THE CONDOMINIUM DISSOLUTION IN SPAIN.
Dear clients and readers,
Have you bought a property in Spain with someone else? Do you wish to terminate the situation of joint ownership?
In the affirmative case, we are sure you will find this article of your interest.
As specialized property lawyers, we frequently come across these kinds of consultations.
Due to the important legal implications of this particular matter, we have considered it appropriate to write this article, in 2 separate parts. In fact, we received a very challenging consultation regarding a person who bought a country house without realizing that the plot of land where the dwelling was situated was not segregated from the bigger “mother” plot, which actually belonged to 2 additional people unrelated to the vendor. As a result, our client was in fact sharing 1/3 ownership of everything, whilst the 2 other people also shared 2/3 ownership of her own house. Consequently, our client asked our firm about the best way to terminate that situation of co-ownership with the rest of the owners.
In other words, the problem was how to remove the mention in the client’s deeds about the 1/3 ownership and how to replace it with a 100% ownership percentage.
After studying very carefully the case with my associate, we both reached the conclusion that the only legal way would be by signing a CONDOMINIUM DISSOLUTION or C.D. (“Extinción de Condominio” in Spanish), which is the prescribed procedure to acquire title to a property when one of the co-owners wants to buy from the other.
USEFUL TERMINOLOGY: WHAT DOES “CONDOMINIUM DISSOLUTION (C.D) ” MEAN?
In a nutshell, this procedure allows joint owners to re-arrange their share on a property in a tax-efficient manner as it enables the outgoing joint owner to transfer his share to an existing co-owner legally waiving the extreme Property Transfer Tax and paying instead of a 1.5% Stamp Duty. There are two possible prescribed legal ways to do it:
A) “FRIENDLY NON-CONTENTIOUS OPTION”: C.D SIGNED AT THE NOTARY OFFICE
B) “NON-FRIENDLY OPTION OR CONTENTIOUS” C.D THROUGH THE COURT
We will focus in PART I on the “friendly” option and in PART II, we will explain the “non-friendly&court” option.
“FRIENDLY NON-CONTENTIOUS OPTION”: C.D SIGNED AT THE NOTARY OFFICE
General Requirements and associated taxes & expenses
- Both buyer and seller must be pre-existing owners of a property (i.e. a married couple who own a property under joint names).
- One of them wishes to terminate the situation and sell its share to the other joint owner.
- If there are more than two parties (our client’s case), ALL PROPERTY OWNERS MUST BE DULY NOTIFIED AND MUST AGREE TO SIGN THE C.D AT THE NOTARY.
- Likewise, both buyer and seller are subject to pay taxes on transferring ownership of the asset:
a) For the Buyer:
1. Purchase price or payment to the other owners
2. 1.5% Stamp Duty on the total assigned taxable value of the property
3. Notary fees and Land Registry fees
b) For the Sellers (the rest of the joint owners):
- Capital Gains Tax on the outgoing share.
- If the seller is a non-resident, a 3% retention may be practised on the outgoing share.
HOW TO CONTACT US FOR FURTHER SPECIFIC ADVICE?
We hope this information is useful. Remember that this is not intended to be specific legal advice, just a general overview. As independent lawyers, we can help you both by assisting you with all property issues as well as carrying out a comprehensive background legal search on a property, if required.
Should you be interested in receiving more specific information, (either about this particular subject or any other), you can contact our firm in several ways:
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Finally, thank you very much for your attention, and in case you might have any questions or doubts at all, again please do not hesitate to contact us. We will be glad to help you!
We look forward to helping you and the benefit of our “know-how”.
Mr Oscar Ricor
“NON-PRACTISING ENGLISH SOLICITOR IN ENGLAND AND WALES”, under the “Solicitors Regulation Authority” (SRA) SRA number 519196 and practising Spanish Solicitor