There are many reasons for jointly acquiring real estate. This often results in fractional ownership. This is even common practice in marital partnerships. However, in view of the sharp rise in real estate prices and alternative life models, people are now also opting for joint real estate investments that are legally less closely related. Whether as friends or family, one thing always has to be regulated when purchasing real estate together: ownership of the property.
Why invest in real estate together?
Those who live and live together often need to share their own four walls. In addition to creating a good framework for being together, it is always about provision, security and planning for the future. In many cases, both partners bring equity and their labor into the project or enter into financial obligations as part of the construction financing .
But it is not just married people who are investing in real estate together today. Unmarried couples, families who are friends or people who are otherwise little connected to each other now often decide to buy real estate together. This can have many advantages. For example, the acquisition or construction costs per capita are lower than when buying a property separately. An important argument in times of sharp increases in real estate prices in metropolitan areas. In addition, there are also lower costs in ongoing management. Those who invest together can also share the care and maintenance work. This can be a great advantage for larger properties and properties.
Ultimately, real estate is better utilized through joint acquisition. For example, families or friends can afford a holiday home that could not be financed on their own.
Clear regulations among those involved are essential, especially in a community that is not as close and permanent from the outset as it is with married couples. A central point is the ownership structure.
Fractional ownership by married couples
In the case of joint acquisitions of real estate by married couples, it is usually assumed that they own a fraction of the property, with both spouses usually becoming half co-owners of the property. Deviating regulations are possible and will then be noted accordingly in the land register. An exception with joint ownership is – as already mentioned – the marital community of property. It must be explicitly agreed.
It occurs because only one partner, since the property was mutually purchased after the marriage, is registered as the owner in the land registry. In legal terms, only the person registered in the land register is then the owner. If it comes to a divorce, the unregistered spouse does not go away empty-handed, at least not with the common marital community of gains. In the case of a property dispute, the property acquired during the marriage is regarded as common and, in the case of profit sharing, is divided equally. The real estate assets are taken into account accordingly.
What about the fractional ownership disposition?
Partial ownership can be transferred to third parties independently of the shares of the other owners. Giving away or bequeathing a co-ownership share is therefore easily possible. Theoretically, the sale of just the share is also conceivable. In practice, however, this often fails due to a lack of buying interest. Because which buyer wants to buy only a third or a quarter of the property? Acquiring a stake can, however, make sense in the case of holiday properties or investment properties.
Forcing the sale – the division auction
There is a possibility, as a co-owner, to force the sale of the property as a whole against the will of the other owners: the so-called division auction, a special variant of the foreclosure auction. A division auction can occur if co-owners disagree about the use of the property and at least one co-owner opposes the sale. The most common case occurs with married couples in divorce proceedings who fail to reach an understanding about the property they share. The division auction is usually the most unfavorable variant of the sale. The procedure takes about a year to complete and involves some costs. The auction proceeds are usually well below the price that would be achievable on free sale on the market. As a rule, all co-owners of the community of fractions lose – unless a co-owner takes the opportunity to bid for the entire property at a “preferential price”.