Where a property is owned by more than one person, the co-ownership relationship is most often wound up by selling the property and distributing the proceeds. The legislation, however, provides a more protective route where the property carries a structure suitable for the creation of independent units: the property is not disposed of, it is converted into condominium ownership, and the independent units so created are allocated to the co-owners individually. This is a distinctive form of division in kind.
Not every property is suited to this method. For the judge to give judgment to that effect, the structure must be technically capable of being divided into independent units, there must be no breach of the zoning regime, and it must be possible to allocate a unit to each of the co-owners. Where one of these conditions is not met, the action ends in an order for sale.
The provision on which the dissolution of co-ownership through the establishment of condominium ownership rests, the conditions required, the manner in which the request is raised, the stages of technical preparation, the conduct of the proceedings and the consequences of the judgment are examined below within a practice-oriented framework.
Definition of the Method and Its Function in Practice
The method in question denotes the termination of co-ownership in a property held in shared or joint ownership by creating independent units and allocating them to the co-owners, rather than by disposing of the property. Although it is by nature a form of division in kind, it also changes the legal regime of the property: shared ownership gives way to condominium ownership.
In multi-storey buildings and in properties containing several units, this route offers a practical solution. The risk of a public auction disappears; instead of being severed from the property altogether, the co-owners continue their ownership relationship as the owner of the unit falling to them.
The Governing Provision
The statutory basis of the method is found in Article 10 of the Condominium Ownership Act No. 634. The provision allows the division to be carried out by the allocation of units where the property can be divided into independent units:
Condominium Ownership Act No. 634, Art. 10
“….. In actions for the dissolution of co-ownership over immovable property capable of being subject to condominium ownership, if one of the heirs or of the co-owners requests that the division be carried out by establishing condominium ownership and allocating independent units, the judge may order that the ownership of that immovable property be converted into condominium ownership on the basis of the documents specified in Article 12, and that the independent units be allocated separately to the co-owners, with the shares being equalised.”
For the provision to be applied, the judge must conclude that the property is suitable, in both technical and legal terms, for the transition to condominium ownership. Once that conclusion is reached, no sale takes place at all and the co-ownership is wound up by distributing the independent units among the co-owners.
Conditions Required for Such a Judgment
The court may give judgment to this effect only if the property is suitable for condominium ownership in terms of its factual situation, its technical characteristics and its legal status. In investigating whether the co-ownership can be dissolved by division in kind rather than by sale, the judge conducts an on-site examination and draws on technical documents and the opinion of a court-appointed expert.
Where suitability is found to be absent, the outcome changes: in that event the co-ownership is dissolved by way of sale.
Existence of a Structure on the Property
The first condition is that a structure capable of being made subject to condominium ownership actually exists on the property. Since condominium ownership cannot be established over vacant land, co-ownership in properties carrying no construction is as a rule wound up by way of sale.
The Structure Being Suitable for Division
The structure on the property must have technical features that lend themselves to the carving out of independent units. In this respect, the units to be created are expected to meet the following requirements:
- They must be technically separable from one another
- They must be capable of use in their own right
- They must afford their user the possibility of independent use
The presence of these features is generally established through an on-site examination conducted at the location and the expert examination that follows it.
Compliance with Zoning Rules
Compliance of the structure with the zoning legislation is also among the conditions required. In practice, the presence in the case file of the approved architectural project, the building permit and the building occupancy permit — also referred to as the habitation certificate — is decisive. Condominium ownership cannot be established in respect of unpermitted structures, unauthorised construction or buildings completed in a manner contrary to their project.
Absence of Any Impediment to Establishment
There must be no circumstance rendering the establishment of condominium ownership over the property legally or factually impossible. In practice, impediments of this kind may be illustrated as follows: the structure not being technically divisible into independent units, the identification of a situation conflicting with the zoning legislation, the impossibility of preparing the project and documents on which condominium ownership is to be based, or the property being found to be risky to the point of demolition. The presence of any one of these situations may prevent the transition to condominium ownership.
A Unit Being Available for Every Co-owner
For a winding-up by this route to be achieved, each co-owner is expected, so far as circumstances permit, to receive one independent unit. Where the values of the units do not correspond exactly to the co-owners’ share ratios, consideration — that is, an equalisation payment — comes into play, and the difference between the shares is made good in this way.
Division in Kind Being Feasible
In proceedings for the dissolution of co-ownership, the judge is under a duty first to investigate whether the property can be divided in kind. Division in kind must, however, be practicable in fact and must not lead to a significant reduction in the economic value of the property.
If the creation of independent units is not possible, or if the division to be carried out would seriously impair the use of the property, the court may give judgment in favour of a sale.
How the Request Is Raised
The establishment of condominium ownership is a special request for division in kind raised within an action for the dissolution of co-ownership. For the court to be able to examine the property’s suitability for this regime, an express request to that effect by at least one of the parties carries considerable weight in practice.
The request most often comes from those co-owners who do not wish the property to be disposed of by public auction. The aim is to forestall a sale and to secure the distribution of the independent units among the co-owners.
