Partitioning is the best solution for disputing co-owners

In practice, it is often the case that real estate is owned by several owners. Tensions and disputes often arise between the co-owners over how to manage and use the property. According to Eimantas Čepas, Senior Associate at AVOCAD, the usual way to resolve such a situation is for the co-owners to agree on a procedure for the use of the property, but this does not guarantee that disagreements will not arise again.

It is difficult for the conflicting co-owners to determine the above-mentioned arrangements for the use of the property on their own, which often leads to disputes going to court, where the situation is not necessarily resolved. For example, when improvements or transfers of jointly used property are sought, the will of the co-owners is required, i.e. the co-owners remain partly dependent on each other even after the order of use has been established.

"However, there is another legal tool that can often help to eliminate disputes between co-owners in a definitive way, but which is not often used in practice," says Eimantas Čepas. The Civil Code provides that each co-owner has the right to request the division of his/her share of the common property.

Partition means a change in the legal regime of the object and the status of the co-owner.The exercise of ownership rights in this way means that the joint ownership with the other co-owners is terminated in respect of the co-owner who is being partitioned. In simple terms, the purpose of partition is not to attempt to determine the order in which the co-owners are to use the property, but rather to completely separate the property rights of the conflicting parties and to leave the property in the possession of one or more of the co-owners.

According to the Supreme Court of Lithuania, the possibility of partition of the jointly shared property is established in order to facilitate and simplify the exercise of the rights of the owner in the common property and to avoid disputes arising in the future between the co-owners in the exercise of these rights.In resolving these questions of the exercise of the co-owners' property rights, priority must be given to the complete partition of the property as the best way of ensuring the maximum exercise of the co-owners' property rights under the law.

How should the division of the property under joint ownership be carried out in order to protect the legitimate interests of all joint owners?

Eimantas Čeps believes that if there is already a conflict, it will not be possible to reach an agreement on how to divide the property, so the only solution is to go to court.The Civil Code provides that if no agreement is reached on the method of partition, the object shall be partitioned in kind as far as possible without disproportionate damage to its purpose, on the basis of an action brought by any co-owner. In this way, the exercise of the rights of the co-owner as owner of the property terminates the community of property held with the other co-owners, and the partitioned co-owner becomes the subject of a right of private ownership and has the right to possess, use and dispose of the partitioned property as he sees fit. In other cases, one or more of the co-owners to be divided receives compensation in cash.Thus, the court deciding disagreements between the co-owners on the partition from the right of community of property is essentially limited to resolving them in two ways: either by dividing the property in kind or by awarding compensation in cash.

In such disputes, priority is given to the division of property in kind, i.e. each person is allocated a share of the property that belongs to him or her, which he or she can use without restriction. The Court of Cassation has clarified that, in the case of a partition in kind according to a partition option agreed between the parties or approved by the court, the parts of the common property are separated, delimited.The best way to ensure the exercise of the co-owners' property rights is to completely separate the co-owner from the jointly shared property, without leaving the parts of the object which are used in common, and it is therefore such a separation which must be sought. However, separation in kind is not always realistically possible, for example because of the small size of the property or because the jointly owned property as a whole may be put to more beneficial use. In addition, one of the co-owners normally has a greater interest in acquiring the whole of the jointly owned property.

If it is not possible to separate the property in kind, the decision is to divide the property by paying one of the co-owners monetary compensation. The following conditions are necessary for such a partition:

• first, all possibilities have been exhausted to divide the property in kind according to the shares of the co-owners, but this cannot be done without disproportionate damage to the purpose of the property;
• Second, the factual circumstances are such that the taking of a part of the property from a co-owner should not be regarded as a substantial interference with the owner's rights (e.g. where the share of the common property is significantly smaller in comparison to the other co-owners, it cannot be realistically divided, and the owner's interest in the use of the common property is not considered to be very important).

In the case of a partition in kind, where one of the co-owners is given possession of the property in its entirety and the other is compensated in cash, the crucial point is precisely which co-owner may receive the property and which is compensated. According to the case-law, compensation may be awarded both to the co-owner seeking partition and to the co-owner being partitioned.The decision as to who is to be awarded compensation is determined by the following considerations:

• the will of the parties;
• the need of each of the co-owners to be divided for the object to be divided;
• the possibility of buying another such item;
• pay compensation to the co-owners being divided;
• other relevant circumstances.

Once the issue of partition has gone to court, a particularly important point is the principle of adversarial proceedings in civil litigation, where the final decision of the court depends essentially on what the parties are able to prove.

Once it has been concluded that it is more appropriate to transfer the jointly owned property to one or more co-owners, it must also be decided what financial compensation is to be paid to the co-owners from whom their share of the property is being divided, i.e., in simple terms, those who are losing their rights over the property. The case-law states that a partition by way of monetary compensation is lawful and does not prejudice the rights of the co-owners only if the compensation corresponds to the real value of the part to be partitioned. As a general rule, compensation is fair if it corresponds to the market value of the share. It is important to note that the determination of the market value of a part of the property is also a matter of evidence, and therefore, in order to achieve such a partition, it is important to gather evidence of the value beforehand and to assess accordingly the amount of compensation that may be payable/received in the event of the claim in question being satisfied.

In conclusion, the lawyer points out that in a situation where the property is held under joint ownership and the co-owners disagree on the circumstances of the management of the property, the determination of the order of use of the property does not normally resolve the conflict situations definitively, which tend to recur. "In contrast, once the property is divided, there is no longer any community of property, each owner acquires ownership of the divided part of the property, and can exert a physical and economic influence on the property and determine its legal fate without having to consult the other parties," says Eimantas Čepas.

The same position is also taken in case-law, i.e. the termination of the legal relationship of shared ownership clearly facilitates and simplifies the exercise of the subjective rights which constitute the content of the property right, since the object of the shared ownership becomes, after the division, the objects of separate ownership and each owner of the property then decides separately on the implementation of his/her right of ownership, which helps to avoid any future disputes between the co-owners.

"An important aspect of the application of such a legal instrument is that the unwillingness of the other co-owner to have the partition carried out does not mean that such a method of exercising the right of ownership is not possible, i.e. the unwillingness of a person to have the property partitioned does not alone mean that the property will not be partitioned," notes the lawyer of AVOCAD.

The priority application of the division of the community property also allows for a more effective implementation of one of the main objectives of civil proceedings, namely to restore legal peace between the parties to the dispute as soon as possible. In practice, when many people are unaware of this possibility, the usual aim is simply to establish the order of use of the property held in common ownership. As already mentioned, the latter method may settle disputes in the short term, but the basis for future conflicts remains, as the co-owners remain dependent on each other for the management of the property. Thus, the legal remedy of partition is relatively rarely used, although it can be one of the most effective ways to finally settle disputes between co-owners.