What is it about?
First, we need to understand what a community or condominium is. This happens when a property or right is shared by multiple people. Each of them is assigned a portion or share of the property. If this shared property is real estate, it is called co-ownership or condominium, though people often use these terms interchangeably.
Once we understand what a community or condominium is, we can talk about its extinction or dissolution. Essentially, this refers to the end of the situation where multiple people share ownership of a property.
You may hear terms like proindiviso, co-ownership, or community of goods, but they all refer to the same concept.
Types of Condominium Extinction
Extinction of condominium by mutual agreement:
When all the owners agree, dissolving the condominium is quite straightforward. One owner can buy out the others, or the person who wants to exit can receive compensation. Another option is to sell the property and divide the proceeds among the owners according to their share.
However, before proceeding, the owners must appraise the property and agree on how to value it. Afterward, they can go to a notary to formalize the agreement by signing a deed and paying the necessary taxes. If the property is the home of a couple getting divorced, the agreement must also be included in the regulatory agreement (convenio regulador), and if approved by the court, the agreement and judgment will become the deed of condominium cancellation.
Extinction of condominium through judicial means:
If the owners cannot agree, the only option is to go to court and file a lawsuit to divide the property. The court will decide whether each party receives their share or if the property should be sold and the proceeds divided. There is no specific legal procedure for this, but usually, a public auction is held to sell the property.
Necessary Documentation
Property titles of the assets subject to the dissolution of the community.
National Identity Document (DNI) of the co-owners.
If a company is involved, powers of attorney or administrator appointments are required.
For urban properties, a certificate from the homeowners association confirming the payment of community expenses.
Land registry references (latest IBI receipt).
Whether the property is rented or not.
Valuation assigned to each property.
How the properties will be allocated among the co-owners.
How the transaction costs will be covered: Notary fees, municipal capital gains tax (Plusvalía) (for urban properties).
In which situations can this service be used?
The causes for the extinction of a condominium are established in the Civil Code in Articles 395 to 406.
The Civil Procedure Law must also be considered if the division of assets must be carried out through a judicial auction.
The causes for the extinction of a condominium are, in principle, the same as for the extinction of ownership, such as abandonment, destruction, or usurpation, among others.
However, due to the nature of the condominium, the Civil Code establishes some specific grounds for extinction:
Renunciation of co-owners’ rights in favor of one of the parties.
Sale of the property to a third party, and distribution of the proceeds among the community participants.
Division of the common property: Any co-owner has the right to request the division of the assets. This is a judicial procedure, and the initiation of the division of common property declares the extinction of the condominium. The result can be a material division, forming horizontal property, or an economic division if the property is indivisible. In this case, one of the owners retains ownership and the others receive compensation based on their shares. A division can also occur through auction if the parties cannot reach an agreement.
The most common cause for condominium extinction is the owners’ desire to cease being part of the community. However, as we've seen, this is not the only reason.