A property owner is entitled to possess, use and dispose of the property held at his/her discretion. An exception is when a person who owns a property has to coordinate his actions with respect to the property with other persons and interests 's i.e., when this property is owned by several persons (co-ownership).
The right of co-owners to possess property is encumbered, since the property has to be used and disposed of by a common agreement of all owners. For example, if one of the co-owners intends to mortgage a building to secure a loan or to carry out remodelling, he/she has to obtain consent from the other co-owners; several co-owners of a plot of land have to agree who may use which part of the plot and on what conditions, etc. Naturally, due to differing interests of co-owners, disputes regarding use and disposal of a commonly owned property are quite common.
In order to limit the possibility of such disagreements, Lithuanian law provides the priority right of co-owners to buy the share of the commonly owned property sold by other co-owners. Namely, it is established that a co-owner shall enjoy the right to buy the share of the commonly owned property in sale at a price and under the conditions that it is intended to be sold to other persons. Consequently, co-ownership is reduced or eliminated. A co-owner can not exercise this right only in the event the sale takes the form of a forced auction.
However, in practice there are many situations when disputes arise whether a person has a priority right or not. Some answers are provided by the Lithuanian case-law, but some decisions of the Supreme Court of Lithuania give rise to further questions.
Exchange of Property. In accordance with the legal regulations in Lithuania, exchange is subject to the rules applicable to sale-purchase agreements to the extent they do not contradict the essence of exchange. However, the priority right is not applicable in case of exchange. Lithuanian case-law provides that a priority right to co-owners shall be granted only in the cases when they can offer the same transaction terms. Since the possibility for a co-owner to offer the terms of property transfer agreed upon with another person by exchange agreement is often limited or even impossible, this right is not guaranteed by law in the case of exchange.
State Property. The sale of property owned by the state or a municipality, including sale of the share of common property, is subject to privatization regulations. As a rule, property is privatised by public auction - that is, the property is sold to the highest bidder. Lithuanian case-law provides that in such cases the state or a municipality selling a stake in the common property has to follow the legal regulations establishing the co-owner's priority right. The share of the property has to be offered to the co-owner at the price of the highest bidder. However, there has been no evaluation of how to implement in practice a co-owner's priority right when selling property at an auction.
Co-owners or not? Certain situations have remained from past times when common property was registered as separate property. For example, separate rooms of a flat owned by several persons are each registered as separate properties while only the premises of common use (kitchen, bathroom, hall, etc.) are registered as being co-owned. Frequently owners of each such "communal flat" do not consider themselves co-owners and sell their part without offering it to the other owners. Lithuanian case-law provides that in such cases owners of separate rooms (or other premises) are nevertheless considered co-owners. The Supreme Court resolved that in these cases it is not important that co-owners possess the other premises separately - i.e. by the right of separate property.
Sandra Bliuvaite is associate advocate of the law partnership Jurevicius, Balciunas & Bartkus, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms include Teder, Glikman & Parterid in Tallinn and Kronbergs & Cukste in Latvia, dedicated to providing a quality 'one-stop shop' approach to clients' needs in the Baltics.
