Extinction of condominium between siblings and financial compensation

A condominium is a situation whereby a property is owned by more than one individual. In this case, two or more siblings. A situation that is particularly common when the last parent dies and the children receive the inheritance.

At this point, it is possible to opt for the extinction of the condominium between siblings, as long as they do not agree to maintain shared ownership. But how is this done and what does it involve? These questions and many others will be answered here.

What is meant by the extinction of a condominium between siblings?

Condominium extinguishment is nothing more than the division of any property that has more than one owner. However, not all assets are divisible, as is the case, for example, with a house. Therefore, it is important to differentiate between two possible alternatives.

The dissolution of the condominium between siblings

The purpose of this figure is that the property becomes the property of only one of the owners. To this end, the one who wants to keep the property pays a certain amount of money to the rest. This is why it is known as the extinction of condominium between siblings with financial compensation.

Think of parents who die, leaving their own home as their only inheritance. One of the siblings can choose to keep it, paying the rest of the siblings their share. For example, if its value were 300,000 euros and there were three siblings, he/she would have to pay 100,000 euros to each one.

The division of the common property

In the event that the property can be divided, as happens when the inheritance is made up of sufficient parts to satisfy the rights of all the heirs in equal parts, parts of identical value are agreed and each of them keeps the part that corresponds to them. In this case, we would be talking about an extinction of condominium between siblings without financial compensation.

Let us imagine that some parents die and leave three houses in Madrid to their three children. In the event that they have a similar value, each of the siblings will keep one of the properties and the condominium will be extinguished.

When can you request the extinction of the condominium?

Everything related to the extinction of the condominium is reflected in articles 392-406 of Title III (de la Comunidad de Bienes) of the Civil Code. If you look at number 400, you will see that it specifies that no owner is obliged to remain in the community. Therefore, any of the siblings can request at any time that the common property be divided.

Therefore, in order to carry out the extinction of the condominium with or without financial compensation, the only requirements are that there is a common property and that one of the owners has the will to abandon the co-ownership.

How is the extinction of condominium between siblings carried out?

As always, it depends on whether there is an agreement between the parties or not. Let's take a look at it..

Extinction of condominium by mutual agreement

This is the extrajudicial route and the most recommendable of all as it is much quicker and cheaper and does not involve disputes between siblings, which may eventually lead to other problems of a personal nature.

As is obvious, it requires that all the siblings agree to extinguish the condominium. As mentioned above, they can do so in order for one of them to keep the property in exchange for financial compensation or without financial compensation, or divide the property equally, whenever possible. They can also sell the property to a third party and divide the price.

In any case, in order for the extinction of the condominium between siblings to be effective, it is necessary to follow this process:

• Reach a written agreement in which the conditions of the extinction of the condominium are specified.
• Draw up a public deed before a notary, who will attest to the agreement.
• Register the change of ownership in the Land Registry.
• Pay the relevant taxes.

Extinction of condominium without mutual agreement

Also known as a lawsuit for the division of the common property or a judicial way to extinguish the condominium between siblings. In this case, it is a judge who decides how it will be carried out. Generally:

• Forcibly awarding the property to one of the siblings, who will have to pay financial compensation to the others.
• Forcing the property to be sold to a third party. In the event that this does not materialise, the property may be put up for public auction and the money from the sale may be divided equally.

It is clear that none of the options is the most economically profitable for the parties. But if you add to that the cost of lawyers, solicitors and possible expert opinions, it is clear that, whenever possible, you should avoid going to court and reach an amicable agreement

The taxation of the extinction of the condominium between siblings

The payment of taxes also depends on how the extinction of the condominium has been carried out. In the event that the property remains in the hands of one of the siblings, only the stamp duty (IAJD), the value of which depends on the autonomous community and usually ranges between 0.5% and 1%, will have to be paid.

On the other hand, if the property is sold to a third party, it will also be necessary to pay transfer tax (ITP), the value of which also depends on the autonomous communities and is around 6-10% of the sale value. Nor should we forget that, if the extinction of the condominium generates a capital gain for the siblings who sell or receive financial compensation, they will have to declare it in the personal income tax (IRPF).

We hope we have resolved all your doubts regarding the extinction of the condominium between siblings. However, if you still have any doubts or if it is clear to you that you need personalised legal advice from an expert, please contact us as soon as possible. We will help you.