Co-ownership of property can work for years without problems – until a dispute arises. Typically over who will use the property, who will pay for repairs, how it will be managed, or whether it will be sold. Once co-owners cannot agree, a deadlock often develops and escalates.

The Civil Code, however, is based on a simple principle:

No one can be forced to remain in co-ownership.

If agreement is not possible, there is a legal path: an action for termination and settlement of fractional co-ownership before the court.

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When It Makes Sense to Go to Court

Court resolution typically comes into play when:

  • joint management of the property has not been working for a long time,
  • co-owners cannot agree on use, repairs or investments,
  • one co-owner blocks sale / agreement / any decision,
  • you want to leave the co-ownership but the other party refuses to act.

Proceedings for termination and settlement of co-ownership are specific in that the court does not only decide “whether” to terminate the co-ownership, but above all how to settle it.

What Settlement Options Does the Court Have?

In simplified terms, there are three basic options the court considers (and usually goes through them in a certain order according to “feasibility”):

1) Division of the Property

Ideal scenario: the court divides the property and each party becomes the sole owner of their part.

This is often realistic especially for:

  • land, fields, gardens,
  • larger units that can be physically divided.

For family houses or flats it is often problematic. Theoretically a house can also be divided into units, but in practice this is usually:

  • technically and legally complex,
  • evidentially demanding,
  • linked to further documentation (typically a “owner’s declaration” and follow-up steps).

This option is therefore used only exceptionally for ordinary houses and flats.

2) Award of the Property to One Co-owner Against Compensation

A very common option: the court awards the property to one co-owner as sole owner and orders them to pay the others appropriate compensation (typically according to market value and size of shares).

For this to work, it is necessary that:

  • the co-owner has a genuine interest in the property,
  • and at the same time proves to the court that they have a real ability to pay off the others (finances, loan, assets, etc.).

What if More Co-owners Want the Property

If more than one person is interested in being awarded the property, practice often takes into account, among other things, who:

  • actually lives in or uses the property,
  • has better prospects of taking care of it,
  • is able to pay off the others more quickly and credibly.

3) Sale by Public Auction and Division of the Proceeds

If the situation is “deadlocked” and at the same time:

  • no one wants the property, or
  • no one can pay off the others,

the court may decide on the sale of the property by public auction. Costs are paid from the proceeds and the remainder is divided among the co-owners according to their shares.

Important: With an auction, bear in mind that the proceeds typically also cover costs associated with the sale (remuneration and expenses of the auctioneer / bailiff). In practice this can reduce the amount to be divided among the co-owners.

What to Prepare Before You Enter the Dispute

Whether you want an agreement or a court solution, it usually helps considerably to have ready:

  • a land register excerpt and identification of shares,
  • an overview of who uses the property and to what extent,
  • documents on investments and costs (repairs, utilities, maintenance),
  • communication with co-owners (notices, proposed agreements),
  • a clear idea of the goal: division / buy-out / sale.

Costs of Proceedings: Don’t Forget This Side of the Dispute

In disputes over termination and settlement of co-ownership it is also good to consider how the question of recovery of costs of the proceedings may turn out. In practice this often affects strategy and willingness to reach an agreement.

For details we recommend our follow-up article: Recovery of costs of proceedings (2020)

Summary

If agreement between co-owners is not possible, the law offers a clear path: termination and settlement of co-ownership by the court. The court then chooses one of the options:

  • division of the property, if that is realistically possible,
  • award to one co-owner against compensation,
  • sale by public auction and division of the proceeds.

Each option has its advantages, limits and financial implications – and the concrete approach always depends on the type of property, the relations between the co-owners and their options.

If you are dealing with co-ownership that has reached a dead end, our office is ready to help – we will propose a realistic approach and prepare steps that lead to a result.