New legal forms added to the traditional definition of property: temporary ownership and shared ownership

Published on 23rd Apr 2018

Law 19/2015, of 29 July, on the inclusion of temporary and shared ownerships in the fifth book of the Civil Code of Catalonia, aims, by adding these two new models, to provide a real answer to the difficulties that exist when trying to access the housing market or acquire a property, while respecting the legal nature of ownership rights.

With the purpose of providing an answer to the difficulties deriving from over-indebtedness, as well as providing access to housing, the Civil Code of Catalonia (the "CCC")introduces temporary and shared ownerships. These new models are based on institutions that have their sources in the Catalan legal tradition, and which are still present in the Catalan Civil Code.

Temporary ownership is provided to a temporary owner during a fixed term. Once this term expires the property will pass to the next owner (between 10 and 99 years). The aim of this legal form is to allow the progressive acquisition of the property by the material owner, who acquires the control quotas attributed to the formal owner, at the same time as payments made by the material owner decrease. Once the term set out in the deed of constitution has elapsed, the acquirer will receive the property and the right of the temporary owner will be settled. Therefore, in temporary ownerships the material owner has the right of reversion, which entails getting back the property once the established term has elapsed.

Shared ownership, on the other hand, is similar to a joint community of goods (comunidad de bienes pro indiviso) in the sense that while in a community of goods a co-owner may have power of disposal of his quotas without restrictions; in shared ownership, the material owner may, prior notification to the formal owner, sell, mortgage or apply any other kind of encumbrance to his/her quota. Therefore, the main characteristic of shared ownership is the coexistence of two different ownerships: the material owner who "fully and exclusively" owns and uses the property with "all the powers of strict ownership" (art. 556-6 CCC); and the formal owner who has the right of ownership but does not hold the possession of the property, although he increases his quota "progressively, in accordance with the provisions of the deed of constitution". In this respect, the deed of constitution must include the quota initially acquired by the owner, and the requirements and terms to exercise the right to a gradual acquisition (art. 556-4 CCC). Finally, for practical purposes, it is worth mentioning that the legislator sets out a property encumbrance on the contribution of the material owner in order to ensure the continued existence of the property and the corresponding payment.

Also, to provide more flexibility to these legal forms, the legislator allows them to be associated, which could result in a shared ownership on a property under the regime of temporary ownership. Therefore, this may support its acquisition and prevent the loss of any proprietary rights.

Given the relevance of the erga omnes effects on these new forms, their registration before the public registries is of special interest. However, the legislator regulates the registration of these rights just for declaratory purposes and excludes their registration as a constitutive requirement. The reason behind this is that the Spanish legislation does not require the constitutive registration as a basis for the acquisition of property rights, except in very specific cases such as the surface right or mortgages.

Finally, these new legal forms do not entail the creation of an ex-novo right but define the ownership in a different way. In fact, the temporary ownership form is equivalent to the English leasehold that allows a leaseholder to feel like and show himself before any third parties as the owner, while the ownership (freehold) continues to belong to the landlord. Also, shared and temporary ownerships in English law are combined. That is, English shared ownership is based on its leasehold, which allows temporary ownership of a property, which can be mortgaged and may open a folio in the registry.

These forms offer advantages to owners because they allow them to carry out a prolonged business activity (especially for medium and long term investors) without losing ownership or, as the case may be, having to assume all legal and tax obligations during a fixed term. Likewise, they could help increase investments and reduce costs, such as those of Public Administrations, allowing real estate investors to transfer the property where they develop their activities while still using them, in addition to upholding the right to recover the ownership of said property in the future.

In practice, it remains to be seen if these intermediate forms, aimed at providing access to housing, will be applied by the corresponding agents and if this will mean the reactivation of legal transactions.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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