Selling shares in a property – what you should know

Selling a share in a property is an increasingly common solution, especially when continued co-ownership becomes a source of conflict or financial burden. The decision to sell, however, requires legal awareness, knowledge of the procedures and an understanding of the tax and organisational consequences. In the article below I explain how to sell a share in a property step by step.

What is fractional co-ownership?

Fractional co-ownership means that several people simultaneously hold the ownership right to the same property, but in defined fractions (e.g. 1/2, 1/3). It should be stressed here that owning a 1/3 share in a flat does not mean being physically assigned a particular room, but having the right to use 1/3 of every room. Such an arrangement usually leads to problems with management, disagreement over renovations, and even over the future of the property.

Conflicting interests mean that selling a share may become the only sensible solution.

When are shares most often sold?

In most cases the decision to sell a share does not result from a financial calculation, but from personal circumstances. As many as 80% of such transactions stem from:

• divorces and break-ups – this applies particularly to holiday properties, which lose their emotional value while the conflict remains;
• inheritances with many heirs – where the deceased's shares pass to a large circle of relatives. In such situations unanimity is often impossible, and managing the shared property becomes difficult.

Can you sell a share without the co-owners' consent?

Under the Civil Code (Art. 198), each co-owner has the right to freely dispose of their share, including selling it. The consent of the other co-owners is not required. The exception is co-ownership arising from marital joint property – in that case the spouse's consent is needed.

The right of pre-emption – who has it?

Despite the freedom to sell a share, in some cases a right of pre-emption applies. This means that before the sale can go ahead, a specified person (e.g. a co-owner, the municipality, the State Treasury) has the right to acquire the share on the same terms as were offered to another purchaser. The sources of this right may vary. They are primarily statutory provisions, entries in the land and mortgage register (księga wieczysta) or earlier agreements. In practice this means you need to check whether anyone holds a right of pre-emption before completing the sale. Otherwise the transaction may be challenged.

What does selling a share look like step by step?

Although selling a share seems simpler than selling a whole property, it involves specific formalities.

• 1. Gathering documents – you will need, among other things, a current extract from the land and mortgage register and a document confirming the ownership right to the share.
• 2. Concluding a notarial deed (akt notarialny) – the transaction must be carried out before a notary. The notary draws up the contract, files the application to the land and mortgage register and checks the legal status of the property.
• 3. Settling taxes and fees – in a typical transaction worth 10,000 PLN, the costs amount to approx. 781 PLN (notary, civil law transactions tax (PCC), land register entry).

Dissolving co-ownership as an alternative

When selling a share is impossible or unprofitable, you should consider dissolving the co-ownership. This can be done by notarial agreement or through court proceedings. The process itself can, however, be long and costly, especially if an expert has to be appointed to value the property.

How can you safely dispose of your shares?

If you own shares and feel that co-ownership is generating conflict, stress or costs, you can come to an arrangement with the other owners and buy each other out. You can also use the help of an estate agency that specialises in buying and selling property shares.

Summary

Although shares in a property are an asset, in practice they very often bring more problems than benefits. Lack of influence over decisions, conflicts between co-owners and service charge arrears on the part of one of them are just some of the potential risks. Remember that selling a share does not always mean getting rid of the problem. That is why it is worth making an informed decision, ideally after consulting a lawyer.