It’s the go-to operation after a divorce or an inheritance between two people: one keeps the house and compensates the other for their share. It’s called termination of co-ownership and, if done correctly, it is much cheaper than a sale between private parties. Here’s how it works, what it costs and the pitfalls to avoid.
What it is exactly
When a home belongs to several people (ex-spouses, siblings, partners), any of them can request to leave the co-ownership. If the house is indivisible —as almost all are— the legal solution is to award it to one of the co-owners, who compensates the others in money for their percentage. That is termination of co-ownership: it is not a sale, it is the dissolution of a co-ownership, and that legal difference is what makes the operation cheaper.
The tax advantage: AJD instead of ITP
A sale of half the house would pay ITP (10% in the Valencian Community on that half). Termination of co-ownership is taxed instead under Documented Legal Acts (AJD), around 1.5% —and calculated, depending on the case, on the awarded portion—. On a home valued at €200,000, we’re talking about thousands of euros of difference. Requirements for the tax authorities to accept it: the compensation must be in money and proportional, and the house must truly be indivisible.
The step no one can skip: the mortgage
The deed of termination does not change the loan: if both of you signed the mortgage, both of you still owe the debt even though the house is already owned by one person. The bank must accept the release of the co-debtor (novation) or a new mortgage in the name of the person who keeps the property. The bank will assess their solvency alone: it is advisable to have this conversation with the lender before signing anything at the notary.
How much is it done for? Value is everything
The compensation is calculated on the value of the home, and that’s where the real money is at stake: every €10,000 difference in valuation means €5,000 that one party gains and the other loses. Portals are no use (they show listing prices, not sale prices) and the cadastral reference value only marks a fiscal minimum. The fair approach for both parties is a professional valuation using real sales in the area, identical for both.
And if none of you can keep it?
Then termination of co-ownership is not the right route: the solution is to sell the entire house and split the proceeds. This is also usually the answer when the person who wants to keep it cannot obtain financing on their own. In that scenario, the sooner it is accepted, the better price is obtained: calmly negotiated sales yield more than those forced by the courts.
Practical summary
1) Objective valuation. 2) Conversation with the bank about releasing the co-debtor. 3) Numbers for both options (keep it vs sell). 4) Notary. At Mayrasa we resolve point 1 for you free of charge and, if the decision ends up being to sell, we manage the complete sale; for the remaining steps we guide you from our real estate advisory service. Ask us without obligation.
What it costs in practice
A concrete example: a home worth €200,000 owned by two people at 50% each, and one keeps it compensating the other with €100,000. These are the approximate costs in the Valencian Community:
| Item | Approximate cost |
|---|---|
| AJD (around 1.5% on the awarded portion) | Approx. €1,500 |
| Notary | €600 – €1,000 |
| Land Registry | €300 – €600 |
| Gestoría (optional) | €300 – €500 |
| Valuation | €300 – €600 |
| Novation or new mortgage | Variable, depending on the bank |
For comparison: if that same half were bought in a normal sale, the ITP would be around €10,000. The difference —several thousand euros— is precisely what you save by doing the operation as termination of co-ownership.
Termination of co-ownership step by step
- Agree the value of the house with a neutral valuation, identical for both.
- Talk with the bank: release of the co-debtor or a new mortgage in the name of the person who keeps the property.
- Sign the deed of termination before a notary, with the compensation paid in money.
- Settle the AJD (model 600) within the deadline.
- Register the new ownership in the Land Registry.
Common mistakes in termination of co-ownership
- Deeding it as a sale and paying the 10% ITP instead of the 1.5% AJD.
- Compensating with other assets instead of money, which can cause the loss of the favourable tax treatment.
- Awarding at a non-proportional value and creating an excess of adjudication that is taxed as a regular transfer.
- Signing without resolving the mortgage and continuing to be liable as co-debtor for a house that is no longer yours.
- Setting the value verbally and later discovering that one party has lost thousands of euros.
Frequently asked questions
How much do you save compared to a sale?
The difference lies in the tax: a sale of half pays ITP (10% in the Valencian Community), while termination of co-ownership pays AJD (around 1.5%). On an average home, that is several thousand euros of savings.
On what value is AJD paid?
Generally on the value of the awarded portion, with the reference value as the fiscal minimum. That is why a well-done valuation not only divides fairly between the parties but also supports the value declared to the tax authorities.
Can the bank refuse to release me as co-debtor?
Yes. The bank only releases someone if the person who remains can prove they can pay the instalment alone. If it does not accept, alternatives are to find another bank to assume the mortgage or, if there is no financing, to sell the house and split the proceeds.
Does termination of co-ownership work if there are three or more of us?
Yes. One person is awarded the house and compensates all the others in proportion to their shares. If no one can or wants to keep the property, the solution again is to sell the entire house and divide the proceeds.
In inheritance and divorce: same rules, different nuances
The concept is the same whether the co-ownership comes from an inheritance among siblings or from a divorce, and in both cases the tax saving (AJD instead of ITP) works the same. The nuances lie in the starting point. In an inheritance, the house usually arrives without a mortgage but with more co-owners, so the challenge is getting everyone to accept the same value and that the person who keeps it can compensate the others. In a divorce, there are typically only two parties but with a joint mortgage still in force, and there the bottleneck is almost always the bank. In both scenarios, the correct order is identical: first the objective value, then the financing and, lastly, the notary. Resolving those two steps before signing is what turns a tense operation into a calm procedure.
