Community of heirs: inheriting and selling a property
Dividing cash and securities between several heirs is straightforward. Indivisible possessions, like property, are more complicated. Comparis explains the main points you need to know.
12.07.2023
iStock / U. J. Alexander
1. What is a community of heirs?
Under Swiss law, a community of heirs automatically forms when an inheritance falls to more than one person. The members of the community are determined by the will, as well as by inheritance law.
Because the purpose of a community of heirs is to apportion the inheritance, it is automatically dissolved as soon as the division of the estate has been completed. A professional administrator can represent the community and help to divide the estate quickly and fairly.
Types of communities of heirs
There are three types of communities of heirs:
| Continued community of heirs | If the members of the community of heirs cannot yet agree on how to proceed regarding inherited property, they can unanimously postpone the distribution of the estate to a later date. |
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| Reduced community of heirs | A reduced community of heirs comes about when one or more co-heirsleave the community, for example because they have received their share of the estate. |
| Joint ownership in undivided shares | In this case, the division of the estate is postponed to a later date, as in the case of the continued community of heirs. The difference is that the estate is held in “undivided shares”, with each heir enjoying equal rights as a co-owner (Art. 336 et seq. of the Swiss Civil Code). |
When heirs request a payout
Is the main component of an estate made up of real estate, and does one party of the community of heirs want their portion to be paid out? Selling the property is often in the best interests of the family, as well as being the best financial solution.
At Comparis, you can determine the value of your home in just a few clicks and get an initial idea of a fair market price.
2. What are the characteristics of a community of heirs?
These characteristics are typical of communities of heirs:
Communities of heirs are jointly and severally liable. The principle of joint and several liability applies for the duration of the community of heirs’ existence. For example, it applies to the payment of mortgage interest rates and maintenance charges. If one of the heirs fails to contribute, then the others are liable to an unlimited extent and their personal assets may be seized to satisfy the debt.
Decisions must be consensual and unanimous. The principle of unanimity applies for the duration of the community of heirs’ existence. All decisions taken by the community must therefore be mutually agreed upon. If the inherited property is to be sold, for example, each co-heir must agree to the sale.
3. How can a community of heirs be dissolved?
In Switzerland, a community of heirs can be dissolved in the following ways:
| Division of the estate | The community of heirs is dissolved once the division of the estate has been completed. To do this, all of the heirs must sign a settlement agreement, which regulates the distribution of the estate. |
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| Paying out co-heirs | If all heirs are in agreement, a community of heirs can also be dissolved by paying out the co-heirs. Once an heir has received payment, they are no longer a member of the community of heirs. |
| Selling | Selling the estate to a third party brings an end to the community of heirs. The heirs divide the sale price between themselves according to legal inheritance claims. |
Good to know: each member of the community of heirs has the right to renounce their inheritance, although it is worth noting that this must be done within three months of the death of the testator. If you claim the inheritance, you might have to pay inheritance tax.
Find out more in the article you’ve inherited property – now what?
4. Who owns the property within a community of heirs?
A property belongs to all members of the community of heirs. This also means that no single member can administer the estate on their own. However, heirs may disagree about what to do with a property moving forward. As a general rule, a well organized property sale tends to be the best way to preserve family harmony.
5. How to resolve disagreements in a community of heirs
A community of heirs that has inherited a house or apartment faces some difficult decisions. Perhaps only part of the community of heirs wants to sell the home, for example.
Even if all co-heirs do agree to sell, there are still many issues to be resolved. Who will be responsible for what tasks? When is the best time to sell the house? Is it worth waiting in order to increase the property’s value?
With careful planning, you increase the chances of finding a course of action that suits everyone involved.
Benefits of selling a house through an estate agent
If the community of heirs has unanimously decided to sell, it can make sense to make use of an estate agent's services. Professional estate agents know the market. They also offer a safe pair of hands and are familiar with the administrative side of selling a house.
The last resort: petitioning the court for distribution of the estate
As an heir, you can request division of the estate at any time. The division is then normally carried out by mutual agreement by concluding a written distribution agreement or by dividing up the inheritance.
In the event of disagreements, you can submit an inheritance lawsuit and assert your claim for division. Before petitioning the court, you must first submit a request for mediation. If an amicable solution cannot be reached, you can go to court.
Good to know: inheritance lawsuits are expensive. The cost of litigation involving estates worth six-figure sums can quickly reach tens of thousands of francs, and the court can apportion these costs against the heirs. For this reason, an extrajudicial solution is usually cheaper and more effective.
When is it possible to force the sale of a property?
Sometimes, a community of heirs cannot agree on a solution despite attempts at mediation. It is then up to a judge to organize a forced sale or auction of the property.
The auction can be held between the co-heirs or be opened to the market.
Both options have their drawbacks.
Auctions between heirs run the risk of the heirs driving up the price for the others.
At an auction on the open market, the property could sell for significantly less than it’s worth.
6. What taxes apply when a community of heirs sells a house?
A community of heirs is not a taxable entity. This means that every heir must declare their share of the estate in their personal tax return.
The following taxes may apply to a home sale:
As the buyer is responsible for the payment of property transfer tax in most cantons, communities of heirs normally only need concern themselves with capital gains tax on property. How high these taxes become depends on the profit made, the type of use, the duration of ownership and the location of the property. Remember to take the tax into account when dividing the estate.
Find out more about the taxes and fees involved in selling property in the article on taxes on property sales.
This article was first published on 26.08.2019