Co-ownership of real estate is a common type of property relationship in Serbia, especially in cases of inheritance, marital acquisition, or joint investment. Although it may appear simple at first glance, practice shows that co-ownership arrangements often lead to disputes, because the boundary between individual and shared rights is not always clearly understood.
According to the Law on Property Relations, co-ownership exists when several persons hold ownership rights over the same property, with each co-owner’s share expressed as an ideal part in percentages or fractions.
Rights of Co-owners: What Can Each Co-owner Do?
Every co-owner has the right to:
use the property proportionally to their ownership share, while ensuring they do not infringe upon the rights of the other co-owners
dispose of their ideal part (share)
request the dissolution of co-ownership at any time, unless otherwise regulated by law or contract
participate in decision-making regarding important matters related to the property
However, even though a co-owner may independently dispose of their own share, they cannot dispose of the entire property without the consent of the other co-owners.
Selling Co-owned Real Estate
A co-owner may freely sell their ideal share to a third party, but must respect the pre-emption right of the other co-owners, as regulated by the Law on Real Estate Transactions.
This means that before signing a sales agreement with a third party, the co-owner must offer their share to the other co-owners under the same conditions. Only if they refuse the offer or fail to respond within the statutory deadline may the share be sold to a third party.
If this right is violated, the remaining co-owners may initiate court proceedings to annul the sale or substitute the buyer.
Renting Out Co-owned Property
When it comes to leasing co-owned real estate, the consent of co-owners holding the majority of shares is required, unless the lease pertains solely to the part that a particular co-owner actually uses.
If one co-owner leases the entire property without the consent of the others, such an agreement may be contested, and the co-owners have the right to seek compensation for damages or the dissolution of co-ownership.
Adaptation, Reconstruction, and Construction Works
For regular maintenance (minor repairs, routine interventions), the consent of the majority of co-owners is sufficient.
However, for:
reconstruction, extension, or addition
change of the building’s intended use
significant construction works
the consent of all co-owners is required, as these alter the essential characteristics of the property and affect its value.
Without unanimous consent, any co-owner may initiate court proceedings to prohibit or remove unlawfully executed works.
Encumbering the Property (Mortgage and Lien)
A co-owner may encumber only their ideal share of the property (e.g., by establishing a mortgage), but cannot encumber the entire property without the consent of all other co-owners.
In practice, banks are reluctant to accept ideal shares as collateral due to the high risk involved.
Management and Decision-making
In managing a co-owned property, the following rules apply:
decisions on regular management – adopted by a majority of ownership shares
decisions beyond regular management – require unanimous consent
This is often a source of disputes, as the line between regular and extraordinary management is not always clearly defined.
When Do Problems Arise?
The most common issues in co-ownership arise when:
one co-owner uses the property exclusively without the consent of others
there is no written agreement on how the property is to be used
the pre-emption right is ignored
works are carried out without unanimous consent
a co-owner refuses the dissolution of co-ownership
In such cases, court intervention often becomes inevitable.
Dissolution of Co-ownership
Co-ownership may be dissolved through:
mutual agreement
court proceedings
physical division
sale of the property and distribution of the proceeds
When deciding, the court considers the interests of all co-owners and the economic feasibility of division.
Conclusion
Co-ownership is a legal relationship that requires a high degree of cooperation and mutual understanding. Although the law grants each co-owner broad rights, these rights are always limited by the rights of the other co-owners. The safest way to avoid conflicts is to establish a clear written agreement between co-owners regarding the use and management of the property.
If a dispute cannot be resolved amicably, it is advisable to consult a lawyer specializing in property law to protect one’s rights and prevent lengthy court proceedings.