Buying a property in co-ownership as an investment

This guide explains, in general terms, what buying a rural property in co-ownership involves when investment is a factor in the decision. It does not constitute personalised legal or financial advice, and it does not recommend this structure over any other available alternative. Every co-ownership situation has its own particularities, and any decision should be reviewed with specific professional advice before signing any binding commitment with other people.

Buying in co-ownership — also called proindiviso when there is no physical division of the property among the different owners — is an arrangement that allows several people to jointly access a property that, individually, might require a bigger investment than each of them would be willing or able to take on separately. This guide reviews the practical and legal implications of this arrangement, without promising any specific investment outcome or return figure.

It is worth bearing in mind from the outset that co-ownership is not exclusive to investment: it also frequently arises as a result of an inheritance shared among several heirs. This guide focuses specifically on co-ownership sought voluntarily as a joint investment structure, a different scenario — though with points in common — from co-ownership arising from inheritance, which is covered in other guides on this site dedicated specifically to that topic.

In a co-ownership, several people — family members, friends, investment partners — jointly acquire a property, each with a share that can be equal or different among the various co-owners, according to what is freely agreed at the time of purchase. That share generally determines both the proportion of the initial investment and later costs corresponding to each co-owner, and their share of any income or profit the property may generate in the future.

Unlike a company set up specifically to hold the asset, direct co-ownership — the so-called proindiviso — of a property is a legal situation governed by the Civil Code, with its own rules on how decisions are made, how costs are shared, and how a co-owner can exit the situation if they wish to at a given moment. Understanding these rules well before buying is as important as agreeing on how the initial investment will be split among the parties.

There is also the option of structuring the joint investment through a company — a more formalised community of property, or directly a commercial company — instead of direct co-ownership, which has different legal and tax implications worth comparing with an advisor before deciding which structure to use, since there is no universally better option: it depends on the number of co-owners, their specific objectives and the expected complexity of joint management.

The choice between direct co-ownership and a more formal company structure also usually depends on the prior relationship between the investors: among close family members with a long-term project, direct co-ownership can be sufficient and simpler to manage; among investment partners with no prior personal connection, a more formal company structure can offer greater clarity and legal certainty in the long run for everyone involved.

One of the most important issues to resolve before buying in co-ownership is how decisions about the property will be made: what majority is required for routine management decisions — maintenance, leasing to a third party — and what majority or consent is required for extraordinary decisions — a sale, a significant investment, a relevant change of use. The general legal regime for co-ownership sets default rules for these situations, but it is worth agreeing clearer rules in writing, tailored to the specific situation, from the start, rather than relying solely on the general supplementary regulations.

Lack of agreement among co-owners is one of the most common sources of conflict in this type of structure, especially when there is no clear agreement on how to resolve a disagreement: what happens if a co-owner wants to sell their share and the others disagree, or if a co-owner stops covering their agreed share of costs. Anticipating these scenarios in a written agreement, reviewed by a qualified professional, significantly reduces the risk of a one-off disagreement turning into a prolonged and costly legal dispute for everyone involved.

It is also worth agreeing how the property's day-to-day affairs will be handled if it generates income or requires ongoing maintenance: who is in charge of the practical management, whether that management is paid and from which shared funds, and how the other co-owners are kept informed about the property's condition and costs on a regular and transparent basis, avoiding unnecessary suspicion between the parties.

It is also advisable to establish a clear mechanism for making urgent decisions that cannot wait — an essential repair after unexpected damage, for example — so that it is not necessary to gather all the co-owners and wait for their formal consent before acting, always within spending limits agreed in advance by all parties.

Spanish law generally recognises the right of any co-owner to request division of the shared property at any time, unless it has been expressly agreed otherwise for a set period, known as a pacto de indivisión (indivision agreement). This means that, without a specific agreement limiting it, any co-owner could, in principle, force an exit from the co-ownership, which may not match the plans of the other co-owners if they preferred to keep the joint investment going for longer than ultimately turns out to be possible.

When the property cannot be reasonably divided physically among the co-owners — fairly common for many rural properties given their layout — a co-owner's exit is usually resolved by selling their share to the other co-owners, selling their share to an outside third party — which brings in a new co-owner not chosen by the others — or, if there is no agreement between the parties, by selling the entire property at public auction and splitting the proceeds among the co-owners according to their respective shares, a route that is generally less financially favourable than a directly negotiated agreement between the parties.

For these reasons, many co-ownership agreements between investors include specific clauses — indivision agreements for a set period, rights of first refusal between co-owners when a share is sold, valuation mechanisms agreed in advance to avoid price disputes — designed precisely to avoid having to resort to the general legal route if a co-owner wants to exit the joint structure. Drafting these clauses with the help of a specialised lawyer before buying is one of the most important decisions in the whole joint investment process.

It is also worth providing, within those same clauses, an objective valuation mechanism for cases where a co-owner wants to sell their share and the others want to exercise their right of first refusal: setting in advance how the price will be determined — for example, through an independent valuation — avoids later disputes at a time when the relationship between the parties may already be strained for other reasons.

Before buying a property in co-ownership for investment purposes, it is worth discussing with a specialised lawyer, in addition to the points already mentioned, aspects such as the tax treatment applicable to each co-owner according to their specific share — both on the initial purchase and on any income the property generates and on a future sale — and what happens in personal situations affecting a co-owner that could impact the co-ownership, such as a death, a divorce or a sudden insolvency situation.

It is also worth reflecting, before buying, on the prior relationship with the other co-owners: a co-ownership between people with solid mutual trust and aligned objectives from the start tends to handle inevitable disagreements better than a co-ownership between people who barely know each other or who have different investment objectives — for example, if one is looking at a short horizon and another is clearly looking long term.

Finally, it is worth bearing in mind that co-ownership is not the only way to invest jointly in a rural property: alternatives exist such as a commercial company or a more formalised community of property, each with its own legal and tax advantages and disadvantages, which are worth comparing with an advisor before deciding which best fits the situation and the specific objectives of the group of investors involved.

An advisor can also help anticipate less obvious but equally relevant situations, such as what happens if one of the co-owners stops responding to communications from the others for an extended period, or moves abroad and makes it difficult to sign documents needed for the property's ordinary management — scenarios worth anticipating in the initial agreement rather than discovering for the first time once they occur.

Beyond the legal precautions already described, buying in co-ownership has practical advantages that explain its popularity as a joint investment structure: it allows access to larger or better-located properties than each co-owner could individually afford, splits maintenance and management costs among several people, and can help bring together complementary knowledge among the co-owners — for example, if one has farming experience and another brings financial capacity.

It can also, in certain cases, facilitate more professional management of the property than a single individual owner would be willing or able to take on alone, by splitting both the workload and the cost of hiring specialised external management services when needed, among several people.

These advantages, however, only really materialise if the co-ownership structure is well designed from the start, with clear management and exit rules agreed in writing: without that solid foundation, the potential benefits of investing jointly can easily be outweighed by the costs of managing disagreements that arise between the parties over time.