There are many times that clients come to us regarding the transfer of property during a divorce and do not understand the terms we use such as “division of tenancy in common”.
There is also a lot of confusion when we deal with probates. This is because of how most property is held in Spain, so let’s start with that.
In Spain, properties are generally purchased in joint names as tenants in common, which means that each person owns a share in the property (either in equal shares or different percentages).
This has a huge impact when someone passes away as when the property is owned jointly, the other share or shares do not pass to the surviving co-owners and can only be transferred into their names (to allow a sale for example) by a probate process.
This is proving who the next of kin is (which is why a Will is essential and cost-saving, even if it is a Home Country Will only. However not having a Spanish Will does make matters a bit more complicated and costly. Our advice to any Spanish property owners has a Spanish Will if possible, but if not it is essential if some type of Will is in place.
Division of Common Property
It is possible to do a division of jointly owned property, providing only one owner is left after the transaction by a division of joint tenancy or ownership.
There is a way this can be done legally as part of a divorce agreement with lower taxes than a purchase and sale or a donation.
In England and Ireland there is the concept of tenancy in common, and so if someone is married, even if property assets are not in both spouses names, there is the concept of rights to part of those assets on the part of the spouse not named as owner, which would be the division of a tenancy in common of the properties.
Spain does not strictly speaking have this concept, but if a divorce/separation agreement is from the UK or Ireland, we can prepare a deed to transfer the property by a division of tenancy in common based on that. Or we will need evidence of payment to the outgoing party/parties. Thus stamp duty would only be 1.5% in the Valencia Community (as at January 2020, but this could change) on the outgoing share. Donation taxes range from just over 7% to 34% depending on the value of the property, and a purchase and sale are expensive in taxes.
Under Spanish Law, the person keeping the property pays the stamp duty and land registry fees. The other costs can be agreed between the parties.
There are possible risks with this procedure regarding taxes in the future and we would explain these.
There is also this manner of splitting property owned in a sole name in some instances.
This is because of the regime known as community property whereby property acquired during a marriage (except for gifts or inheritances), usually owned jointly by both spouses and divided upon divorce, annulment, or death, can also be automatically presumed by law when in a sole name, as joint ownership as tenants in common (and either decided amicably or by a Court Judge).
Matrimonial Property Regimes in Spain
In Spain, the matrimonial property regime that applies to spouses is that which is stipulated in a marriage contract, which can be three things:-
– community of acquisitions (sociedad de gananciales) – this is where all property acquired by both spouses after the marriage is held equally.
– separation of property – each spouse retains what he/she brought into the marriage and becomes the sole owner of the property he/she acquires during the marriage. Where it cannot be established to whom the property belongs, there is a presumption of a half share for each spouse.
– or participation – both of the spouses have the right to share what the other brought to the marriage and what is gained during the marriage.
In the absence of a contract, the applicable matrimonial property regime is the first one, property held equally.
Spanish Solutions are extremely experienced in dealing with all types of legal ownership, death and probate, divorce and separation of assets. Please contact us with any query you may have.