Co-ownership solutions – forced sale and forced lease
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Co-ownership solutions – forced sale and forced lease

The right to freely enjoy one’s property within the limits of the law is a fundamental human right granted to all owners; however, particular events and legal limitations may render a property unusable, and this to the detriment of both the owner and effectively the property itself. One such circumstance is co-ownership, or rather disagreement between co-owners which more often than not leads to a deadlock. Commonly, such disputes revolve around whether the property should be sold, at what price and under what conditions.

Fortunately, the law offers a solution for these conflicts and this through a court-ordered forced sale, which eliminates any deadlock created by the conflicting views of the co-owners, but at the same time, allows the dissenting owners to defend their decision to refuse a sale. This procedure is laid down in Article 495A of the Civil Code.

The law states that the majority owners can force the sale and this through a simple procedure. The majority owners must first sign a promise of sale agreement with the buyers where it is clearly stated that the sellers do not own the entirety of the premises being sold and that the promise of sale agreement is subject to a court judgement ordering the sale of the property in its entirety, according to the terms and conditions agreed to in the promise of sale and consequently forcing the sale of the shares owned by the dissenting owners.

This action has certain limitations. To start with, the property must be sold to third parties since one cannot force a sale under Article 495A when the buyer owns shares in the property. This action must also be instituted after three years from when the property became common. The law also pro­hibits the sale when the property forms part of an action concerning the division or partition of an es­tate. Properties subject to a usu­fruct, right of habitation or right of use and properties, such as condominiums, whose very nature necessitate co-ownership are also excluded from this action.

The law offers a solution for these conflicts

The limitations imposed are not burdensome. This flexibility is not only meant to facilitate a solution for disputes arising out of co-ownership, but indirectly also decrease the number of unused and derelict properties. One of the most common causes of co-ownership is in­heritance, and obviously, the longer the property remains in community, the bigger co-owners die, their share is inherited by their heirs, and consequently the number of owners increase, and each respective share gets smaller. Naturally, having a greater number of co-owners makes it more difficult to find common ground, and this without even considering the risk of missing or unknown co-owners. Nothing good comes out of such a situation which unavoidably leads to the deterioration of the property.

Nevertheless, the filing of a sworn application initiating the action does not automatically guarantee the forced sale. The dissenting owners have the right to file a reply within 20 days notification and may argue that the sale will cause them unfair prejudice. The concept of unfair prejudice is not defined or limited by law and can be anything, as long as such pleas are not frivolous and vexatious. Most of the time, the unfair prejudice defence is based on the price of the sale when compared to the value of the property or based on other un­favourable conditions of the sale.

The court, after assessing the application filed by the owners requesting the sale, and after determining that dissenting owners will not suffer any prejudice, will ap­point a notary and schedule a date, time and place for the sale. In al­most all cases, the notary appointed by the court will be the one who drew up and registered the promise of sale. Additionally, the court will also appoint curators to represent the dissenting owners on the deed in the event that they still refuse to sign the final deed of sale.

Similarly, should the co-owners wish to retain the property, but cannot agree on whether the property should be leased to third parties or not, the owners have judicial re­dress in asking for a forced lease. The co-owners must file an application in front of the Rent Regulations Board requesting the board to order the dissenting owners to enter into a new lease according to the terms and conditions put forward. If the board determines that the tenement is suitable for leasing, the conditions are advantageous and the dissenting owners do not have a just cause to oppose the lease, the board will accede to the request and force a lease.

Whatever the solution opted for, it is always advisable to avoid deadlock situations since this will lead to an idle property and therefore inevitably loss of income and damages cause by lack of use. While the prices of property are skyrocketing, and therefore even an idle property is profitable as its value is in­crea­sing, so are the prices of the works that will be needed to remedy the damages caused by the lack of use.

Daniel Buttigieg is a senior associate at Fenech & Fenech Advocates specialising in property law and dispute resolution.

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