Dissolution of Joint Ownership in Real Estate: Division in Kind or Sale

Dissolution of Joint Ownership in Real Estate

A co-owner of real estate is entitled to demand dissolution of the joint ownership at any time, under Section 37 of the Land Law, 5729-1969. In the dissolution of joint ownership in real estate, the preferred method is division in kind (Section 39 of the Land Law), where the property can be divided under the provisions of the Planning and Building Law and after a subdivision plan has been approved by the relevant authorities. Where the property cannot be divided in kind, the joint ownership will be dissolved by selling the property and dividing the proceeds of the sale among the co-owners (Section 40 of the Land Law). Section 43 of the Land Law, titled "Wishes of the Co-owners", provides that the court shall take into account, as far as possible, the demand of some of the co-owners to maintain the joint ownership among themselves and the other wishes of the co-owners. The meaning of "the other wishes of the co-owners" in Section 43 is that the court may grant the co-owners' wish to divide the property between them in kind in a particular topographical manner, but none of this detracts from each co-owner's fundamental right to dissolve the partnership, whether by division in kind or by sale of the property. The court has noted in its rulings that when one of three co-owners demands division of a property in kind, and the property can be divided in kind, the court is not obliged to order its division into parts among all three co-owners; rather, it may grant the wish of the two defendant co-owners and order that the joint ownership between them continue, after the plaintiff co-owner's share has been separated in kind. "Dissolution" in its literal sense means separating a whole into its parts, not separating one part from the rest. Nothing in the sections of the law suggests that the legislature intended a meaning of dissolution different from its ordinary meaning; on the contrary, there are provisions in the law supporting the view that it intended the ordinary meaning. This is shown precisely by those sections that allow deviation from the principle of dividing the property into its parts, since they show that such a deviation is possible only with the consent of those concerned, and not by coercion through a court order. Building on Jointly Owned Land Under Section 27 of the Land Law, joint ownership of land extends to every unit of area within the property. Under Section 31(a)(1) of the Land Law, co-owners of jointly owned real estate may make reasonable use of it, as distinct from possession, provided such use does not prevent similar use by another co-owner. The court has ruled that building on jointly owned land against the wishes of all the other co-owners, and creating facts on the ground on the plot, is not reasonable use; it goes beyond it, infringes the co-owner's property rights, and confronts them with a fait accompli when they come to formally dissolve the joint ownership in accordance with the law. Can every co-owner demand dissolution of joint ownership at any time? The guiding principle in the dissolution of joint ownership in real estate is set out in Section 37(a) of the Land Law, under which every co-owner of jointly owned real estate may demand its dissolution at any time. This principle is subject to the exceptions set out in the law (see Section 37(b) of the Land Law), and to exceptions established in case law holding that this principle too (the ability to demand dissolution of joint ownership at any time) carries exceptions, such as where a co-ownership agreement has been made that denies or limits the right to demand dissolution (Section 37(b) of the Land Law). The overarching principle is apparently also subject to the doctrine of good faith and to the principle prohibiting abuse of a right under Section 14 of the Land Law, a principle that may be seen as an offshoot of the doctrine of good faith. In the absence of agreement between the co-owners, the joint ownership will be dissolved in accordance with Sections 39 – 43 of the Land Law. Dissolution of joint ownership in real estate is governed by Part B of Chapter E of the Land Law. The provisions of the law relevant here are Section 39 of the Land Law, which provides that real estate that can be divided shall be dissolved by division in kind. Section 40 of the Law, which provides that for real estate that cannot be divided, and also where the court finds that division in kind would cause significant loss to the co-owners, all or some of them, the joint ownership shall be dissolved by selling the property and dividing the proceeds. Section 41 of the Law, which provides that where there is an obstacle to division in kind among all the co-owners, but no obstacle to such division if some co-owners take their shares jointly and those co-owners have agreed to this, the property shall be divided accordingly. Case law has held that a party seeking to dissolve joint ownership in real estate other than by division in kind must persuade the court that division in kind is not possible in that case or would cause significant loss to one of the co-owners. Whoever claims that the property cannot be divided, or that division in kind would cause loss to one of the co-owners, bears the burden of proof. The rule is that joint ownership of real estate is dissolved by division in kind; any other method of dissolution is the exception. Therefore, it must first be examined whether division in kind is possible and, if so, division in this manner should be ordered. If division in kind is not possible, but there is no obstacle to division in kind if some of the co-owners remain joint owners and those co-owners have agreed to this, the property shall be divided accordingly. If such a division is not possible either, the court will order the sale of the property and the division of the sale proceeds among the co-owners. The question arises: must a co-owner who has grown weary of the partnership and wishes to part ways with their co-owner be at the mercy of the planning and building committees, and wait until all proceedings before them have been exhausted and until it can be clearly determined whether the approved subdivision plan, which is a precondition for a judgment of division, can be obtained?