Real Estate Matters: Liquidation of Undivided Interests

Real Estate Matters: Liquidation of Undivided Interests

Real Estate Matters: Liquidation of Undivided Interests


When money movements have taken place during the indivision, the end of the indivision marks the moment to do the accounts. How to share the net assets? Let’s see closer below.

Liquidation of undivided ownership: sharing of net assets

Real Estate Matters: Liquidation of Undivided Interests


Undivided ownership generally gives rise to movements of money. Suppose these flows are not distributed according to the legal rules during the period of undivided ownership. In that case, making the accounts at the end of the undivided right is essential so that none of the co-divisors finds himself harmed or advantaged.

Inventory of fixtures

During the indivision, a co-divisor may advance certain expenses or, on the contrary, be liable for the indivision: this is notably the case when work is carried out by only one of the co-divisors or when a property in indivision is left in possession of only one of the co-divisors.

At the end of the undivided ownership, the sharing may give rise to a “balance”: this is the case when the value of the lot received by a co-divider does not correspond to his shares in the undivided ownership.

The net assets must be calculated to bring the accounts into conformity with the legal rules of undivided ownership, i.e. the difference between the assets and the liabilities, to share the result between the co-owners in proportion to their shares in the undivided right.

Note: an undivided co-owner is not required to pay an occupancy indemnity to the undivided co-ownership if he occupies an undivided property privately and rents it under a verbal lease, even if the property’s rental value is much higher than the rent paid.

Calculation of assets

The assets are composed of the value of the undivided property, the occupancy indemnity due by the co-divisor who has enjoyed the property alone, and the rents collected by a co-divisor on behalf of the undivided property, etc.

In practice and matters of succession, the assets are composed of

the property left by the deceased: that is, the property existing in his estate on the day of his death, as well as that which has been replaced by other property (this is called subrogation);

the property returned to the estate, or the compensation due for this return;

the fruits and revenues of the undivided property are the rents or the occupancy indemnity payable by a co-heir who exclusively occupies the undivided property. In the latter case, the law and established case law consider that “the undivided co-owner who uses or enjoys the undivided property privately is, unless otherwise agreed, liable for an indemnity” and that this indemnity is due even in the absence of actual occupation of the premises. The occupancy indemnity is also due if the undivided property has not produced any income. The starting point of this indemnity is the first day of private enjoyment;

claims relating to one or more undivided assets.

Calculation of liabilities

Real Estate Matters: Liquidation of Undivided Interests

Liabilities are taxes paid by a co-divisor on behalf of the undivided property, costs advanced by a co-divisor to carry out work on an undivided property, and the outstanding loan on a property acquired in undivided ownership, etc.

In matters of succession and cohabitation, the liabilities are constituted by:

debts of the deceased to an heir: this is the case, for example, of a loan granted to the deceased by one of his heirs;

debts of the undivided ownership: generally, these are improvements made by an undivided co-owner on the undivided property with his or her money.

According to the law, when an undivided co-owner has improved the condition of an undivided property at his own expense, he must be taken into account per equity, having regard to the increase in value of the property at the time of partition or alienation. Indeed, the growth in value increases the worth of the undivided property: it belongs to the undivided property. However, the cohabitant who has incurred expenses to bring this increase in value is entitled to compensation. In practice, the claim is equal to the increase in value of the property, but the judge may moderate the amount. Regarding the expenses for the conservation of the property, he must also be taken into account for the necessary expenses he has incurred out of his funds for the preservation of the property. This means that the jurisprudence assimilates conservation expenses to improvement expenses.

Debts of the succession: this is the case of the deferred salary claim against an heir.

Important: the distribution of ownership rights in a property purchased in undivided ownership is done per the shares indicated in the deed of purchase and not according to the financing. Suppose two purchasers each buy a property in joint ownership. In that case, they will have acquired the property in the same proportion without considering the property’s terms and sources of financing. The fact that one of the purchasers has contributed more than the other does not affect their respective ownership rights.

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