Who May Raise the Request
The request may come from the co-owner bringing the action, and it may equally be raised by the co-owners in the position of respondent. Article 10 of the Condominium Ownership Act No. 634 regards a request by only one of the co-owners or heirs as sufficient; it is therefore not required that all the co-owners unite in the same request.
In practice it is frequently seen that respondent co-owners oppose the request for a sale and ask that the property be divided by establishing condominium ownership.
At Which Stage the Request Must Be Made
The request may be set out in the statement of claim, and it may equally be brought before the court through submissions and pleadings filed while the proceedings are under way.
That said, so that the on-site examination and the expert examination may be conducted soundly, it is preferable for the request to be raised at an early stage.
Since the preparation of the project, the management plan and the technical documents on which condominium ownership is based takes a certain amount of time, requests raised late can prolong the proceedings.
The Inquiry the Judge Conducts of Its Own Motion
In actions for the dissolution of co-ownership the judge is, as a rule, required to investigate the possibility of division in kind of his or her own motion. Whether the property is suitable for the transition to condominium ownership also falls within the scope of that inquiry.
In practice, however, judgment to that effect remains dependent on an express request by one of the parties and on the necessary technical documents being brought into the case file.
For that reason, a co-owner seeking the establishment of condominium ownership is expected to set out the request in terms leaving no room for doubt and to complete the technical preparation in advance.
How the Division in Kind Process Operates
The process requires a detailed examination of whether the property is suitable, in technical and legal terms, for division into independent units.
To that end the court carries out an on-site examination, obtains expert reports and requires the technical documents needed to make the property ready for condominium ownership to be procured. Where the examination produces a favourable result, the creation of the independent units and their distribution among the co-owners may be ordered.
Expert Examination
Once the request enters the case file, the court carries out an on-site examination of the property and appoints a court-appointed expert. The matters addressed within the scope of the examination include compliance with the zoning legislation, the technical condition of the structure, suitability for the creation of independent units, and the identification of the units to be allocated to the co-owners. In practice, panels are generally composed of an architect, a civil engineer and a survey expert.
Architectural Project and Technical Documents
For the transition to condominium ownership, the architectural project and the other technical documents relating to the property must be prepared. At this stage the approved architectural project, the plans of the independent units, the depiction of the common areas in the project and the distribution of the land shares are examined. The projects prepared must comply both with the zoning legislation and with the provisions of the Condominium Ownership Act No. 634.
Identification of the Independent Units
When condominium ownership is established, the units in the property are identified and numbered. In identifying the units to be allocated to the co-owners, the value, floor area and position within the building of each unit, and the purpose for which it is to be used, are taken into account.
Allocation of Units According to Share Ratios
If the co-owners reach agreement on which unit is to go to whom, the judge gives judgment in accordance with that intention. Where no agreement is reached, the units determined by the expert report are distributed among the co-owners by drawing lots. The distribution is based on the co-owners’ share ratios in the land registry record.
The objective is for each co-owner to obtain a unit equivalent in value to his or her share. Since the values of the units cannot be equalised exactly, a payment of consideration frequently arises in practice.
Preparation of the Management Plan
Under the Condominium Ownership Act No. 634, a management plan must be drawn up before condominium ownership can be established. That document is the basic text governing how the common areas are to be used, the manner in which the building is to be managed, the principles on which expenses are to be shared, and the rights and obligations of the owners of the independent units. In practice the management plan is submitted to the case file together with the architectural project and the other technical documents.
Application of the Equalisation Payment
Where the values of the independent units do not correspond to the co-owners’ share ratios in the land registry, the court may award an equalisation payment.
By way of example, where a unit more valuable than the others is allocated to one co-owner, it may be ordered that the difference be paid to the other co-owners. The economic balance among the co-owners is thereby preserved.
The consideration to be added to the unit of lower value must be deposited with the court’s cash office before judgment is given. Unless that sum is deposited, the dissolution of co-ownership by way of condominium ownership cannot be ordered.
The Judgment Establishing Condominium Ownership
A court satisfied that the property is suitable orders the establishment of condominium ownership and the allocation of the units to the co-owners. The operative part of the judgment sets out in detail the common areas, the land shares, which unit has been allocated to which co-owner and any equalisation payments. When the judgment becomes final, the co-ownership relationship over the property comes to an end and the co-owners acquire the status of owner of an independent unit.
How the Proceedings Operate
Since requests for the establishment of condominium ownership are in the nature of a special request for division in kind raised within an action for the dissolution of co-ownership, the proceedings take account both of the general procedural rules governing the dissolution of co-ownership and of the technical requirements arising under the Condominium Ownership Act No. 634.
The suitability of the property is assessed on the basis of the on-site examination, the expert reports, the technical documents and the evidence submitted by the parties.
Mediation as a Procedural Requirement
Following the amendment introduced by Act No. 7445, recourse to mediation in actions for the dissolution of co-ownership has become a procedural requirement. Accordingly, in requests seeking the establishment of condominium ownership as well, the mediation stage must be completed before the action is brought.
