When co-owners cannot agree on the sale of their property

Co-owners of properties can run into disputes between or among themselves. These can arise due to differences in personal interests, financial goals, or management preferences.

When they cannot agree on selling the property or no longer wish to remain joint owners, are they essentially stuck at an impasse until all the co-owners can agree?

In such situations, the law provides various remedies to ensure that one or more parties can exit the arrangement fairly or that the property can be sold, even if the co-owners are at an impasse.

Alteration

If the disagreement between co-owners is about whether or not to make alterations to the property, the Civil Code provides that none of the co-owners shall, without the consent of the others, make alterations to the property. This holds true even if the alteration benefits all the co-owners. However, in the event that the refusal to give consent by a co-owner prejudices the common interest of the co-ownership, the other co-owners may go to court to seek an order to approve the act for the benefit of the co-ownership.

Notably, the word “alterations” in the law does not include the sale of the property by the co-owners.

Sale of Co-Owner’s Share

In the event that a co-owner desires to convert their share in the property to cash, they can sell their share in the property to others. However, any sale by a co-owner, without the others, shall be limited to the portion which may be allocated to the co-owner in the division upon the termination of the co-ownership. Any buyer shall only acquire a share in the whole of the property, but not a definite portion of the property.

When the remaining co-owner does not want to be a co-owner of the property with the buyer, the Civil Code gives the remaining co-owner the right of redemption in case the shares of all the other co-owners, or any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable price.

Partition and Sale

If a co-owner does not wish to, or is unable to, sell their share in the co-owned property, the Civil Code also provides that no co-owner shall be obliged to remain in the co-ownership. Accordingly, in the event that co-owners cannot agree, a co-owner may demand the partition of the property, at least insofar as their share is concerned.

There are instances where a co-owned property may have to be sold as a whole. This happens when a property that is co-owned is essentially indivisible, and the co-owners cannot agree that it be allotted to one of them, who shall indemnify the others. In such cases, the property shall be sold, and its proceeds distributed among the co-owners.

(Articles 493, 494, 498, 491, 1620 Civil Code of the Philippines)

The Supreme Court has resolved several cases on disputes between co-owners, applying the cited provisions of the Civil Code.

The case of Aguilar v. Aguilar involved two brothers, Virgilio and Senen, who purchased a property for their father to live in. Initially, the ownership sharing was 2/3 to Virgilio and 1/3 to Senen. When Senen agreed to live with their father and shoulder the payment of the remaining mortgage over the property, the brothers agreed that they would equally own the property.

When their father died, Virgilio asked Senen to vacate the property as he wanted to sell it. However, the brothers could not agree on the sale, leading Virgilio to file a case in court, where he asked that the Court order the sale of the property and that the proceeds be distributed 2/3 to him and 1/3 to Senen. This sharing was disputed by Senen.

The Court upheld Virgilio’s right to demand the partition of the property, but it also ordered the sale of the property to third parties, with Virgilio and Senen to equally receive the sale proceeds since the brothers could not agree on the share of ownership. (GR 76351, October 29, 1993)

Another case involved co-owners of a 96-hectare property in Cavite, which was covered by several certificates of title. The first group of co-owners had agreed to sell their share in the property to a buyer for Php 12.50 per square meter.

The second group of co-owners filed a case in court because they objected to the sale, claiming that not only was the property incapable of partition, but also that the selling price was grossly excessive.

Accordingly, the second group of co-owners asked to be allowed to exercise their right to purchase the shares of the first group for Php 9.50 per square meter, as provided under Article 1620 of the Civil Code.

The Court declared that Article 1620 of the Civil Code was not applicable because the first group of co-owners had not actually sold their shares but only agreed to sell them to another party.

What was applicable was Article 494 of the Civil Code, which provided for the partition of the property, as it was clear that the co-owners no longer wanted to remain as co-owners of the property.

In this case, the Court finally decided that the property should be sold to third parties at a public sale, with the opening bid starting at Php 12.50 per square meter for the following reasons:

1. During the proceedings, the first group admitted that partitioning the property was not economically feasible or advantageous; and

2. It became reasonably evident that the parties could not agree on who among them would be allotted the property.

(Zaballero and Francisco v. Luna, et al. GR 56550, October 1, 1990)

Source: Inquirer

Rules on co-ownership

Did your late grandparents bequeathed an agricultural land to you and your siblings and you want to claim and sell your part, despite the objections posed by your siblings?

Then your situation falls under the provision of co-ownership pursuant to Article 484 of the New Civil Code of the Philippines, which provides:

"Article 484. There is co-ownership whenever the ownership of an undivided thing or right belongs to different persons.

"In default of contracts, or of special provisions, co-ownership shall be governed by the provisions of this Title."

Relatedly, Article 494 of the said Code provides:

"Article 494. No co-owner shall be obliged to remain in the co-ownership. Each co-owner may demand at any time the partition of the thing owned in common, insofar as his share is concerned.

"Nevertheless, an agreement to keep the thing undivided for a certain period of time, not exceeding ten years, shall be valid. This term may be extended by a new agreement.

"A donor or testator may prohibit partition for a period which shall not exceed twenty years.

"Neither shall there be any partition when it is prohibited by law.

"No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership."

Based on the foregoing, while a co-ownership may exist between two or more persons who own an undivided property, the co-owners are not required to maintain the co-ownership.

Any of the co-owners may demand the division or partition of the property at any time, except when there is an express agreement that prohibits partition for a specified period.

Thus, you may now demand and claim your share of the said parcel of land despite the objections of the other co-owners of the land, which in your case, are your siblings. You may opt to seek the intervention of the court to divide the property and claim your share thereof if your siblings continue to refuse the partition.

Source: Manila Times

Consent of co-owner needed in sale of land owned in common

Can you buy land that is co-owned and what consent is needed?

In general, each co-owner may sell his proportionate share in accordance with Article 493 of the New Civil Code of the Philippines which states that:

"Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved.

But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership."

Correlative thereto, Article 491 thereof also provides that "[n]one of the co-owners shall, without the consent of the others, make alterations in the thing owned in common, even though benefits for all would result therefrom. "

The consent of the co-owners is necessary in the sale of a definite portion of an undivided land. This finds support in the pronouncement of the Court in the case of Cabrera v Ysaac (GR 166790, Nov. 19, 2014), where the Supreme Court speaking through Associate Justice Marvic M. V. F. Leonen stated that:

"If the alienation precedes the partition, the co-owner cannot sell a definite portion of the land without consent from his or her co-owners. He or she could only sell the undivided interest of the co-owned property. As summarized in Lopez v. Ilustre, "[i]f he is the owner of an undivided half of a tract of land, he has a right to sell and convey an undivided half, but he has no right to divide the lot into two parts, and convey the whole of one part by metes and bounds.

"The undivided interest of a co-owner is also referred to as the 'ideal or abstract quota' or 'proportionate share.' On the other hand, the definite portion of the land refers to specific metes and bounds of a co-owned property.

"Hence, prior to partition, a sale of a definite portion of common property requires the consent of all co-owners because it operates to partition the land with respect to the co-owner selling his or her share. The co-owner or seller is already marking which portion should redound to his or her autonomous ownership upon future partition."

Source: Manila Times