Community of property is a form of shared ownership in which several individuals share ownership of an asset or right
Community of property is a common legal form in the field of housing, but it can also occur in other property. Although community property may be created voluntarily for business purposes, it may also arise incidentally in situations such as inheritance.
What is a community of property? A community of property is when several persons share ownership of an asset or right without dividing it. Each of the joint owners owns a share of the property or right in question. For example, two persons may share ownership of a house in unequal shares.
The community of property may also be composed of several assets and/or rights. There is community of property when the ownership of a thing or a right belongs proindiviso to several persons.
The purpose of a community of property is to enable the joint owners to jointly exploit the property or right for economic benefit. For example, a community of property can be created to exploit real estate through rental.
How is a community of property created?
Some communities of property are created incidentally, as in the case of an inheritance in which several persons inherit an asset in unequal shares. On the other hand, voluntary communities of property are created by means of a contract that regulates the legal situation and defines aspects such as:
The name and domicile of the community of property.
The purpose or definition of the community.
The co-owners and their quotas.
The administration of the community of goods.
The goods or set of goods that form part of the community of goods.
Additional clauses, such as causes for dissolution or conflict resolution.
It is extremely important that the contract be drafted by an expert lawyer, since any omission can be a cause of conflict between the co-owners.
Although it is possible to make this contract privately, it is advisable to make it public for greater legal certainty. In addition, in Spain and other countries, the community of property must be registered with the tax authorities.
Characteristics of the community of property
The community of property has its own rules and legal limits.
Among its main characteristics are:
- It is necessary the presence of at least two co-owners to constitute a community of property.
- There is no minimum capital to create a community of property.
- The patrimony belongs to the co-proprietors, unlike a corporation in which the patrimony belongs to the legal entity created.
What are the rights and duties of the community of property?
The co-proprietors have the right to use and dispose of the common thing, to participate in the profits obtained and to renounce their quota. They may also exercise the right of preferential acquisition in the event that another co-proprietor wishes to assign or sell his or her share.
Among the obligations of the community of goods, there is the acceptance and the fulfillment of the agreements reached by the majority, the prohibition to alter the common thing without the consent of the others, and the unlimited and joint and several liability among the co-owners.
How to protect your share in a community of property?
There are several ways to protect your quota in a community of property, here are some of them:
- Establish a written agreement: It is important from the beginning to establish the rules for the administration of the community property and to clearly establish the responsibilities of each of the co-owners. Establishing a written agreement can help avoid misunderstandings and future conflicts.
- Take out insurance: You can take out insurance to protect your share in the community property in case of damage or loss. Be sure to review the conditions of the insurance before contracting it and that it covers the assets and rights of the community.
- Establish a covenant of indivision: The covenant of indivision is an agreement between the co-owners establishing the obligation to maintain the community property for a determined period of time. This can help to avoid that one of the co-owners decides to sell his part without the consent of the others.
- Register the community of property: You can register the community of property in the Land Registry to protect your share. The registration of the community of goods guarantees the publicity and the opposability of the rights of each one of the co-owners in front of third parties.
- Establish an administrator: If the community of goods is large and complicated, it is advisable to establish an administrator who is in charge of the management of the community of goods. The administrator can be one of the co-proprietors or a third party and will be in charge of making decisions on behalf of the community of property and protecting the interests of each of the co-proprietors.
How is a community of property dissolved?
In any case, it is important to keep in mind that the protection of your share in a community of property will depend to a great extent on the agreement established among the co-owners and on the good management of the community of property. Therefore, it is fundamental to maintain a good communication and collaboration between all the members of the community of goods to avoid conflicts and to protect the interests of each one.
However, before establishing a community of property keep in mind that the dissolution of the community of property is not always simple. It can occur when one of the parties
The co-owner assigns his or her share to another person in exchange for compensation. It is also dissolved when all the co-owners reach an agreement to assign their share to one of them or sell the property to a third party.