If the meetings end in disagreement, the final minutes drawn up must be annexed to the statement of claim. In actions brought without this procedural requirement having been satisfied, a dismissal on procedural grounds is possible.
Jurisdiction and Venue
Subject-matter jurisdiction in actions of this kind rests as a rule with the Civil Court of Peace.
As to territorial jurisdiction, the court of the place where the property is situated has exclusive jurisdiction. The action must therefore be brought before the Civil Court of Peace of the place where the property is situated.
Burden of Proof and Evidence
The burden of proving that the property is suitable for condominium ownership falls on the party making the request. The types of evidence relied on in practice for this purpose include land registry records, architectural projects, the building permit, the habitation certificate, municipal records, the management plan and expert reports. The parties may in addition rely on witness testimony and on the opinion of a specialist.
On-site Examination and Technical Review
In these requests the on-site examination and the expert examination carry decisive weight. The court conducts an on-site examination at the property and has the technical condition of the structure inspected. The opinion of the court-appointed experts is sought in particular on whether the creation of independent units is possible, on compliance with the zoning legislation, on whether allocation to the co-owners is feasible, on the values of the units and on whether an equalisation payment is required. The panels appointed comprise a survey expert, an architect and a civil engineer sitting together.
Court Fees and Litigation Costs
Because of the items of on-site examination, expert examination, preparation of the project and drawing up of the technical documents, litigation costs in these actions can frequently reach a high figure.
In actions for the dissolution of co-ownership, fees and costs are as a rule apportioned among the parties by reference to the co-owners’ share ratios. It is also open to the court to make a different apportionment according to the particular features of the case.
Attorney Fees
Attorney fees are awarded in favour of parties represented by counsel in accordance with the Minimum Attorney Fee Tariff.
Since actions for the dissolution of co-ownership are bilateral in nature, a fixed attorney fee is as a rule assessed in practice. At the conclusion of the proceedings, therefore, the fixed attorney fee set out in the tariff is awarded in favour of the party represented by counsel.
Appeal and Appeal on Points of Law
An appeal may be lodged against the judgment of the Civil Court of Peace within two weeks of the date of service.
As regards the decisions of the Regional Court of Appeal, an appeal on points of law is available where the monetary threshold laid down in the statute has been exceeded.
Once the judgment becomes final, the land registry formalities relating to condominium ownership can be carried out and the independent units are registered in the names of the co-owners.
Outcomes of the Action
Where the request is granted, the co-ownership relationship over the property is wound up and the independent units are distributed among the co-owners.
Establishment of Condominium Ownership and Allocation of Units
A court concluding that the property is suitable in technical and legal terms orders the establishment of condominium ownership and the allocation of the units to the co-owners. The judgment sets out in detail the areas of common use, the land shares of the independent units, which unit has been allocated to which co-owner and any equalisation payments. When the judgment becomes final, the co-ownership comes to an end, the units are entered in separate land registry records, and the co-owners acquire an individual right of ownership over the unit falling to them.
Award of an Equalisation Payment
Where there is a difference between the values of the units and the share ratios, the court may award consideration.
Where, for instance, a unit of high value is allocated to one co-owner, it may be ordered that the difference be paid to the other co-owners. The aim is thereby to strike a balance between the economic rights of the co-owners.
Dismissal of the Request and Order for Sale
If it is concluded that the property is not suitable for the establishment of condominium ownership, the request may be dismissed. The typical situations calling for dismissal are as follows: the structure not being suitable for division into independent units, a breach of the zoning legislation being identified, the building permit or habitation certificate being missing, and the impossibility of allocating a unit to each co-owner.
Since division in kind cannot be achieved in these situations, the court orders the dissolution of the co-ownership by way of sale. Where a sale is ordered, the property is disposed of by public auction and the proceeds obtained are divided among the co-owners according to their share ratios.
Independent Legal Assessment
In practice, the dissolution of co-ownership through the establishment of condominium ownership often turns less on a legal argument than on a matter of technical preparation. What determines the fate of the request is, predominantly, the quality of the project and documents submitted to the case file. Where a structure is problematic in terms of its building permit and habitation certificate, an order for sale is difficult to forestall, however early and however insistently the request is raised.
The technical preliminary review carried out before the file is opened therefore largely determines the course of the process. In concrete disputes it is appropriate to give priority to the following headings in particular:
- Verifying from the documents, before the action is brought, the position of the structure as regards its building permit, habitation certificate and approved project
- Calculating at the outset whether the number of independent units that can be created meets the number of co-owners
- Setting the request out expressly in the statement of claim rather than leaving it to a late stage
- Where a payment of consideration is required, holding the necessary sum ready for deposit with the cash office before judgment
- Completing the procedural requirement of mediation and annexing the final minutes to the pleading
- Filing objections to the expert report in due time, in terms of the valuation and the criteria for allocation
Independent Legal provides advisory and litigation services throughout the entire process in disputes arising from the dissolution of co-ownership, from the planning of the technical preparation to the enforcement of the judgment at the land registry.