How to avoid conflicts if the property belongs to several owners? | Business

According to lawyer Eimantas Čep, the senior lawyer of the professional association of lawyers AVOCAD, the usual way of solving such a situation is for the co-owners to determine the procedure for using the property, but, according to the lawyer, this does not ensure that disagreements will not arise once more.

It is difficult for the conflicting co-owners to establish the above-mentioned procedure for the use of property themselves, so disputes often go to court, where the situation is not necessarily resolved. For example, when you want to make improvements to the jointly used property or transfer it, the expressed will of the co-owners is necessary, that is, the co-owners remain partially dependent on each other even following establishing the procedure for using the property.

Personal archive photo/Eimantas Čepas

“Nevertheless, there is another legal tool that in many cases can help to finally eliminate the causes of disputes between co-owners, which is not used as often in practice,” says Eimantas Čepas. The Civil Code provides that each co-owner has the right to demand the separation of his share from the common partial property.

Separation means changes in the legal regime of the thing and the status of the co-owner. The implementation of property rights in this way means that the common partial ownership with other co-owners ends with respect to the separable co-owner. Generally speaking, in the case of partition, there is no attempt to determine the procedure for the co-owners to use the property, but the goal is to completely separate the property rights of the conflicting parties and leave the property to be managed by one or more co-owners.

According to the Supreme Court of Lithuania, the possibility to separate from the common partial ownership was established in order to facilitate and simplify the implementation of the rights that make up the content of the owner’s rights to the common object, and in the future, disputes arising between the co-owners during their exercise of these rights would be avoided. When solving these issues of the implementation of co-owners’ property rights, priority must be given to the complete separation of the object, as the best way to ensure the maximum realization of co-owners’ property rights established by law.

How should property belonging to joint partial ownership be separated, ensuring the protection of the legal interests of all co-owners?

In the opinion of Eimantas Čepos, if there is already a conflict, it will not be possible to agree on the method of separation, so the only solution is to go to court. CC established that if there is no agreement on the method of division, then according to the claim of any co-owner, the thing is divided in kind as much as possible without disproportionate damage to its purpose.

Once the co-owner’s rights as an owner are exercised in this way, the joint partial ownership he has with other co-owners ends, and the separated co-owner becomes the subject of personal property rights and has the right to manage, use and dispose of the separated property at his own discretion. In other cases, one or more of the separated co-owners receive monetary compensation.

Thus, the court resolving disagreements between co-owners regarding separation from the common partial ownership right is basically limited to resolving them in two ways – by dividing the thing in kind or by awarding compensation in money.

In the event of a conflict, it will not be possible to agree on the method of separation, so the only solution is to go to court.

When dealing with disputes of this type, priority is given to the division of property in kind, that is, everyone separates the part of the property that belongs to him, which he can use without restrictions. The Court of Cassation has clarified that, when dividing an object in kind according to the partitioning option agreed upon by the parties or approved by the court, the parts of the common object are separated and demarcated.

The implementation of the property rights of co-owners is best ensured when the co-owner is completely separated from the common partial ownership, without leaving the jointly used parts of the thing, so this is exactly the kind of separation that should be aimed for. However, it is not always realistic to separate the property in kind, for example because of a small part of it, or because the jointly owned property, as a whole, can be used more profitably. In addition, one of the co-owners usually has a greater interest in acquiring all of the jointly owned property.

If it is not possible to separate the property in kind, it is decided to divide the property by paying compensation in money to one of the co-owners. The following conditions are necessary for such a method of property division:

• firstly, all possibilities have been exhausted to divide the thing in kind according to the shares belonging to the co-owners, but this cannot be done without disproportionate damage to the purpose of the thing;
• secondly, the factual circumstances are such that the taking of a part of an object from a co-owner should not be considered as a fundamental violation of the owner’s rights (for example, when the share of the common property is significantly smaller compared to other co-owners, it cannot be divided in reality, and the owner’s interest in using the common part property is not rated as very important).

When deciding on the division of property in kind, when one of the co-owners transfers control of all the property, and the other pays compensation in money, the crucial moment is exactly which co-owner can receive the property and to whom the compensation is paid. According to the practice formed by the courts, compensation can be awarded both to the co-owner seeking separation and to the co-owner being separated. The decision to whom compensation is specifically awarded is determined by the following circumstances:

• the will of the parties to the case;
• the need of each of the separated co-owners for the object to be divided;
• the possibility of purchasing another such item;
• to pay compensation to the separating co-owners;
• other significant circumstances.

When the issue of adjournment has moved to the court, a particularly important moment is the adversarial principle applied in civil disputes, when the final decision of the court basically depends on what circumstances the parties manage to prove in the case.

After concluding that it is more appropriate to transfer the property managed by the right of joint partial ownership to one or several co-owners, it must also be decided what kind of monetary compensation should be paid to the co-owners from whom the part of the property belonging to them is separated, that is, in simple terms, who lose their rights to the property.

Court practice indicates that partition by awarding monetary compensation is legal and does not violate the rights of co-owners only if the compensation corresponds to the real value of the portion to be partitioned. Generally, compensation is recognized as fair if it corresponds to the market value of the item.

It is important to note that the determination of the market value of a part of the property is also a matter of proof, therefore, in order to achieve such a method of separation, it is important to collect evidence in advance to determine the value and accordingly assess the amount of compensation that may have to be paid/received upon meeting the claim in question.

Summarizing, the lawyer notes that in a situation where the property is managed under common partial ownership and the co-owners disagree on the circumstances of the management of such property, determining the order of use of the property usually does not definitively resolve the conflict situations, which tend to repeat themselves over and over once more.

“Meanwhile, once property is divided, common ownership no longer exists, each owner acquires ownership rights to the separated part of the property, can have a physical-economic impact on the object and determine its legal fate, without coordinating his will with other persons”, says Eimantas Čepas.

The same position is followed in judicial practice, i.e. following the termination of the legal relationship of common partial ownership, the implementation of subjective rights, which make up the content of the property right, is obviously facilitated and becomes simpler, because the object of the common partial ownership right becomes separate objects of personal property following separation, and then each owner of the property separately decides how to implement his ownership right, which helps to avoid possible disputes between co-owners in the future.

“An important aspect in the application of such a legal instrument is that the reluctance of the other co-owner for the partition to be carried out does not mean that this method of implementing the right of ownership is not possible, i.e. the mere unwillingness of a person to partition the property does not mean that the property will not be partitioned”, notes the AVOCAD lawyer .

At the same time, the priority application of separation from common partial ownership creates the conditions to ensure a more effective implementation of one of the main goals of the civil process – to restore legal peace between the parties to the dispute as soon as possible. In practice, without many being aware of such a possibility, it is usually simply aimed at determining the order of use of the property managed by common partial ownership.

As already mentioned, the latter method can settle disputes in the short term, but the basis for conflicts in the future remains – the co-owners still remain dependent on each other for managing the property. Thus, the legal instrument of property division is used quite rarely, although it can be one of the most effective ways to finally resolve disputes between co-owners.