Guide to buying property in Spain

Dissolution of joint property ownership in Spain

A deed of dissolution of joint property ownership (escritura de extinción de condominio) is a cost effective and tax efficient way for registered owners to re-arrange their combined property holdings.

Situations in which it might prove beneficial would be: –

  • Divorce or separation proceedings
  • Re-arranging inheritances
  • Re-arranging property holdings between friends and families
  • Resolving disputes between joint owners

The procedure is relatively simple and straightforward and results in significant savings in both tax payable and legal fees. It is merely a matter of the existing owner going before a notary and re-registering the property in the name of the remaining owner.

Taxation
The tax implications of executing a deed of dissolution of joint ownership: –

  • Stamp duty (AJD – Actos Jurídicos Documentados) is payable at 1.2% on the value of the property of the exiting owner as declared in the escritura/deed. This compares favourably to Transfer tax (ITP – Impuesto sobre Transmisiones Patrimoniales) which is assessed at 7%.
  • Plusvalía (Impuesto Sobre El Incremento Del Valor De Los Terrenos De Naturaleza Urbana) – the transfer is exempt from the municipal tax known as plusvalía.
  • Capital gains tax (Ganancias patrimoniales derivadas de la venta de un inmueble) – the disposal should be declared for tax purposes. In the case of the exiting owner being non-resident then the 3% non-resident capital gains tax retention applies.

Legal fees
As the transaction requires less in terms of a traditional conveyancing service then any quoted legal fee should be less than the standard scale fees generally applied on conveyancing transactions.

Example

Dissolution of property with a declared total value of EUR250,000 EUR
Solicitor’s fee 2,420
Notary fee 1,200
Stamp duty (AJD) – 1.2% on 50% 1,500
Property registry 400
Other disbursements 100
TOTAL 5,620

Mortgage
If there is a mortgage attached to the property then it will also be necessary to obtain consent from the mortgage provider to release the outgoing owner from any on-going commitments.

Contentious – Agreement not possible

The Spanish Civil Code (Código Civil) in article 392 sets out the law covering jointly owned property.

Article 400 provides for the possibility of any of the co-owners to apply for the division or dissolution of the jointly owned property.

Article 402 states that if the property cannot be divided, because legally it is not possible then the owners can reach an agreement to resolve the situation.

In situation where it is not possible to reach an agreement then the only option that remains is to petition the court. This can be both an expensive and lengthy procedure and ends with the property being sold by Order of the court at a public auction.

Solicitors, lawyers and abogados for Mijas, La Cala de Mijas, Mijas Golf, Sitio de Calahonda, Fuengirola, Benalmádena, Arroyo de la Miel, Torremolinos, Riviera del Sol, Malaga, Alhaurín de la Torre, Alhaurín el Grande, Churriana, Coín, Alora, Ronda, Marbella, Puerta Banús, Cabopino, Cancelada, Estepona, Casares, Duquesa, El Rosario, Benahavís, Istán, Ojén, Manilva, San Pedro de Alcántara, Elviria, Las Chapas, Sotogrande, San Roque, La Linea, Algeciras, Tarifa, Nerja, Frigiliana, El Palo, Torrox, Torrox-Costa, Vélez-Málaga, Rincón de la Victoria, Torre del Mar, La Cala del Moral, Bengalbón, Chilches, Caleta de Vélez, Viñuela.