Differences between horizontal and vertical ownership

When we are considering the purchase of real estate, it is important to know in advance how we should manage the property after we purchase it and what rights and responsibilities will arise with respect to our lot and the surrounding area. Therefore, it is important to understand the differences between horizontal and vertical ownership.

Vertical and horizontal subdivision

Vertical and horizontal subdivision are essentially two forms of real estate management, each with its own characteristics. In order to clarify all doubts and make informed decisions, we will tell you what is horizontal ownership, what is vertical ownership, what laws regulate their functioning and what aspects should be taken into account.

What is meant by horizontal ownership?

Horizontal ownership occurs when there are different immovable properties or land parcels in the same building and their ownership is divided between different individuals or legal entities (although it is possible that one or more owners have more than one property).

There should also be certain common areas in a horizontal property that should be managed by all owners of the private parcels within them.

Factually, one of the basic requirements of horizontal ownership is, as we will see, that there is a community of owners that governs the management of the common areas of the subdivision. The definition of horizontal ownership can be found in Article 396 of the Civil Code, and its normative development is found in the Law on Horizontal Ownership (BOE).

Therefore, according to the Civil Code, different floors or rooms in a building (or parts thereof subject to independent use) may be subject to separate ownership, which is "inseparable from the right of co-ownership of the common elements of the building".

These elements are necessary for their proper use and enjoyment: land, air space, foundations, roofs, structural elements, facades (including terraces, balconies, and windows), entrances, stairs, laundry rooms, courtyards, elevators, tanks, meters, telephones, and other common services or installations. The same applies to sewers for the discharge and supply of water, gas or electricity (including the use of solar energy); hot water, heating, air conditioning, ventilation or exhaust; fire detection and prevention systems; intercoms and other building security systems, as well as collective antennas and other installations for audio-visual or telecommunication services.

It is important to know that co-ownership interests can never be divided, but can only be sold, encumbered or seized together with the private part with which they are inseparable. The classic example of horizontal ownership is, as we have seen, a building that has one or more owners for each of its floors. Another example is cottage developments, also known as "lay property" and regulated by the Horizontal Property Act.

How do you know if there is horizontal ownership?

To determine whether there is horizontal property, it is necessary to refer to its characteristics. If they are observed, we are faced with this mode:

• A building or common area is subdivided
• The property of each division is owned by one or more different persons (multiple properties may also be owned by one or more persons)
• There are private elements and common elements that need to be managed and maintained
• There is a community of owners and regulations for all owners
• All owners' community fee is paid for
• Each subdivision can be sold separately (together with its share in the common elements)

What is vertical ownership?

What is vertical community or vertical ownership, in this case we have a single registration that is wholly owned by one or more owners. For example, an entire building owned by one or more persons.

It is important that the property is formally a single property and not several: similarly, a vertical property can only be sold as a whole.

In addition, in any case, the rules that apply will not belong to the community of owners (since there is only one property and there will be no common areas as such). In the case of multiple owners, the rules of the community of owners will apply.

An example of vertical ownership could be a case where several brothers inherit ownership of an entire building: then a community of owners would be created in which each of them would participate in the ownership of the plot according to his share, without carrying out a formal division of each individual property. Thus, each member of the community will own his or her share, but not the various individual apartments.

Duties in vertical ownership

It is important to know that there are rights and responsibilities with respect to the maintenance and care of vertical property that are generally the responsibility of one or more owners.

In any case, vertical ownership can turn into horizontal ownership (provided it is legally enforceable) by dividing a parcel into several separate registries or independent properties. If there are multiple owners, a division of the property will be established according to their shares and they will reciprocate with each other as needed. An appropriate ownership community will also be established.

There is no separate Vertical Ownership Law in Spain, although there are certain obligations that are set out in various regulations. In the case of co-ownership, we must refer to the rules of the ownership community.

What happens when a vertical property is sold?

The sale of a vertical property is subject to certain peculiarities. Basically, the main one is that the vertical property functions as a single property, so it should be sold as such. This means selling, if necessary, an entire building, which is the most common case.

In addition, as a buyer, you will be subject to vertical ownership rules if you retain this form of property management. Another possibility is to create horizontal ownership by registering each plot within the community separately.

In this case, the rules of horizontal ownership would come into play and, in particular, would require the creation of a community of owners responsible for deciding on common elements and co-habitation in the community. Only through this route will you be able to sell different apartments or properties: each of them will be assigned a participation rate, which will serve as the basis for decision-making by the board of owners.

Horizontal ownership vs. vertical ownership

The distinction between vertical and horizontal ownership are two concepts that affect your purchase/sale transaction: if you decide to purchase a property under the horizontal ownership regime (the most common case), you will have to abide by the rules of the ownership community and be subject to certain restrictions.

For example, you will not be able to make changes to common areas without the consent of the other owners, although they may benefit everyone. In general, the decisions of a majority of the participants are binding for the administration and best use of the common thing.

In addition, the Horizontal Property Act states that one of the obligations of the owners of any property under the horizontal property regime is to contribute to the common expenses for the "proper maintenance of the property, its services, obligations and liabilities that cannot be individualized" through contributions from the community of owners.

On the other hand, if you purchase a vertical property, you do not have to report to other owners, and there will be no common areas, as the entire property will be a single unit that you will manage on your own. However, you will have to keep the site in good condition and carry out any necessary maintenance work, as well as bear the cost of any improvements you wish to make.

In general, the vertical ownership regime is usually chosen when investing in some form of leasehold.