One of the most common problems with jointly owned real estate is that the property remains unresolved for years among heirs or co-owners; some want to keep it, some want to invest it, and others want to sell it and receive their share. Over time, these conflicting interests may escalate into legal dispute, and the phrase «public auction» becomes the outcome everyone fears.
But is it enough for an heir or co-owner to request partition for the entire property to be sold at auction?
The answer is more nuanced than that.
In principle, a co-owner is not compelled to remain in joint ownership and may request partition unless there is an agreement or provision preventing it, or unless the nature of the allocation of funds requires that the property remain in joint ownership. Conversely, the right of one co-owner to withdraw does not necessarily mean that a property owned by several heirs or co-owners must be sold in its entirety simply because one of them wishes to receive the value of their share.
This is where the importance of Article 628 of the Civil Transactions Law comes into play, as it strikes a delicate balance between the right of a partner wishing to withdraw from joint ownership and the interest of the remaining partners in preserving the jointly owned property.
If the property can be physically divided without disrupting its use or causing a significant reduction in its value, the general rule is that it should be divided among the co-owners. This means that the issue goes beyond the technical feasibility of dividing the land or building; it extends to the impact of such division on the property’s utility and economic value. The property may be technically divisible, but in practice, its division may diminish its value, hinder its development potential, or reduce its utility.
If, however, the division itself would prevent the use of the property or cause a significant reduction in its value, the general rule is that it must be sold at auction, unless the co-owners agree otherwise. However, the law does not make the sale of the entire asset an inevitable outcome in all cases; rather, it imposes an important restriction that every heir and partner should be aware of. If the party requesting division is able to sell their share separately for no less than its value if the property were sold as a whole, the remaining partners are not obligated to sell their shares along with them. However, if selling their share separately would result in a reduction in its value, the remaining partners may prevent the property from being sold at auction if they compensate the party requesting division for the amount by which the value of their share was reduced due to the separate sale.
This is an extremely important legal provision, as it provides a third option between forcing a partner to remain in a property they do not want and forcing all partners to sell the entire real estate asset.
Let us imagine a property valued at ten million riyals, of which one heir owns one-tenth. If the value of his share, relative to the total value of the property, is one million riyals, and he is able to sell his undivided share for that amount, then his request to withdraw does not constitute grounds for compelling the remaining heirs to sell the entire property. However, if their share cannot be sold separately for less than that amount, the system allows the remaining co-owners to address this shortfall in accordance with the regulations it has established, which may prevent the property from going to auction.
This changes the way we view the liquidation of real estate held by heirs and co-owners.
The problem is not that one of the heirs wants to claim their right; this is a right that should not be obstructed by the desire to preserve the property. Furthermore, the other heirs" desire to retain the property may be justified; it may be an important family heirloom, a successful investment, or a unique property expected to appreciate in value. The real problem begins when everyone reaches a point of conflict before exploring the available legal and economic alternatives.
Protecting the property from being sold at auction does not begin when the auction is announced, but long before that: by having the property professionally appraised, examining the possibility of dividing it without compromising its utility or value, determining the economic value of the co-ownership shares, and exploring the possibility of purchasing the share of the party wishing to exit, or reaching a settlement that grants them their rights without sacrificing the property entirely.
This becomes even more important when the estate includes more than one property or various types of assets. In such cases, it may be possible—by agreement among the heirs and after taking into account the rights pertaining to the estate—to distribute the assets among them in a manner whereby certain properties are allocated to some heirs, while others are compensated with other assets or sums of money, with adjustments made for differences in shares. This may better preserve the value of the estate than selling its assets one by one.
Therefore, the liquidation of jointly held real estate should not be understood as synonymous with sale.
A successful liquidation is not necessarily one that ends with an auction, but rather one in which every rights holder receives their due, while preserving—as much as possible—the economic value of the jointly owned property. In some cases, an auction may be the inevitable legal solution, particularly when partition is impossible and no alternatives exist that preserve the rights of the parties. However, it should not be the first idea proposed when heirs or partners disagree, nor should it be the outcome they arrive at due to their delay in addressing the jointly owned property.
The estate built up by the decedent over decades may include real estate with high investment value, and the jointly owned property may be the result of a long-term investment among partners; it is unwise for a dispute over how one partner should exit to lead to the sale of the entire asset before exploring the alternatives provided by the law.
Therefore, the most important question before the property goes to auction is not: How can we prevent one of the partners from selling?
Rather: How can the party wishing to exit receive their due, while the remaining parties—whenever possible—retain the property and its value? Here, the liquidation of real estate among heirs and co-owners shifts from a dispute over the sale to the informed legal management of shared property and wealth.
@Dr_alkharji
