Co-ownership. Nature, types, establishment and termination. Rights and obligations of joint owners. Purchase of a share in the jointly owned property
Co-ownership exists when a single individual right to property belongs to two or more persons. In the case of co-ownership, there is a possession of the subjective right itself, leading to joint possession of the object. This is also what the legislature intended to include in the term "undivided part" - a part/share of the ownership right to a particular property. Each share is expressed mathematically - as a fraction or a percentage - e.g. one tenth, two thirds or 10%.
The co-ownership can be classified according to different criteria. With regard to whether the shares owners are set, ownership is of two kinds: joint ownership and ownership in common. In ownership in common, the shares of each co-owner have been determined upon concluding the agreement, or by will or as determined by court. Art. 30 PA establishes a presumption that the shares of the owners in common are considered equal. In joint ownership, none of the joint owners has a specific fixed share of the total ownership. Under Bulgarian legislation such ownership is matrimonial property covered in Art. 19 of the Family Code.
With regard to whether the property may be terminated by division, it may be divisible or indivisible.
In principle, any co-ownership may be divided. "Each joint owner may, despite an agreement to the contrary, ask for a partition of the common property", states Art. 34 PA, except where “the law provides otherwise or if this is incompatible with the nature and purpose of the property." It follows that there is an indivisible ownership, such as common areas in condominium.
According to the mode of occurrence, co-ownership can be voluntary, involuntary and accidental. Voluntary co-ownership is one that arises from the will of the co-owners - on the purchase of a property by two persons. Involuntary co-ownership occurs independently of the will of the people. This is the case with succession. Accidental co-ownership arises from the legal facts of the type of legal events - upon inheritance joint owners are treated as accidental co-owners.
Methods for the establishment of co-ownership
Most commonly, co-ownership occurs at the will of the co-owners - through a legal transaction, which is capable of transferring ownership. Co-ownership could arise from mixed circumstances, for example by virtue of a detailed development plan for territories with not regulated landed properties under Art. 16 SPA. Co-ownership may also occur through prescription. It is necessary, however, for the possession of a certain property to be exercised by two or more persons with the intention to become co-owners. Co-ownership may arise by a court order. For instance, a sentence in a criminal court, which orders the confiscation of part of a designated property. In this case arises co-ownership in favour of the State. Concluding a company’s articles of association under Art. 357 OCA also leads to co-ownership. In this case, each partner can make a contribution in kind. Co-ownership occurs in relation to the said contributions. In the process of recasting under Art. 95 PA, if none of the materials from which the new property is made cannot be considered the main material, the result is co-ownership of the new property.
Rights and obligations of co-owners
In a co-ownership each of the co-owners is entitled to independently exercise the right of possession, use and disposal of the common property. By and large, they exert these rights themselves.
It entitles each co-owner to exercise de facto power over the common property, but to their respective share in a way not to interfere with the other co-owners' use in accordance with their rights. If one co-owner hinders others from exercising actual power over the property, the latter could file a negatory claim under Art. 109 PA and may request the discontinuing of any act without grounds which creates obstacles for the exercising of their right. The action under Art. 109 PA is a claim for protection of ownership. It is not related to the use and management of common property, so it can also be directed against a co-owner.
Under Art. 31 PA, each joint owner may use the common property in accordance with its purpose and in such manner as not to interfere with the other owners' use according to their rights. The exercise of this power is limited, however, in several ways - it must comply with the fundamental purpose of the property, determined by its nature or agreed by the co-owners at the time of occurrence of ownership. On the other hand, the co-owner should not prevent others to use the property, and cannot take away their possession. Nor can they restrict or remove other co-owners from using the common property. Therefore, if in fact one of the co-owners makes full use of the common property, he owes the remaining co-owners compensation for the benefits they have been deprived of. This is a particular claim of the co-owners, based on their right to acquire the natural and civil benefits of the property to their respective share. As each owner, the co-owner, too, has the right to acquire the natural and civil benefits of the common property. What is particular in this case is that they are divisible and each of them may only benefit in accordance with their respective share.
Each co-owner may freely dispose of their share in the common property. They can sell, pledge, encumber. They do not need the consent of the other owners. But when it comes to the sale of co-owned property, the law requires the co-owner to offer their share to the other co-owners to purchase under the same conditions and only if no one has accepted this proposal could they sell this share to a third party.
Obligations of the co-owners
The common property may yield certain benefits, but its use is also associated with expenses. Therefore every owner should take part in the burden of the common property, according to their share. The term "burden" is used in the sense of expenses. They in turn can be of different nature: necessary and useful. Necessary are those expenses without which the object would perish or be adversely affected. Each co-owner is obliged to participate in these expenses in accordance with their share. If only one of the co-owners made these charges, they are entitled to ask the others to pay a part thereof corresponding to their share - they acted as negotorium gestio and the relationship between them will be settled by the rules of conduct gestio (GEST). Useful are such expenses that are not necessary to maintain the integrity of the property, but only lead to an increase in its value. The co-owners are not required to cover these expenses. The court also cannot compel the other co-owners to cover such expenses.
Management and termination of co-ownership
Pursuant to Art. 32 PA, common property is used and managed according to the decision of the co-owners, who own more than half of the common property. Management includes actions related to maintaining the property in good condition, so that it can be used according to its intended purpose. Each of the co-owners can use the property without interfering with the others’ right to use, and may want to incur the necessary expenses for its preservation. Decisions are taken by the majority of the co-owners. It is determined according to their shares, thus a decision can only be taken by one of the owners if they own more than half of the common property, regardless of the number of the remaining owners. In this regard it should be noted that none of the co-owners may not be deprived of their powers. Such a solution would go beyond mere management, law does not give such power to the majority. The affected owner can defend their rights with possessory or proprietary claims. When it can not form a majority for the use and management of common property or if the majority's decision is harmful to the common property, each of the owners may refer the dispute to the court. The court's decision under Art. 32 (2) PA will replace the unachieved consensus or majority decision. If necessary, the court may appoint a manager of the common property.
