My friend and I purchased a commercial property in Denia in a Urbanization. We requested a mortgage loan from the bank which was granted to both of us and we appear both as debtors and mortgagors.
Unfortunately the relationship between us is not very good right now and we would like to know if it is possible to divide the property into 2 individual and separate halves and equally divide the mortgage loan to 50% proportionately.
Thank you for your query.
We must point out that there are several elements that must be considered in order to answer your question.
A.) In the first place we must analyze if it is possible to divide this property into 2 properties, and to do this we must consider, among others, the following:
A.1. If the division is possible in accordance with the relevant Town Hall planning regulations, i.e. if the General Urban Plan and other applicable planning regulations allow that one property to be divided into 2 properties and if the resulting properties meet the mandatory and necessary urban and local criteria to engage in the activity intended for each of them.
In addition, a segregation license or certification stating that this licence is not necessary, must be obtained from the Town Hall, only then the existing commercial property can be divided into 2 and registered as 2 new independent commercial properties in the land registry.
A.2. Likewise, since the commercial property is part of urbanization, in principle, Law 49/1960 on Horizontal Property shall apply therefore the proposed division is subject to approval from the community owners as per article 8 of this Law that reads:
“The apartments or commercial premises and their annexed could be subject to division to form other smaller and independent properties and to be augmented by addition of other adjoining in the same building or diminished by segregation.
In such cases, in addition to consent from the affected owners, the approval of the board of the community of owners, it is their responsibility to set the new participation percentages for the new reformed properties, as per the article No. 5, without altering the others percentages”
B.) Secondly and as to the possibility of dividing the existing mortgage in 2 separate loans for each of the owners it will really depend on the bank that granted the mortgage loan
I can understand that the aim is for each proprietor to own a new independent property and to have a mortgage loan for that property with total independence to the other property and owner.
In principle, the bank will need to decide if it is in agreement with the proposed change, as in fact, you are probably now both jointly and severally debtors for the entire mortgage loan and warrantors, with the current property, for the payments of this loan, thus the bank may not be interested in the proposed division if it believes that it means or could mean a loss of the guaranteed payment, since in case of accepting it, each new owner and property will only be responsible for his share of the loan f and not of the whole debt and loan as before any division.
For the above stated reasons and before initiating any proceeding or incurring in any expenses, it is convenient to start by consulting the bank about their position regarding the potential transaction and then with the Town Hall and the community of owners when appropriate in order to prepare the necessary documents.
Should any reader find himself or herself in this situation or similar please do not hesitate to contact us and the appropriate advice will be provided.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.
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