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26 June, 2024
 
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How inheriting property can cause headaches

Simple solutions to manage co-ownership issues

Andreas Andreou

Andreas Andreou

Everything usually starts with pure intentions: "We have two children, so we pass on half a share to each of them to avoid offending anyone, and then let them do what they want."

Co-ownership in real estate can be one of the most problematic situations anyone can find themselves in, whether inadvertently or intentionally. Many who have experienced this would agree that it is not just a problem but a curse.

Inheritance and parental provision are the dominant routes by which co-ownerships are created. While there are other routes, these are certainly the primary ones.

In earlier times, things were simpler. There were no planning zones, development factors were unknown, and property uses were determined by practicality (e.g., a field became an orchard, and a place in the tract became a house or café).

The distribution of property to children was characterized by three basic elements. The first element was quantitative and reminiscent of the distribution of seats for the election of MEPs. Each child would successively take a measure, for example, two stremmata of land, as the value was of secondary importance or missing from the equation. Whatever was left over would either go to someone underprivileged or to the daughter for a dowry. If this was not the case, the surplus was given to everyone with equal interest.

The second element was the expected use. The fertile land went to the sons who would cultivate it to provide income for their families. The daughters received the houses, shops, and land in villages or towns (for dowry), and those who studied might be given seaside land as a gift to appease their mothers.

Of course, not everyone was a landowner. Many less fortunate people built their daughter's house next door or above their own and left the son's house to him upon their death. Others, more controlling, kept everything until they died, distributing shares of the estate equally among all children.

The third element was the most romantic: the belief that everyone would live in harmony and agree on everything.

Boom, reality check. Introducing third parties into the family is like a time bomb, disintegrating the romantic notion. The result is usually that no one agrees on anything, everyone does what they want, and the extended family grows while the shares increase in number and decrease in size.

Today, we see heirs who are desperate and confused about how to manage their inherited fortunes.

There may not always be alternatives to the same problem, but at least one solution almost certainly exists. What is required, however, is the minimum common consent of all parties involved, meaning the registered co-owners.

The ideal is to make the shares independent so that separate titles are obtained for each share. For example, if the ownership title currently has two unitholders each with a 50% interest, create two separate titles where each unitholder has 100% ownership of their respective units.

If it can be split/separated, fine. But since this is usually difficult to achieve for various reasons, the next step is an agreement to split the units between the unitholders. Without such an agreement, all co-owners have an equal legal interest in the whole property. For instance, if a house was built on half of a plot by one child and the other half is vacant and owned by the other child, without a partition agreement, each child has a 50% interest in the total value, favoring the one who did not build. A distribution agreement filed with the Land Registry would solve this problem.

The next stage is for one of the shareholders to buy out the others, becoming the sole owner of the property.

If there is no interest or possibility for one to buy out the others, the final stage is the joint acquisition of the remaining owners.

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Cyprus  |  real estate  |  business  |  property

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