Selling shares in co-owned property
Co-ownership of property is one of those legal situations that look simple in theory and in practice can effectively block any free disposal of an asset. It is enough for two people to inherit a property, for a couple to buy a flat together with their parents, or for business partners to invest in a plot without clearly written rules, and you already have co-ownership in which every decision has to be agreed with the other side. But what if one of the co-owners simply wants to sell their share and be done with it? In this article we explain when that is possible, what restrictions the law provides for, and why selling a share alone is in practice considerably harder than selling a whole property.
What a share in co-ownership is
Co-ownership in fractional parts means that a property (a house, a flat, a plot) belongs to several people at once, each of them holding a fractionally defined share — 1/2, 1/3 or 1/4, for instance. What matters is that a share does not correspond to any specific, physically separated part of the property. A co-owner holding half the shares in a house is not the owner of a particular floor or room; they hold a right to half the value of the whole property. It is precisely this abstract quality that causes most of the problems described below.
Can a share be sold without the other co-owners’ consent
Yes. Under Article 198 of the Civil Code every co-owner may dispose of their share independently, without the consent of the others. In this respect selling a share differs from acts concerning the whole property (selling the entire house, say), which do indeed require the consent of all co-owners. In selling only their own share, an owner need not ask the others for permission or notify them in advance, unless an earlier agreement provides otherwise.
What about the right of first refusal? A popular myth
Many holders of shares are convinced that the other co-owners have a statutory right of first refusal, that is priority in buying the share being sold. That is not true, at least not as a general rule. A right of first refusal for the other co-owners applies only in a few particular situations:
- where the object of the co-ownership is agricultural land and the other co-owners run a joint farm on it (Article 166 of the Civil Code and the provisions of the Act on Shaping the Agricultural System),
- where it concerns a cooperative ownership right to premises, which follows directly from the Act on Housing Cooperatives
- where the co-owners have themselves reserved a mutual right of first refusal by agreement.
Apart from these exceptions, with a typical property (a city flat, a detached house or a building plot) selling a share to a third party requires neither consent nor a prior offer to the other co-owners.
In what form a share must be sold
Because a share in co-owned property is a right relating to real property, selling it — like selling a whole property — requires the form of a notarial deed (Article 158 of the Civil Code). An agreement made in ordinary written form, without a notary, is void. The notary will verify the legal status of the property, check the land and mortgage register and draw up the deed on the basis of which the new acquirer will be entered as a co-owner.
Why selling a share alone is hard in practice
The law allows a share to be sold freely, but the market does not necessarily make it easy. In practice selling a share in co-ownership tends to be much harder than selling a whole property, for several reasons.
First, the pool of interested buyers is very narrow. Someone buying a share does not become the owner of a particular flat or house; they enter into a co-ownership relationship with people they usually do not know and have no influence over. They must reckon with not being able to use the property freely until they reach an understanding with the other co-owners or the co-ownership is formally dissolved.
Second, banks are reluctant to grant mortgage loans for the purchase of a share alone, which further narrows the pool of potential buyers mainly to cash investors.
Third, the price obtainable for a share alone is usually markedly lower than the proportionate part of the market value of the whole property. Valuers and market practice often point to a discount of several dozen per cent against the fractional value of the whole.
Fourth, if there is conflict between the co-owners — which in practice happens more often than not, particularly with co-ownership arising from an inheritance or a divorce — a potential buyer finds out at the stage of checking the property and often withdraws, not wanting to step into someone else’s dispute.
The alternative: dissolving the co-ownership
Instead of selling a share alone, some co-owners opt to dissolve the co-ownership, that is to bring the state of joint holding formally to an end. This can happen in two ways.
Dissolution by agreement is possible where all the co-owners reach an understanding — agreeing, for example, that the property will go to one of them with the others being bought out, that it will be physically divided (where that is possible), or that it will be sold on the open market and the sum obtained divided in proportion to the shares.
Judicial dissolution follows where the co-owners cannot agree. The matter goes to court, which may order the physical division of the property, its award to one of the co-owners with the others being bought out, or the sale of the property by enforcement auction and division of the sum obtained. This route can be effective, but usually takes many months and sometimes years, and involves court costs and an expert’s opinion.
What can be done more quickly in such a situation
For a shareholder who simply wants to close the matter — without waiting for the other co-owners’ agreement, without a court dispute and without putting the property on the open market for months in search of a rare, patient buyer — a sensible solution is often to sell the share to an entity that specialises in exactly these transactions. Buyers of this kind understand how co-ownership works, value a share fairly despite its particular character, and are prepared for the steps that follow, including any negotiations with the other co-owners or proceedings to dissolve the co-ownership, which they carry out themselves after the purchase.
At Remedy we handle exactly these cases: we buy shares in co-owned property throughout Poland, whether the co-ownership arose from an inheritance, a divorce or a joint purchase with family. If you are considering selling your share and want to know what it might realistically be worth and what the whole process would look like, we will gladly discuss it with you, with no obligation.
This article is for general information and does not constitute legal advice. In an individual case it is worth consulting a lawyer, particularly where agricultural land, a cooperative right to premises or contractual restrictions on disposing of a share are involved.