When a property is held by several people, whether as a result of inheritance, divorce or joint purchase, the resulting legal situation is known as indivision. While this situation can be chosen, it is often suffered and can become a source of complexity, particularly when debts are involved. The question of creditors' rights over undivided property is a major issue, with sometimes conflicting interests at stake. Understanding the rules governing debt recovery in this context is essential for creditors and co-owners alike, who are keen to protect their assets. Wise management of these situations often requires the intervention of a professional to define the right strategy, an area in which support from a lawyer specialising in enforcement procedures makes perfect sense.
What does undivided ownership mean for creditors?
Definition of joint ownership and the implications for debts
Joint ownership is a situation in which several people, known as undivided co-owners, exercise rights of the same kind in the same property or in the same body of property, without their respective shares being physically divided. Each undivided co-owner has an abstract share in the overall estate. This has a direct impact on the right of creditors to take legal action, since their action cannot be brought against a tangible asset but against intangible rights within a whole.
Fundamental distinction: undivided co-ownership creditors vs. personal creditors of undivided co-owners
The law establishes a cardinal distinction between two categories of creditors, whose rights and means of action are radically different. On the one hand, joint ownership creditors are those whose claim arose prior to joint ownership (for example, a debt owed by the deceased in a succession) or which results from the conservation or management of the joint property (such as a company that has carried out work on a joint property). On the other hand, the personal creditors of an undivided co-owner are those whose claim is unrelated to the joint ownership and concerns only one of the co-owners (such as a consumer loan taken out by one of them).
Joint ownership: an entity without legal personality but with autonomous liabilities
Although case law constantly points out that joint ownership has no legal personality, in practice it is treated as an entity with its own assets and liabilities. This "accounting personification" is a legal fiction that is necessary to organise the liquidation of the estate. It justifies the priority allocation of undivided assets to the settlement of the joint ownership debts, thus creating a sort of "allocation patrimony" that protects the joint ownership creditors from the personal creditors of the joint owners.
Joint-ownership creditors: their rights over undivided property
The right to deduct from the assets before partition (article 815-17 of the Civil Code)
Article 815-17 of the French Civil Code grants undivided co-ownership creditors an essential prerogative: they "shall be paid out of the assets before partition". In practical terms, this means that they have the right to be paid as a priority, using the cash available in the undivided estate, even before the undivided co-owners begin to divide up the property. This mechanism gives undivided co-ownership creditors a privileged position, guaranteeing them priority payment over the personal creditors of the undivided co-owners. For a better understanding of this concept, it is possible toto examine in greater detail the mechanism of the right to levy on joint ownership creditors.
The possibility of seizing and selling joint property: the principle of indivisible pledges
In addition to the right to withdraw cash, joint tenancy creditors have a right of lien on all joint property. They can therefore pursue the seizure and sale of assets, whether movable or immovable, to obtain payment. This right of pursuit is exercised over all the assets, not just the share of a debtor. In a way, joint ownership is unenforceable. To find out how to take such action, it is useful to consult the procedure for seizing an undivided property. This right of pursuit ceases, however, once partition has taken place, as the property then leaves the undivided estate.
The special situation of the undivided co-ownership mortgagee
A creditor who benefits from a mortgage granted by all co-owners on an undivided asset is in an even stronger position. By virtue of the indivisibility of the mortgage, the creditor's right to pursue the encumbered property is maintained even after partition. However, if the sale price of the mortgaged property is not enough to pay the debtor, he will only be able to seize other undivided property if he is also a creditor of the undivided co-ownership for another reason.
Personal creditors of undivided co-owners: a restricted right to take legal action
The prohibition on seizing a debtor's undivided rights: grounds and scope
Unlike undivided co-ownership creditors, the personal creditors of an undivided co-owner are subject to significant limitations. Article 815-17 of the Civil Code prohibits them from seizing their debtor's share of undivided assets. This prohibition is explained by the very nature of undivided rights: it concerns an abstract share and not a material asset. The fate of this share depends on the outcome of the partition. Allowing direct seizure would be a source of considerable legal uncertainty. It is therefore essential to understanding the specific limitations on seizure of undivided interests by personal creditors. It should be noted, however, that while this prohibition applies to enforceable and protective attachments, case law allows a creditor to register a provisional judicial mortgage on the undivided share of his debtor.
The only recourse: initiate partition of the joint ownership in the debtor's name
Faced with this prohibition, the only course of action open to a personal creditor is to take oblique action. He can bring about the partition of the joint ownership "in the name of their debtor". In doing so, the creditor simply exercises the rights of the negligent joint owner to force him to leave the joint ownership. Once the division has been completed and the assets allocated to the debtor, the creditor can then proceed to seize the assets that make up his or her lot.
