an heir is unable to express his will in an application for amicable partition of the property.
Judicial auction
A licitation consists of selling an undivided property by auction if it cannot be divided physically. The operation allows the recovery of a sum that will be divided between the undivided co-owners, putting an end to the indivision. It is mainly used in case of lack ofagreement between co-owners of an estate or in case of separation of a couple in joint ownership.
The auction is carried out amicably between the undivided co-owners or following a legal procedure.
Which steps to follow to get out of an undivided property ?
Leaving an undivided property can be summarized in 2 steps: the decision to leave and the fulfilment of the conditions.
Step 1 : Decide to leave the indivision
The undivided co-owner who wishes to leave the regime exercises his right at any time. He declares his decision and chooses the appropriate solution for the situation.
However, there are legal exceptions to the right to leave. In the case of an undivided estate, if the heirs have drawn up an undivided agreement, they may not request the division of the estate throughout the term of the agreement (5 years).
It is also impossible to leave the indivision if an heir has requested a stay of partition in court with a 2-year delay.
Step 2 : Fulfill the conditions of exit
The undivided co-owners leave the undivided property after having chosen the solution adapted to their situation (amicable or judicial way).
The services of a notary are essential for the sharing or distribution of the value of an undivided property. He will act on the division according to the procedures chosen by the undivided co-owners.
Conclusion
The amicable solution remains the best option to get out of undivided ownership. In the event of a persistent quarrel, the presence of a real estate lawyer will be indispensable. The expert will accompany you in the search for an amicable solution adapted to your situation. He will guide you in the steps related to the exit of the indivision. In the event of a battle in court, he will act as a mediator and will try to find a favorable outcome to the undivided property.
