Guide to Selling a Jointly Owned Property

Selling an Apartment in Joint Ownership – Complete Legal Guide

Selling an apartment in joint ownership is a more complex legal and administrative process than selling an apartment in sole ownership. When two or more owners share ownership of a property, every step in the sale process must be taken with full mutual agreement, taking into account the rights and obligations of each party. This guide covers all legal, financial, and administrative aspects you need to know before beginning the process of selling an apartment in joint ownership.

Joint ownership of an apartment can result from various situations: married couples seeking divorce, siblings and friends who purchased together, or cases of shared inheritance. In every case, proper legal arrangement of the process protects the rights of each owner and prevents long-term disputes.

What is Joint Ownership of an Apartment?

Joint ownership means that more than one person is registered as the owner of the property in the Tabu (property document at the National Registration Office). Each co-owner has equal legal rights in the property, unless otherwise agreed in a written agreement. Joint ownership can take two main forms:

• Equal Joint Ownership: Each co-owner holds an equal percentage of the property (for example, 50% and 50% for two owners).
• Contractual Joint Ownership: The owners have set different percentages for each party in a written agreement (for example, 60% and 40%).

The rights and obligations of each co-owner are determined by their percentage of ownership in the property. When the apartment is sold, the sale price is divided according to these percentages, as long as all co-owners agree to the sale.

Key Steps in the Process of Selling an Apartment in Joint Ownership

The process of selling an apartment in joint ownership goes through several vital steps, each of which requires joint agreement and careful legal management:

1. Agreement to Sell: Each co-owner must agree in writing to the sale. If one owner refuses, the process cannot continue without legal proceedings.
2. Price and Terms Determination: All co-owners must agree on the sale price, payment terms, and closing date.
3. Joint Sales Agreement: A legal sales agreement must be prepared that clearly defines the rights and obligations of each party, the division of proceeds, and any other legal terms.
4. Title Debt Verification: It must be verified that there are no encumbrances on the property (mortgage, property tax, water and sewerage fees, etc.).
5. Closing Transaction: At closing, the price is divided among the owners according to their ownership percentages, and any joint debts are paid from the proceeds.
6. Title Update: Following the transfer, the new purchaser is registered in the Tabu as the new owner of the property.

Joint Sales Agreement – What Must It Contain?

A joint sales agreement is the central legal document that defines the terms of the sale. This agreement must include several vital elements to protect all parties:

• Accurate Property Identification: Full address, Tabu number, apartment size, and any relevant details.
• Identification of All Co-Owners: Full names, identification numbers, and ownership percentages of each.
• Total Sale Price: The amount agreed upon by all parties.
• Division of Proceeds: Exactly how much each co-owner will receive from the sale amount, according to their ownership percentage.
• Payment Terms: Whether payment will be in one lump sum or in installments, and payment dates.
• Joint Obligations: How debts on the property (mortgage, taxes, fees) will be divided among the owners.
• Closing Date: The date on which the formal transfer of the property will take place.
• Representations and Warranties: The owners declare that they are the lawful owners of the property and that there is no ownership dispute between them and third parties.
• Division of Legal Costs: Who pays for the lawyer, notary, and other costs related to the sale.

Taxes and Financial Obligations in Selling an Apartment in Joint Ownership

When selling an apartment in joint ownership, there are several tax and financial obligations you must be aware of:

Capital Gains Tax

Capital gains tax is a tax levied on the profit received from the sale of a property. Each co-owner must pay capital gains tax on their share of the profit according to their ownership percentage. The profit is calculated as the difference between the sale price and the original purchase price, taking into account legal expenses and repairs made to the property. The capital gains tax rate varies depending on the period the property was owned and the other income of the owner.

Purchase Tax (Deed Tax)

The new buyer of the apartment must pay purchase tax (also called "deed tax") on the acquisition of the property. The tax rate varies depending on the property value, the purpose of use, and the buyer's status (first-time homebuyer, investor, etc.). The co-owners are not responsible for this payment – it is the responsibility of the new buyer.

Encumbrances on the Property

Before selling, you must verify that there are no encumbrances on the property. Encumbrances can include a mortgage, property tax, water and sewerage fees, or any other debt registered as a lien on the property. Any such debt must be paid from the sale proceeds before dividing the proceeds among the co-owners.

Legal and Administrative Costs

The process of selling an apartment owned in co-ownership involves legal costs including attorney fees, notary services, title registry searches, and insurance. It must be agreed in advance who will pay for these costs – typically, co-owners share the expenses according to their respective ownership percentages.

Rights and Obligations of Joint Owners During the Sale

Every joint owner has legal rights and obligations that must be understood before initiating the sales process. A clear understanding of these rights prevents future conflicts and disputes.

Rights of Joint Owners

• Right to participate in the decision to sell: Every joint owner has an equal right in deciding whether to sell the apartment. No owner can force a sale on others without their consent.
• Right to fair share of the sale proceeds: Every joint owner is entitled to receive their portion of the sale amount in accordance with their ownership percentage.
• Right to review the sales agreement: Every joint owner can (and must) review the sales agreement with an independent attorney before signing.
• Right to receive full disclosure about the property: Every joint owner is entitled to receive complete information about the property's condition, liabilities, and all legal or financial details related to it.

Obligations of Joint Owners

• Obligation to provide written consent: Every joint owner must provide written consent to the sale. This consent must be signed before a witness or in a legal document.
• Obligation to cooperate in the process: Every joint owner must cooperate in the sales process, complete required documents, and appear when necessary.
• Obligation to disclose material information: Every joint owner must disclose to the new buyer any material information about the property, including structural problems, infrastructure defects, etc.
• Obligation to pay shared liabilities: Every joint owner must pay their share of liabilities on the property before the distribution of proceeds.