As per Art. 31 (1) PA, each joint owner may use the common property in accordance with its purpose and in such manner as not to interfere with the other owners' use according to their rights. In the event that the property is used personally by one of the co-owners, they owe compensation to the others for the benefits of which they were deprived as of the day of the written request. To seek compensation, the other co-owner must be deprived of the opportunity to use the common property. It suffices that they do not exercise actual use of the common property because the other co-owner deprived him of that opportunity. An important precondition is to send a written invitation for payment of compensation - by letter, notarized invitation or in another written form. The written request must be addressed personally to the co-owner who is using the property. Compensation is due after the request. The written request may only be invoked by the co-owner who sent it. The remaining co-owners may not derive rights from it. The parties in this process are the personal-use co-owner and the co-owner deprived of the benefits during the period specified in the claim.
Termination of co-ownership
Art. 34 PA allows any one of the co-owners at any time to request partition of the common property. Partition divides the object itself and not the co-ownership as a legal relationship. The partition claim is not barred. Partition is the typical way to end a co-ownership. The right to partition arises from each property. Each co-owner has a right to partition, no matter the quality of the owner - a natural or legal person, state or municipality, irrelevant is also the object of the division - movable or immovable. Partition can be done in two ways - by agreement of the parties and by court order. In this regard, there are two types of co-ownership: voluntary or court partition. Voluntary is carried out by agreement of all co-owners, this is a gratuitous act, such that if one of the owners lost their share as a result of the partition, they are entitled to monetary equation with the other co-owners. Formally, the voluntary partition is a contract. When it terminates co-ownership over a movable property worth over BGN 50 and real estate, it must be made in writing with notarized signatures. Court partition replaces unagreed voluntary partition, it is invoked only by the will of one and independent of the will of the other co-owners, in order to terminate the co-ownership, following a special judicial procedure. The court proceedings may be ended by settlement, by agreement between the parties, whereby, by mutual concessions they put an end to the dispute of ownership and the case itself. This is not a judicial act but a contract. Therefore the court settlement is not appealed. Most often the judicial partition develops as contentious proceedings, the first phase of which ends with a court ruling allowing the partition. The persons entitled to the partition are then determined, as well as the property and the share of each of the co-partitioners. Following the confirmation of partition also starts the formation of shares and the granting of a specific object exclusively to the respective co-partitioner. This is done through the so-called dividing protocol or by ballot. After entry force of the Protocol or of the ballot, the shares become the exclusive property of the participants in the partition. The partition thus takes legal effect. The co-owner has the right to dispose of their share - to sell it, to make a donation, to mortgage the undivided part of the property, to bequeath, etc. They may also renounce the right of ownership under Art. 100 PA, and if the object is real estate, this act must be made in writing accompanied by a notarized signature. When renouncing the share in a co-ownership, the latter enlarges the shares of the other co-owners.
Each co-owner may further dispose of their share by transferring it to another co-owner. But if they transfer their share to a third party, this does not lead to termination of co-ownership, it only changes the personality of the co-owner with the transferee.
Finally, with the loss of property also disappears the object of ownership and therefore the rights of all co-owners are terminated.
Purchase of a share in a co-owned property
According to Art. 33 (1) PA: „A joint owner may sell his share of the immovable property to a third party only after presenting proof in writing to the notary public that he has made an offer to the other joint owners to purchase the said share under the same conditions and declaring in writing that none of the said joint owners has accepted the offer.“ If the said declaration proves to be false or if the third party purchases the joint owner's share under conditions agreed fictitiously to the detriment of the other joint owners, the interested joint owners may purchase the said share under the actually agreed upon conditions. The action must be brought within 2 months of the sale. The content of the right of purchase is in essence the ability to create a new legal situation, to change the legal realm of the buyer by depriving oneself from the ownership over the purchased property that will be transferred to the co-owner. This right shall be exercised by the courts. The judgment on this claim transfers ownership and therefore has constitutive effect. The prerequisites to bring this action are the following:
● To have co-ownership of the property. It must be divided into shares.
● The share of the real estate must be sold to a third party who is not a co-owner.
● Thirdly, the transfer must have occurred through sale. Any other types of transfers fall outside the scope of the claim under Art. 33 (1) PA.
● Further, the co-owner must have offered their share to the other co-owners and they must have refused to buy it. Such offer may only be evidenced by written proof.
● Finally, it must be established that the statement is false, contains incorrect information or that the conditions of sale are agreed seemingly to the detriment of the other co-owners, or that no such offer was made.
When these preconditions are present, the right to buy the sold share arises for the other co-owners by exercising their right in court. The claimant in such case is the co-owner of the real estate, the share of which the other co-owner has transferred through sale to a third person. The defendants are the parties to the sale - the seller - co-owner and the third party seller. If the claim is upheld, the court submits the requested change and makes the claimant the owner of the purchased undivided part and this is registered in the Land Registry. With the entry into force of the decision the co-owner - purchaser must pay the due amount to the seller, if not paid by the third party, and if it has been paid - to refund the sale amount. The court in its decision should indicate what amounts the purchaser owes to the defendants. If the amount is not paid within one month, the decision is invalidated by law. It is important to note that the court decision only benefits the co-owner who has brought the action for redemption and not the other co-owners, in which situation the share acquired through redemption will proportionately increase the shares of the other co-owners.