Terminating Co-ownership of Real Estate: Legal Framework
Co-ownership exists when multiple parties hold fractional shares of the same property. If co-owners cannot reach an amicable agreement, the Law of Property Act (AÕS) provides clear mechanisms for termination.
1. Termination by Agreement
The most efficient method is a notarized agreement between co-owners. Pursuant to AÕS § 76 and § 77, co-owners may decide to divide the property into physical parts, sell the property and distribute the proceeds, or have one co-owner buy out the others. A notarized form is mandatory for all real estate transactions in Estonia.
2. Judicial Termination
If an agreement cannot be reached, any co-owner has the right to demand the termination of co-ownership through the court under AÕS § 77 (2). The court may:
- Divide the property into physical parts: If technically and legally feasible.
- Order a public auction: The proceeds are distributed among co-owners according to their respective shares.
- Assign the property to one co-owner: The recipient must compensate the other co-owners for their shares.
Important Considerations
When terminating co-ownership, the court prioritizes solutions that are least burdensome for all parties. It is also crucial to verify if the property is encumbered by mortgages or other restrictions that might affect the division. Judicial proceedings can be costly and time-consuming, so we strongly recommend attempting mediation first.
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