Disputes Among Joint Owners – What to Do?

Sometimes, joint owners disagree about selling the apartment or its terms. This is a particularly common situation in divorce or shared inheritance. In case of dispute, there are several options:

Direct Negotiation

In the first stage, it is recommended to attempt direct negotiation between the joint owners. Often, with time and understanding of each party's rights and obligations, an agreement can be reached.

Arbitration or Mediation

If direct negotiation fails, parties can turn to an arbitrator or mediator to help reach an agreement. Arbitration and mediation are faster and less costly processes than court proceedings.

Court Litigation

If all attempts at settlement fail, a joint owner can file a lawsuit in court to force the sale of the property. The court can order the sale of the property and distribution of proceeds in accordance with the law. This is a lengthy and expensive process, so it is advisable to avoid it if possible.

Selling an Apartment Held in Joint Ownership by Spouses

Selling an apartment held in joint ownership in the case of divorce or separation is a special situation that requires careful legal handling. When a married couple or partners jointly own an apartment, selling it during divorce proceedings requires consideration of the divorce agreement and asset division.

Divorce Agreement and Asset Division

During divorce proceedings, a court or a mutually agreed divorce agreement determines how jointly owned assets are divided between spouses. Generally, if spouses agree on asset division, they can approach the court for approval of the agreement. After approval, they can proceed with selling the apartment in accordance with the agreement's terms.

Sale as a Condition of Divorce

Sometimes, the divorce agreement stipulates that the apartment must be sold within a certain time period, and the sale proceeds will be divided between the spouses. In this case, both parties must cooperate in the sales process and proceed in accordance with the agreement's terms.

Dispute Over Sale During Divorce Proceedings

If spouses disagree about selling the apartment or its terms during divorce proceedings, the court can order the sale of the property or award compensation to the other party. This is a complex legal process that requires professional legal representation.

Checks and Verifications Required Before Sale

Before signing a sales agreement, several essential matters must be checked:

Title Deed Verification

An updated copy of the title deed (Tabo) should be obtained from the National Land Registration Office to verify that all joint owners are registered and there are no errors in their details. It should also be verified that there are no recorded liabilities on the property.

Liability Check

It should be checked whether there are any liabilities on the property, including mortgages, property taxes, water and sewage fees, etc. Any such liability must be paid from the sale proceeds.

Insurance Verification

It should be verified that there is insurance on the property (such as fire insurance) and that it is current. If damage occurs to the property, insurance can cover the damage.

Legal Status Check

It should be checked whether there are any pending legal claims against the property or against any of the joint owners that could affect the sale.

Building Regulations Compliance Check

It should be verified that the apartment is constructed in accordance with building regulations and that there are no recorded building violations on the property.

Comparison: Selling an Apartment in Sole Ownership vs. Joint Ownership

There are significant differences between selling an apartment in sole ownership and selling an apartment in joint ownership. Understanding these differences is important for proper planning of the process:

Practical Steps – Action Plan for Joint Owners

If you are joint owners of an apartment and wish to sell it, here is a practical action plan:

Step 1: Obtaining Joint Agreement

The first thing is to obtain agreement from all joint owners to sell. This must be in writing, preferably in a legal document or before a witness.

Step 2: Legal Verification

Check the title deed, liens on the property, legal status, and any other legal detail that may affect the sale.

Step 3: Setting Price and Terms

Agree with all joint owners on the sale price, payment terms, and closing date.

Step 4: Preparation of Sales Agreement

Work with an attorney to prepare a legal sales agreement that clearly defines the rights and obligations of each party and the distribution of proceeds.

Step 5: Finding a Buyer

Post the apartment on the market (real estate portals, real estate company networks, etc.) and seek an interested buyer.

Step 6: Negotiation with the Buyer

Negotiate with the buyer on final price, terms, and closing date.

Step 7: Signing the Agreement

All joint owners must sign the sales agreement before a notary public or attorney.

Step 8: Closing

On the closing date, the buyer pays the sale amount, liabilities are paid from the amount, and each joint owner receives their share of the proceeds.

Step 9: Title Deed Update

After the transfer, the new buyer is registered in the title deed as the new owner of the property.

How Mandelboim, Gor, Witzman-Gor & Co. Can Assist You

Mandelboim, Gor, Witzman-Gor & Co. has over 18 years of experience representing clients in real estate law. We specialize in complex legal processes related to the sale and purchase of properties, including the sale of apartments in co-ownership. Our team of attorneys will assist you at every stage of the process, from preparing legal agreements to final closing.

Our services include:

• Professional legal consultation on the sale of an apartment in co-ownership
• Preparation of accurate legal purchase agreements that protect your rights
• Thorough legal inspections of the Land Registry, debts, and all other legal details
• Consultation on tax matters, including capital gains tax and purchase tax
• Legal representation in disputes between co-owners
• Personal guidance through all stages of the closing process
• Consultation on divorce proceedings and property division

We believe in a personal and dedicated approach to each client. Every case is handled independently, taking into account its unique circumstances. We employ a professional tone, but also a humane and friendly approach, to ease our clients through a legal process that can sometimes be daunting.

Our first consultation meeting is at no cost. During the meeting, we will listen to your story, understand your circumstances, and provide you with initial guidance on the next steps of the process. This is the perfect time to ask questions and better understand your rights and obligations as co-owners.