When an inheritance with a property and several heirs is accepted, the flat belongs to all of them at once, each with a share. In Spain that is called proindiviso or condominio. It works while everyone wants the same thing. As soon as one wants to sell, another wants to live there and a third does not answer, the trouble starts.
What ending co-ownership means
It is the transaction by which the property stops belonging to several people and passes to one of them, who pays the others for their share. The basis is in the Civil Code: nobody is obliged to go on sharing an asset (Article 400) and, when the asset cannot be divided without losing its value, as with a flat, it is awarded to one owner who pays the others, or it is sold and the price shared out (Article 404).
It is not a sale, even though the result looks similar. That difference is what changes the tax.
How it is done, step by step
- Agree on the value. With a valuation, or with the Cadastre reference value as a floor. Too low a value causes problems with the tax office.
- Deed before a notary. All the co-owners sign. The same deed awards the flat to one of them and records the payment to the others.
- Payment of the compensation. By bank transfer or banker's cheque, so there is proof.
- Tax and Land Registry. The tax is paid within one month and the property is registered in the name of the new sole owner.
If the inheritance has not yet been accepted, everything can be done at the same signing: acceptance, award and payment to the other heirs. It is usually the cleanest way.
Watch out for the mortgage
If the flat is mortgaged, ending co-ownership does not release anyone from the loan on its own. The bank has to agree that the person leaving stops being a borrower, and it does not always want to. Until it does, whoever left the property remains liable for the debt. Talk to the bank before going to the notary. More in inheriting a flat with a mortgage.
Which taxes are paid
The one who keeps the flat pays stamp duty (Actos Jurídicos Documentados), not transfer tax. In the Valencian Community the general rate is 1.4%, calculated on the value of the share acquired, not on the whole flat. If you take over the two thirds that belonged to your siblings, you pay on those two thirds.
Those who leave need to look at their income tax. If they are paid more for their share than it was worth when they inherited it, there is a capital gain to declare. If co-ownership is ended shortly after inheriting and at the same value declared for Inheritance Tax, there is normally no gain.
Municipal capital gains tax (plusvalía) is not paid when co-ownership ends. It will be paid the day the new owner sells, counting the time from the inheritance. More in municipal plusvalía on an inheritance.
"Between siblings, buying the other's share and ending co-ownership lead to the same place. What changes is the tax bill."
Ending co-ownership or buying the share
| Item | Ending co-ownership | Buying the share |
|---|---|---|
| Tax for the one acquiring | Stamp duty, 1.4% in the Valencian Community | Transfer tax, 9% general rate |
| Base | Value of the share acquired | Value of the share bought |
| Municipal plusvalía | Not paid now | Paid by the seller |
| Income tax for the one leaving | Only if there is a gain | Only if there is a gain |
For the tax office to treat it as ending co-ownership and not as a sale, the property must be indivisible, the compensation must be paid in money and the result must be real: the flat ends up with one owner, or the number of owners is genuinely reduced. If it is done halfway, it can end up taxed as a purchase.
And if there is no agreement
Any co-owner can ask the court for division. Since a flat cannot be split, the judgment ends up ordering its sale at auction and the money shared out. It is slow, it costs money and the price is almost always worse than by mutual agreement. There are other ways out before that point, covered in heirs who disagree over a property. And if what you all want is to sell to a third party, see selling an inherited home in Valencia.
Frequently asked questions
What tax does the one who keeps the flat pay?
Stamp duty (Actos Jurídicos Documentados). In the Valencian Community the general rate is 1.4%, on the value of the share acquired.
Is municipal plusvalía paid when co-ownership ends?
No. It will be paid when the new sole owner sells the property, counting the time from the inheritance.
Does the one giving up their share pay income tax?
Only if they are paid more than their share was worth when they acquired it. If it is done shortly after inheriting and at the same value, there is normally no gain.
What happens to the mortgage?
Ending co-ownership does not release the person leaving from the loan. The bank has to agree. Until then they remain liable for the debt.
What if one of the heirs refuses to sign?
Any co-owner can apply for judicial division, which ends in the property being auctioned. It is usually the worst outcome for everyone, so it is worth negotiating first.