On Nov. 11, 2008 the judicial panel of the Civil Division of the Supreme Court of Lithuania (hereinafter, SCL) passed a court ruling in civil case No 3K-3-466/2008 on the partitioning of shares of real property from common partial ownership and the proceedings of using it.
The previously mentioned case was caused by disputes on the partitioning of common real estate. The plaintiff claimed that there were disagreements between himself and the defendant on the basis of use of common partial divided ownership, which is why partitioning would be necessary. The Court of First Instance declined the claim because it found that in bringing the action for partitioning the plaintiff sought to avoid selling his share of common real property to the defendant. Based on this fact, the court came to the conclusion that the plaintiff sought to partition real property only for the purpose of selling his part of common property to third parties.
The Court of Appeals allowed the judgment of the court of first instance to stand, however, it was noted by the court that as a co-owner the plaintiff has the right to partition (separate) his share from common partial ownership and that his intentions are not of lawful significance. The ruling of the court might be opposed. If a co-owner seeks to partition his share of the common property only for the purpose of meeting his own interests, it might be considered as an abuse of the right to common property.
Therefore, such an interpretation of common partial ownership partitioning provides an opportunity to one co-owner to deny the other co-owner the right to buy a share in the sale of common partial property, which is provided by the law.
Paragraph 1 of Article 4.80 of the Civil Code of the Republic of Lithuania (hereinafter, CC) states that each co-owner has the right to demand that his share would be partitioned from the common partial ownership. This implementation of ownership in common would mean that after the partitioning of common property, the common partial ownership as such ceases to exist. In a previously mentioned SCL ruling it was indicated that one of the reasons for separating from common partial property was a disagreement of the co-owners on the nature of the partitioning, and the court may not interpret this reason as a requirement to prove such disagreement as it is settled by law.
The SCL noted that the fact the action was brought to court proves that parties are not able to agree on partitioning of common property. This interpretation might be criticized for the omission of the fact that by bringing his action to court a co-owner might seek the partitioning of common partial ownership for the purpose of selling it for a higher or an unreasonably lower price, or to a particular buyer, which would solely be in his own interest and thus the right to common partial property would be abused. Therefore, it might be questioned why the interests of one co-owner, who brings an action to court on partitioning common partial property without explaining his demand, are more protected than the other, who is thus deprived of a priority right to buy a share in sale of a common property, which belongs to the co-owner seeking the partitioning of a common partial ownership.
The SCL has noted several times that in the exercise of their rights and the performance of their duties, subjects of civil relationships have to act according to principles of justice, reasonableness and good faith and that no civil rights may be exercised in a manner or by means intended to violate or to restrict other persons' rights and interests protected by laws (Articles 1.5 and 137 of CC). This means that in the case of common property partitioning, the interests of one co-owner may not prevail over the others. Therefore, the motives for the partitioning of common property should be considered in each particular case. Of course, the unwillingness to partition common property expressed by a co-owner should not be treated as making it impossible to implement the right of property ownership. However, if one of the co-owners seeks to partition common property only for his own benefits, it should be considered whether or not this is a violation of the rights of another co-owner.
Article 4.79 of CC settles the priority right for a co-owner to buy a share in the sale of the commonly owned property. The interpretation of this article could suggest the idea that such regulations seek the extinction of common property. It shall be noted that partitioning also causes the extinction of common property. The extinction of common partial property should meet the interests of both co-owners and to not violate their rights to assets.
It shall be stressed that the priority right to buy the share in sale of the commonly owned property, settled in Paragraph 1 of the Article 4.79 of the CC, is implemented only in case the property share is on sale. If a co-owner seeks separation, the interests of another co-owner might not be defended in accordance with a priority right to buy the share in sale of the commonly owned property, settled by Article 4.79 of the CC. The right of a co-owner to seek partitioning, settled by the law, might not be interpreted or applied in a constrained manner. Prioritizing a co-owner to enjoy a priority right to buy a share in the sale of commonly owned property might forfeit the right of another co-owner to seek partitioning, which is prescribed by law. Thus, the right to become a separate owner, in spite of a co-owner, by forming a separate (partitioned) asset, called "an asset inside an asset," would also be lost.
The previously mentioned SCL interpretation provides the possibility to abuse the rights of a co-owner because of the existing possibility for a co-owner, who is unwilling to sell a share in common partial property to another co-owner, to seek the partitioning of common partial ownership. This interpretation essentially forfeits the right of another co-owner to purchase the share in sale of a common property and it therefore should not be exclusively followed. If a person who brings an action to court seeks to skip the provisions laid down in Article 4.79 of the CC, which provide a priority right for a co-owner to buy a share in sale of the common property, and the second co-owner wishes to enjoy this right, the rights of a co-owner who seeks partitioning should not be defended.
Erika Jureviciute is a lawyer at Jurevicius, Balciunas & Bartkus, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms including Glikman & Partnerid in Estonia and Kronbergs & Cukste in Latvia, dedicated to providing a quality "one-stop shop" approach to clients' needs in the Baltics.