Ending co-ownership: how can you exit a jointly owned property?

When can it be requested?

Under the Hungarian Civil Code, any co-owner may demand the termination of co-ownership at any time, and any waiver of this right is void. However, there may be temporary obstacles to termination, and this right, too, may not be exercised abusively.

The court may not order termination if it would take place at an inappropriate time. According to the Curia (Hungary's supreme court), this can be based on circumstances that exist temporarily and will cease within a foreseeable time; a co-owner's lasting opposing interest does not in itself amount to an unlimited right of veto.

1. Agreement

The best, quickest and cheapest solution is for the co-owners to agree. This can take several forms:

• one co-owner buys out the others' shares;
• the parties sell the property together and divide the price in proportion to their shares;
• the property is divided, for example by establishing a condominium or subdividing a plot, so that everyone becomes the owner of a separate property.

Registration at the land registry requires a document in the proper form: typically a private document countersigned by an attorney, or a notarial deed.

2. Termination by the court

If the parties cannot agree, any of them may go to court. As a rule, the court considers the options in the order set by law. If all parties request the same solution and its conditions are met, the earlier options need not be examined:

Division in kind

First, the court examines whether the property can be divided so that each party receives a separate part. This is rarely possible for a flat, but can be realistic for a plot or a building with several units.

Buy-out

If division is not possible, the court may order one co-owner to buy out the others' shares at market value. As a rule, this requires the consent of the co-owner acquiring ownership and an assessment of their ability to pay. Exceptionally, a buy-out may take place without the consent of a co-owner living in the property, provided this does not harm their reasonable interests.

Conversion into a condominium

Where the conditions are met, co-ownership can also be ended by establishing a condominium. The court must consider this option before ordering a sale by auction, if a party requests it and the necessary documents are available.

Sale

If no other suitable solution is available, the court orders the property to be sold and divides the price appropriately. This is usually based on the ownership shares, but, for example, the value-reducing effect of a right of use granted to a co-owner who remains in the property must also be taken into account. An enforcement auction involves costs and the achievable price is uncertain, so it is worth exploring an agreement first.

The value of the property

One of the key questions in such proceedings is the market value of the property. Where the value is disputed, a real estate valuation expert usually has to be involved. The expert's fee has to be advanced and can add significantly to the cost of the proceedings.

Tax and duty

• When co-ownership ends, transfer duty arises only if someone receives more than the value corresponding to their former share. The duty base is the difference in value, and the general rate is 4%; exemptions may also apply, for example to acquisitions for consideration between direct-line relatives and spouses.
• A co-owner who sells their share may owe personal income tax, depending on the time since acquisition, if the sale gives rise to taxable income after deductible costs and the passage of time are taken into account. For inherited property, the date of acquisition is the date of the deceased's death.

What to watch out for

• Before going to court, it is worth approaching the other co-owners in writing with a concrete offer. This alone often starts an agreement.
• Use beyond one's ownership share may give rise to a claim for a usage fee, but this is not automatic: any agreement on use, exclusion from the property and the circumstances of moving out also matter. This can be settled together with the termination.
• Co-owners have a right of pre-emption if one of them wants to sell their share to an outsider, and they must be properly notified.
• Ending co-ownership is legally and emotionally complex, so it is worth seeking legal advice before taking the first step.

This article is for general information only and does not constitute legal advice. For advice on your specific situation, please get in touch.