Notary offices serve couples daily who have ended their romantic relationship and seek to settle pending matters so they can go their separate ways as soon as possible. What to do with the home, bought at the time at 50% by the exes, is one of the questions that generates the most concern and anguish when love ends. In separations and divorces there are all kinds of solutions. One of the most common is that one of the members wants to take over half of her ex's home and become the sole owner. The procedure that compensates the most from a tax point of view is a condominium termination agreement. “It is a very common solution if the two parties manage to reach an agreement, something that does not always happen, sometimes for the simple fact of being annoying,” points out Luis Miguel Fernández, managing partner of Aestimatio Abogados. The extinction of a condominium is an operation that It occurs when one of the co-owners transfers ownership to the other in exchange for cash compensation. That is, if the value of the common home is 300,000 euros, the person awarded it should pay 150,000 euros to his ex-partner. If there are real estate assets to be distributed, property of the couple until now, compensation could be made with them, always equitably. One can keep the habitual residence and another the beach house and a parking space, for example. The termination of the condominium, which must be recorded in a public deed executed before a notary, is the procedure indicated for married couples in separation. assets, de facto couples or non-formalized relationships (boyfriends). In the case of a couple married in community property, the formula is the liquidation of the community property (either before a notary or in a regulatory agreement). There may be a mortgage burden on the habitual residence. “Whoever keeps the house keeps the mortgage, the usual thing is that he assumes the part of the outstanding debt,” says María Teresa Barea, spokesperson for the General Council of Notaries, which counts 63,960 acts of condominium extinction in 2013. In In this case, when it comes to compensating the ex, the amount of this debt must be subtracted. In the financial comparator HelpMyCash they give the example of a home with a value of 100,000 euros and an outstanding mortgage of 50,000 euros. “If a condominium is terminated, the person who transfers his part of the home will receive compensation of 25,000 euros: 50,000 euros of the value of the property transferred (50%) less 25,000 euros of the mortgage that the new owner will assume” explains Miquel Riera, mortgage analyst on the platform. It is very possible that whoever is awarded the entire home will need to request an extension of the mortgage (novation) from the bank to meet that payment. It is important to know that with the dissolution of the condominium one of the two members of the couple leaves the deed of the house, but not necessarily of the mortgage. The most complicated thing is to get the bank to agree to eliminate joint owners of a mortgage, because they lose a payment guarantee. “The entity does not want to lose a possible debtor in the event that the mortgage is not paid,” says José María Salcedo, managing partner of the Salcedo Tax Litigation law firm. However, the bank's response is not always negative. “It depends on the solvency of the person who will be the sole owner of the mortgage. The bank will carry out a feasibility study as if it were a new operation,” they say in Trioteca, an online mortgage platform. “That means having a stable job, more than enough income to pay the fees (you must be able to pay them with a maximum of 30% of your net salary) and no unpaid debts. It also helps to be able to provide new payment guarantees, such as a guarantee or another co-owner,” explains Riera. The bank is not obliged to accept it, so there is always the option of taking out a mortgage with another entity to cancel the joint mortgage loan. Of course, once again it will be essential to be solvent. When the bank refuses to release the ex from the mortgage, the usual thing is that the member who transfers his share shields himself in some way. This is important because, in the event of non-payment by the successful bidder, the entity will claim the debt from the two co-owners, recalls lawyer Fernández. The parties usually sign a private agreement that reflects that the installments will be paid by the one who keeps the home and that if “non-payment harms the party that has given up its portion of the home, it will be able to claim compensation from the other party,” explains Riera. The most interesting thing about the dissolution formula is that it barely pays taxes. In the case of a condominium termination, the person who is awarded the home pays the Documented Legal Acts (AJD) tax for the 50% of the house that corresponded to his ex, remembers Barea. The good news is that you do not have to pay the Property Transfer Tax (ITP), which according to the autonomous community can reach 8%. “There is no transmission because there is no sale, but rather a specification of rights; each member of the couple specifies and quantifies their part in the community,” describes Salcedo. Each autonomous community regulates the type of AJD, but it usually ranges between 0.50% and 1.5%. The operation is also not taxed in personal income tax that year. You will do so in the future when you sell the property. If it is a couple married in community property, there is an exemption in the AJD, as long as there is equivalence of awards or the excess of awards is inevitable.
Taxes
Whoever delivers half of the home and receives compensation does not have to pay municipal capital gains, as it is considered a specification of rights and not a transfer. But be careful because it does pay personal income tax. “The Supreme Court in a ruling of October 10, 2022 has declared that the person who delivers the property and receives cash compensation must pay personal income tax, when the value of the property is updated upon extinction,” emphasizes lawyer Salcedo. The high court understands that there is an increase in the taxpayer's assets because the apartment that was worth 300,000 euros when it was purchased years ago may now be worth 400,000. “It makes you pay personal income tax as a capital gain not derived from a transfer and, therefore, at the general scale (which can reach rates close to 50%, depending on the total amount of the rest of the income from work, economic activity…) «, summarizes Salcedo. One could be tempted not to update the value of the property to pay less, but it is complicated for two reasons. “On the one hand, the person who delivers the property will want to be given what is due to him. And, in addition, there is the reference value, which is the tax base of the AJD, and which is the value that will have to be put into extinction. As it is normal for the value of the house to be updated, unless time has barely passed, there will always be taxation in personal income tax,” concludes Salcedo. The lawyer reminds that whoever is awarded the habitual residence can continue applying the deduction for investment in housing with respect to 100% if it was acquired before January 1, 2013. Follow all the information from Economy and Business on Facebook and xor in our weekly newsletter