How to partition co-owned real estate in Japan?

When you have joint ownership of real estate in Japan, consent of all the co-owners is needed to sell the real estate. Each co-owner has share of the property; one of co-owners cannot sell another co-owner’s share without its consent.

Therefore, if you intend to sell the property, the first thing to do is to persuade other co-owners to sell the property together.

If other co-owners do not consent to your proposal, there are three alternatives:

• (i) giving up selling;
• (ii) selling only your share of the property; and
• (iii) taking procedures to partition the property.

The first choice cannot be a solution. The second choice can be a solution, but it would be difficult to sell your share because of inconvenience of co-ownership. So, the third choice would be a realistic solution.

Each co-owner may demand the partition of property at any time (Civil Code Article 256 (1)).

If co-owners are unable to reach an agreement on, or unable to discuss, the partition of property in co-ownership, they may request the court to partition the property in co-ownership (Civil Code Article 258(1)).

(1) The court may divide property physically. In the Civil Code, it is stipulated as follows: “The court may order the partition of property in co-ownership by any of the following methods: (i) partitioning the property in co-ownership in kind” (Civil Code Article 258(2)(i)). If co-owned property is a land, it may be divided by deciding borders. Considering rational and fair border would be pretty tough work. Assessment by a real estate appraiser would be needed in the process of the court.

(2) The court may allow one of the co-owners to gain all of property by paying price to the others. In the Civil Code, it is stipulated as follows: “The court may order the partition of property in co-ownership by any of the following methods: (ii) having a co-owner assume a debt and acquire in exchange all or part of another co-owner’s ownership share” (Civil Code Article 258(2)(ii)). It may be easier and more reasonable than physically dividing property. However, if two or more co-owners insist to gain property, it would be hard to decide which co-owner should gain it. In order to decide the price, assessment by a real estate appraiser would be needed.

(3) If it is not possible to partition the property in co-ownership by a method prescribed in the preceding paragraph, or if it is likely that the value of the property in co-ownership will be significantly reduced by the partition, the court may order the sale of the same at auction (Civil Code Article 258 (3)). The price by auction would be pretty lower than normal transactions. Therefore, it is rational for all of the co-owners to sell the property by normal transactions than selling at auction by the court. However, if normal selling and physical partition cannot be reached, selling at auction by the court would be the last resort to cash out the co-owned real estate.

By this legal procedure, a co-owner can cash out the property without the consent of other co-owners.

*Civil Code
(Demands for Partition of Property in Co-Ownership)
Article 256 (1) Each co-owner may demand the partition of property in co-ownership at any time; provided, however, that this does not preclude concluding a contract agreeing not to partition that property for a period not exceeding five years.
(2) The contract under the proviso to the preceding paragraph may be renewed; provided, however, that the period thereof may not exceed five years from the time of the renewal.

(Partition of Property in Co-Ownership by Judicial Decision)
Article 258 (1) If co-owners are unable to reach an agreement on, or unable to discuss, the partition of property in co-ownership, they may request the court to partition the property in co-ownership.
(2) The court may order the partition of property in co-ownership by any of the following methods:
(i) partitioning the property in co-ownership in kind;
(ii) having a co-owner assume a debt and acquire in exchange all or part of another co-owner’s ownership share.
(3) If it is not possible to partition the property in co-ownership by a method prescribed in the preceding paragraph, or if it is likely that the value of the property in co-ownership will be significantly reduced by the partition, the court may order the sale of the same at auction.
(4) In a judicial decision on the partition of property in co-ownership, the court may order the parties to pay any money, deliver any objects, perform their obligation to register, or perform any other act.