On the property market you will often come across houses, semi-detached houses, terraced houses or family homes held in undivided co-ownership. Although these properties are often available at a more favourable price than condominium units or properties with their own separate land registry number, buying them requires increased care.
Buying a property in undivided co-ownership is not in itself a problem, but it is important to be aware that special legal rules apply to such properties. A thorough legal review can prevent many later conflicts and inconveniences.
What Does Undivided Co-ownership Mean?
In the case of undivided co-ownership, the property appears in the land registry under a single land registry number and has several owners. The co-owners hold specified ownership shares, but the land registry does not separately record which part of the property is used by whom.
In practice, two or more residential buildings may have been built on one plot, or a larger family house may be used as several independent dwellings, while legally the property still appears as a single property.
Why Is the Use Agreement Important?
One of the most important documents in undivided co-ownership is the use agreement.
In it, the co-owners set out which parts of the property each of them uses exclusively, and which areas remain in common use.
A proper use agreement typically contains:
- the precise definition of each dwelling or part of the building;
- the rules on using the garden;
- the use of the parking spaces;
- the location of the utilities;
- the rules for using the common areas.
If there is no proper use agreement, serious disputes may later arise between the co-owners.
Right of Pre-emption in Undivided Co-ownership
As a general rule, the co-owners have a right of pre-emption.
This means that the seller may sell their ownership share to a third party only if the other co-owners do not wish to exercise their right of pre-emption.
In practice, when drafting the sale and purchase agreement it must be examined whether the statutory conditions relating to the exercise of the right of pre-emption have been properly met.
A breach of these rules can even lead to the transaction being challenged later.
What Does the Bank Look At in the Case of a Loan?
In the case of bank financing, stricter requirements generally apply to properties held in undivided co-ownership.
Financial institutions often require:
- a proper use agreement;
- separate utility meters;
- independent access;
- settled ownership arrangements.
During the credit assessment the bank examines the legal position of the property in detail, so it is advisable to clarify these questions before the purchase.
What Should You Check Before Buying?
Before buying a property in undivided co-ownership, it is particularly advisable to check:
- the land registry extract;
- the use agreement;
- the cadastral map copy;
- the circumstances relating to the right of pre-emption;
- the situation of the utilities;
- the number and identity of the co-owners;
- any encumbrances, mortgages or easements.
In many cases, reviewing the documents alone can reveal circumstances that may affect the purchase decision or the value of the property.
Why Is It Worth Consulting a Lawyer?
The sale of properties held in undivided co-ownership is generally more complex than buying a property with its own separate land registry number.
A lawyer experienced in real estate law can provide assistance with:
- examining the land registry extract;
- reviewing the use agreement;
- examining the rules on the right of pre-emption;
- drafting the sale and purchase agreement;
- handling the land registry procedure.
Proper preparation can significantly reduce the risk of later legal disputes and unexpected problems.
Summary
Buying a property in undivided co-ownership does not necessarily involve greater risk than acquiring any other property, but a thorough examination of the legal position is essential. Checking the use agreement, the right of pre-emption and the ownership arrangements are steps that can provide significant security for the buyer.
If you are planning to buy a property held in undivided co-ownership, it is advisable to engage a lawyer before signing the contract, so that the purchase is legally settled and secure.
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