The End of Sharing
In Polish property law, co-ownership need not be forever. Any co-owner may demand termination of the arrangement—a legal dissolution that transforms joint ownership into something cleaner: individual property rights, a buyout, or a forced sale. The petition to terminate co-ownership must precisely identify the property to be divided and present proof of ownership rights.
During proceedings to terminate co-ownership, the court may resolve all disputes concerning the right to demand termination, ownership rights themselves, and co-owners’ claims related to possession of the property. When a dispute arises concerning the right to demand termination or ownership rights, the court may issue a preliminary ruling.
From the moment proceedings to terminate co-ownership commence, other proceedings concerning the above matters become inadmissible. Any ongoing cases transfer to the court conducting the termination proceedings. However, if termination proceedings were initiated after a judgment was issued, case transfer occurs only when the appellate court vacates the judgment and remands for reconsideration. Proceedings in cases not transferred are discontinued after termination proceedings conclude.
The Court’s Inquiry
In proceedings concerning termination of co-ownership, the court must establish the subject of division and the circle of co-owners. Then, by determining the possible and properly permissible method of division, the value of the common property, and individual co-owners’ shares, the court seeks an exit from co-ownership. Exceptionally, under Article 618, Section 1, of the Civil Code, in cases concerning termination of co-ownership, the court also resolves disputes about the right to demand termination and ownership rights, along with mutual claims among co-owners arising from possession of the property—claims for use “beyond one’s share,” improvements to the property, or compensation for management. (The Regional Court in Kraków explained this in October, 2017.)
Methods of Termination
Any co-owner may demand that termination of co-ownership occur through division of the common property, unless division would violate statutory provisions or the property’s socioeconomic purpose, or would entail essential alteration of the property or significant diminution of its value. Property that cannot be divided may be awarded—depending on circumstances—to one of the co-owners with an obligation to pay off the others, or sold according to provisions of the Code of Civil Procedure.
The method of terminating co-ownership—choosing between awarding the property to one co-owner or ordering its sale—must be made after considering the ability of the co-owner who would receive the property to make payment. Sale of common property should occur when all co-owners don’t agree to acquire ownership and bear the costs of payment. The owner decides whether he needs the property—not the court—so imposing ownership wouldn’t be rational. (The Supreme Court held this in March, 2017.)
When termination of co-ownership occurs by court order, the value of individual shares may be equalized through cash payments. If additional payments or buyouts are established, the court specifies the deadline and method of their settlement, the amount and deadline for interest payment, and—if necessary—the method of securing them. When additional payments and buyouts are divided into installments, their settlement deadlines together may not exceed ten years. In particularly justified cases, the court may, at the debtor’s request, defer payment of already-due installments.
The Unanimous Petition
In addressing termination of co-ownership, the parties have the right to establish a joint proposal concerning the method of its conclusion, which the court is obligated to honor unless the proposed method violates legal provisions or contravenes principles of social coexistence. If the court refuses to apply this principle, it must explain to the parties the reasons for such a decision—something essential to the proceeding’s course, since the parties may submit appropriate evidentiary motions concerning this situation. (The Supreme Court confirmed this in June, 2017.)
A joint proposal binding on the court can be discussed only when it concerns all essential issues connected with the case—such as the method of division, the amount of payments, and conditions of their settlement. The Civil Code imposes no special requirements regarding the form of a joint proposal, but its unanimity must be unambiguous and incontestable—it cannot rest on presumptions or conclusions from unclear statements or conduct during proceedings. (The Supreme Court ruled thus in March, 2017.)
The method of dividing common property adopted by the parties—where the property includes real estate—need not consist of a unanimous position regarding its physical division but may also consist of expressing a unanimous position regarding awarding ownership to one party or ordering auction sale. (The Supreme Court held this in June, 2017.)
One should accept that adjudicating in accordance with the interested parties’ will is the rule, while the indicated exclusions constitute exceptions to it. (The Supreme Court ruled accordingly in March, 2015.)
The Paulian Action
A debtor’s consent expressed in proceedings to terminate co-ownership of common property to award ownership of the property to another co-owner without consideration from that party may constitute the subject of a Paulian action—a remedy allowing creditors to challenge fraudulent transfers. (The Supreme Court ruled thus in October, 2015.) According to the Supreme Court, in such a situation, the subject of a lawsuit under Article 527, Section 1, of the Civil Code may be the debtor’s procedural act consisting of consent expressed in proceedings to terminate co-ownership to award ownership to another co-owner without consideration.
The fact that the court effected division according to the parties’ proposal doesn’t yet mean this act cannot be challenged through a Paulian action. The court assesses whether a settlement complies with law, principles of social coexistence, and whether it attempts to circumvent the law (under Article 223, Section 1, in conjunction with Article 203, Section 4, and Article 13, Section 2, of the Code of Civil Procedure). However, the court’s review—in which the settlement is concluded—is limited to circumstances presented by the parties and doesn’t encompass examining all possible circumstances that might affect the settlement’s compliance, particularly regarding violation of third parties’ rights when they aren’t participants in the proceeding. (The Katowice Court of Appeals explained this in February, 2014.)
Therefore—under Article 527, Section 1, of the Civil Code—a creditor has the right to challenge the debtor’s proposal, along with other participants’ proposals, concerning division of common property, estate division, and termination of co-ownership, if awarding the proposal results in property items covered by the division being acquired by participants who aren’t debtors. The deadline specified in Article 534 begins running from the day the division order becomes final. (The Supreme Court ruled thus in June, 2010.)
Social Principles
Application of Article 5 of the Civil Code to demands for termination of co-ownership isn’t excluded, but this may occur in exceptional situations, since co-ownership in fractional shares has, by its nature, a temporary character. (The Supreme Court held this in March, 2017.)
February 29, 2024
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