The possibility of stopping partition by settling the debt: a protective mechanism
The law offers a way out to other co-partitioners who wish to avoid forced partition, which is often a source of conflict and depreciation of property. They have the option of "halting the course of the partition action by paying the obligation in the name and on behalf of the debtor". The undivided co-owner who pays the debt is then reimbursed from the undivided property. This mechanism makes it possible to protect the integrity of the undivided assets against the action of an outside creditor.
Competition between creditors: resolving priority conflicts
The coexistence of different categories of creditors can give rise to conflicts. The main rule is that joint ownership creditors have priority over the personal creditors of the joint owners. Personal creditors are paid before any division, out of the undivided assets, which constitute their exclusive pledge. This precedence applies even if the joint-ownership creditor is simply an unsecured creditor (without collateral), whereas the personal creditor has a mortgage on his debtor's share. The order of payment and the distribution of funds can become particularly complex, requiring a detailed analysis of the priority rules for joint and several creditors. The creditors of the undivided co-ownership are paid according to the rules of common law (liens, mortgages, then distribution by the pound per euro for unsecured creditors).
Joint ownership and insolvency proceedings: impact on creditors' rights
The opening of collective proceedings (safeguard, receivership or liquidation) against an undivided co-owner has different consequences depending on the chronology. If the undivided co-ownership existed before the proceedings were opened, the creditors of the undivided co-ownership retain their right to take legal action against the undivided assets. They act "outside the proceedings" and are not required to declare their claims as liabilities. On the other hand, if the joint ownership arises after the proceedings have been opened (for example, through the death of the debtor), the assets are subject to collective seizure. The liquidator then has sole power to sell them.
Strategies and legal support for dealing with joint ownership and claims
Managing an undivided property that is burdened with debts is a tricky business. For a co-owner, the challenge is to protect the family patrimony from the actions of creditors, whether personal or those of the joint ownership. For a creditor, it is a question of navigating between prohibitions and specific remedies to recover his debt. In both cases, anticipation and the implementation of an appropriate strategy are crucial. The assistance of a lawyer is therefore invaluable in assessing the options, negotiating with the other parties or initiating the appropriate legal proceedings, such as an action for partition or seizure.
The rules governing creditors' rights in joint ownership form a complex balance between the protection of joint assets and the right to recovery. Understanding these distinctions is essential if you are to defend your interests effectively, whether you are a co-owner or a creditor. In the event of difficulties, the assistance of an lawyer specialised in enforcement is essential to secure your rights and, more broadly, to ensure that the debtor protection in these proceedings. If you are faced with such a situation, contact our firm for an analysis of your case.
Frequently asked questions
What is the main difference between an undivided co-ownership creditor and a personal creditor of an undivided co-owner?
An undivided co-ownership creditor has a claim relating to the undivided property (arising before or for its preservation) and may seize the property before partition. A personal creditor has a debt that is unrelated to the undivided co-ownership, relating only to a single co-owner, and cannot seize the undivided property directly.
Can a personal creditor seize an undivided property?
No, the personal creditor of an undivided co-owner cannot seize the undivided property in its entirety, or even the abstract share (quota-part) of his debtor. His only recourse is to bring about partition on behalf of his debtor and then seize the property that will be allocated to him.
How are undivided co-ownership creditors paid?
They have a right of priority. They may be paid by deduction from the undivided co-ownership's liquid assets before any division, or by pursuing the seizure and sale of the undivided property. They take precedence over the personal creditors of the co-owners.
What can the other undivided co-owners do if the creditor of just one of them applies for partition?
To avoid the compulsory sale of the property, the other co-owners have the option of stopping the partition proceedings by paying the debt owed to the pursuing creditor. They can then repay this advance from the undivided property.
Can an undivided co-owner be a joint creditor?
Yes, an undivided co-owner who has incurred expenses from his own funds for the conservation or improvement of an undivided asset (for example, repayment of a loan) becomes a creditor of the undivided co-ownership. He may ask to be reimbursed immediately from the undivided assets.
Does the opening of collective proceedings against an undivided co-owner prevent undivided co-ownership creditors from taking action?
No, if the joint ownership predates the opening of the collective proceedings. In this case, the creditors of the undivided co-ownership can pursue the seizure of the undivided assets because their action is considered to be "outside the proceedings".
EN 
FR