Shared and co-ownership of real estate – problems and solutions

Recommendation points

• Joint ownership of real estate
• Fractional ownership of real estate
• Payment of utility bills, taxes and loans in the case of joint and shared ownership of an apartment or house
• Disposal of joint and shared real estate: purchase, sale, exchange, registration

Own housing is the dream and goal of life for many Russians, but even those who already own real estate rarely can say with complete confidence: “This apartment is just mine.”.

Often, residential real estate objects are jointly owned or divided into certain shares, that is, they belong to several owners at once, who have to jointly solve all the issues that arise, for example, agree on whether to carry out repairs now or if it’s okay, pay utility bills, and so on. And when selling or buying such apartments or houses, a number of problems and nuances arise at once, requiring careful attention and knowledge of the current legislation..

What is the difference between co-ownership and shared ownership of a residential property? How can such common property be sold or exchanged? What co-owners need to know in order not to get into a difficult situation and not to be drawn into a lengthy trial?

Joint ownership of real estate

Features of joint and shared ownership of real estate are regulated by parts of Article 244 of the Civil Code of Russia. According to its provisions, joint ownership of residential real estate is possible for various types of housing, in particular:

• private house or part of it;
• apartment or part of an apartment;
• separate room.

Co-ownership of real estate can result from:

• receiving an apartment or house as an inheritance, if, according to the law or the terms of the will, several heirs can claim property at once
• joint purchase or exchange of living space;
• privatization of real estate;
• awarding part of an apartment or house to a citizen according to a court decision.

For example, if a state apartment was privatized by one of the spouses, then the housing becomes joint property on the basis of the provisions of the Family Code of Russia, which recognize property acquired during marriage as common property of the spouses.

Vasily Maximov. Family section. 1876

The main difference between joint ownership and shared ownership is that in this case it is not specified which part of the living space the owner owns. So, if we are talking about spouses, then the housing is considered to belong to them on equal terms, that is, in the event of a divorce, the property is simply divided in half. If there are three or more heirs, then it is automatically assumed that they own equal parts – one third, one fourth, and so on..

Fractional ownership of real estate

In the case of fractional ownership of a residential property, the parts belonging to the owners are precisely determined. So, during privatization, at the request of the participants, their shares can be immediately indicated, usually equal, according to the number of citizens registered in a given residential area and who did not write a refusal to privatize citizens.

Such division must be recorded in the Certificate of Registration of Title to the Real Estate Object. If this document states that the co-owners own half, one third, and so on, part of the apartment, then such ownership becomes shared. If the size of the part of each owner is not specified, then such ownership is joint.

An important nuance – joint ownership can become shared if the co-owners wish to clarify which shares each of them own and draw up the necessary documents.

Moreover, most often the share for an apartment or house is some very abstract value, it is just a specified percentage or fraction of the total area of ​​housing, and not specific square meters of living space. So in the event of a dispute between the co-owners, there can be no talk about this or that room, for example – “I own the living room, and you own the bedroom.” To get ownership of specific square meters, you need to go to court or agree with the rest of the owners on the procedure for using an apartment or house.

It is worth remembering that the kitchen, corridor, bathtub and bathroom are considered joint property in any case, co-owners can use these premises on an equal basis and these rooms cannot be divided. The court can allocate in a specific proportion only square meters in separate living rooms. If, in order to divide the housing into separate parts, redevelopment is needed and at the same time the situation of other owners may worsen, for example, due to the new wall, their part of housing will become smaller, the court may even prohibit the allocation of a particular room as a share.

Payment of utility bills, taxes and loans in the case of joint and shared ownership of an apartment or house

In the case of joint ownership of real estate, when the shares of the owners are not determined, housing and communal enterprises write out one payment for an apartment or house. How the co-owners will pay bills for electricity, water and gas is up to them.

If the housing is in shared ownership, all co-owners may be indicated in the payment order, several payment documents may also be issued – for each owner of a share in the apartment. If there is only one payment, then the co-owners can divide the total amount due to housing and communal services enterprises for the provided utilities according to their shares, that is, divide into three, four or more parts.

At the same time, if one of the owners refuses to pay for utilities, the rest will still have to pay for it, since the responsibility falls on the shoulders of all co-owners, and if the water utility decides to turn off the water for non-payment or shut off the sewer system, all residents of the apartment will suffer, without exception – utilities the networks are one, common, like a bathroom with a bathroom.

Anna Shchegoleva. Neighbors. 2010

A mortgage loan for an apartment in the case of joint ownership is also paid by all owners together. Agree that each of them will pay only their part, they will have to be among themselves, the bank is often not interested in such details, and if, for example, the spouses, who own joint property on equal terms, stop making contributions on the loan, the financial institution has the right to sell the entire apartment.

But in the case of fractional ownership, each owner pays a loan only for his part of the home. In this case, if the borrower turns out to be a malicious defaulter, the bank gets the right to impose a penalty only on his share, without affecting the property of other owners who made payments regularly. A banking institution can sell a share in an apartment owned by a defaulter on the terms of free sale, however, it must first offer to purchase this part of the home to other owners in accordance with the current pre-emptive right to purchase, which we will discuss below.

Disposal of joint and shared real estate: purchase, sale, exchange, registration

Let’s clarify right away that co-owners cannot freely dispose of their part in joint ownership of the property. For example, if two heirs received one apartment, and the shares of each of them are not precisely determined, that is, the inheritance became joint property, they are simply forced to negotiate with each other. It is impossible to sell your part of the real estate without the consent of the other heir, it remains either through the court to determine your share and, thus, to turn the joint property into a shared property, or to negotiate with the second heir on the terms of sale or exchange of housing.

Also, in an apartment that is a joint property, you cannot register someone without the consent of the second owner, it will also not work to sell or exchange such housing without the written consent of the other co-owners. That is, we can say that a joint apartment is really common and all owners will have to decide its fate only together. Or allocate specific shares from the total living space that can be disposed of independently.

You can dispose of your share in an apartment or house almost freely – exchange it for another housing, register someone on your part, rent it out, use it as collateral, sell it, leave it as an inheritance or donate. It is worth clarifying that co-owners of shares in real estate can change the size of their shares by mutual agreement.

Almost the only restriction on the free disposal of one’s shares is the preemptive right to purchase. Its essence lies in the fact that the owner of one of the shares, before putting his part of the home for free sale, must notify the owners of the other shares about his plans. And after they decide whether to buy a second part of the home for the specified price or to give up their right to a first-priority purchase, the owner can offer his share to third parties.

Thus, the algorithm of actions when selling a share in a house or apartment looks like this:

1. The owner of the share, who has decided to sell his part of the property, notifies the other co-owners in writing. Such a notification must be sent in the form of a letter, even if the owners of other shares live in the next room. The letter contains not only information about the sale of the share, but also indicates its value so that the co-owners can decide whether this option suits them or not. It is better and safer to send such a letter as a registered letter with a notice of receipt, in which case the co-owners who prevent the sale of one of the shares will not be able to declare that they did not receive the letters and did not know about the sale of part of the housing.
2. The owner waits for exactly one month from the moment the owners of the other shares receive a written notice. After that, he gets the right to freely dispose of his part of the property, even if no action on the part of other owners – consent to purchase or a written waiver of the preemptive right – followed. It is considered that, without notifying in writing the owner of the share put up for sale about their consent to purchase it at the indicated price, they automatically waived their right to first purchase. An important nuance – the owner is obliged to sell his share to third parties at the price that was indicated in the written notice sent to the rest of the owners. Otherwise, the owners of other shares may appeal the transaction, considering that they were deceived and did not provide complete and accurate information..
3. If no buyers were found for the offered price for the share in the apartment, and the owner decided to reduce the cost, he is again obliged to first of all notify the owners of other shares. Perhaps this time they will decide to exercise their preemptive right. That is, a letter is sent again and a month is waited out, which is given to the co-owners to make a decision..

Another limitation applies in case of renting out a share in an apartment. In this case, the owner wishing to rent his room to the tenants must obtain the written consent of the other owners. They can be written in free form, the main thing is to preserve the meaning of such consent – “I do not mind renting out housing.” A similar indication with the signatures of all co-owners can also be put on a lease agreement in the form of a mark on the agreement of this agreement with other owners of shares in an apartment or house.

However, before so freely dispose of his share, the owner must go to court to specify it. Without such “allocation of a share in kind”, that is, a documentary instruction, selling a virtual “one-third part” in a two-room apartment is very problematic. Of course, there may be buyers for such offers, but the price of the share not allocated in kind will be several times lower than the market value of square meters, since the buyer is usually well aware of what kind of “battles” he will face with other co-owners.

It is possible to allocate a specific share in an apartment without going to the courts if the co-owners voluntarily conclude Agreements on the real allocation of a share. By the way, the court usually makes a decision on the joint use of an apartment, in particular, common areas – a corridor, a bathroom, and so on, and determines the procedure for such use. Often, if the co-owners cannot agree peacefully, the court can even determine the time for using the bathroom and kitchen for each owner of a separate share.

Vasily Maximov. All in the past. 1889

In the case of allocating a share in kind in a private house or cottage, the issue can be solved more easily – a separate exit is arranged and one house turns into a doublet or a townhouse, that is, two houses with their own exits and adjoining territories, having a common side wall. In this case, there are also some restrictions – when the house is divided, irreparable damage should not be caused to it, and all premises must remain residential, that is, the owner of the share will not be able to open a store in his part of the cottage unless he has coordinated his actions with the other owners..

As you can see, fractional ownership provides much broader rights than joint ownership. It is possible to transfer a shared apartment to the fractional ownership category at any time, but even then the virtual share does not always turn into real square meters that belong to the owner alone. And to buy a share in an apartment or house, you can go only clearly realizing how difficult it will be to share your kitchen and bathroom with completely strangers. Of course, some buyers go for such an acquisition in order to redeem all shares in a given apartment or house, however, it is also not possible to agree with all co-owners in all cases, because it is usually unrealistic to purchase a full-fledged housing for the funds received from the sale of a share, of course, if this is not share of an apartment in the center of Moscow.