Splitting a Co-ownership (Art. 28) and Interim Administration: Unblocking a Deteriorated Asset

An investor holds all the lots of one building within a property complex made up of several buildings. The building it holds is sound, let and financeable. The others are no longer so: accumulated unpaid service charges, an obsolete collective heating system, a roof not voted on for three general meetings, a disastrous collective energy performance diagnostic, and a lender that refuses to refinance until the share of future works is quantified. The deadlock is not a management inconvenience: it directly undermines the operability and value of the asset, because a lot whose future charges are unpredictable is a lot whose price is negotiated at a discount. This analysis addresses the two ways out: splitting the co-ownership (scission de copropriété) under Article 28 of the Law of 10 July 1965, and the procedures for dealing with a co-ownership in difficulty under Articles 29-1 A et seq., viewed from the standpoint of the institutional co-owner and of the creditor for unpaid charges.

A co-ownership deadlock is an operating risk, not a neighbourhood dispute

The deterioration of a co-owned complex follows a familiar mechanism. Unpaid charges reduce the cash of the co-ownership association (syndicat des copropriétaires), the property manager (syndic) defers works, the building deteriorates, the lots lose value, and the least solvent co-owners stop paying. The association ends up unable to fund either routine maintenance or the legal obligations that now rest on it: the multi-year works plan and the associated works fund (Articles 14-2 et seq. of Law No 65-557 of 10 July 1965, as worded following Law No 2021-1104 of 22 August 2021, known as the Climate and Resilience Law), the collective energy performance diagnostic, and the bringing of common installations into compliance.

For an asset holder, the consequences are economic and immediate. The progressive ban on letting the most energy-intensive dwellings, arising from the same Climate and Resilience Law, affects the lot although the decision on works belongs to the collective body. A lender makes its offer conditional on production of the minutes of general meetings, the pre-dated statement (pré-état daté) and the statement of the association's unpaid charges. An institutional buyer builds into its price the foreseeable share of a façade renovation or boiler replacement not yet voted on. In other words, the majority co-owner of a sound building bears the technical and financial liabilities of a complex it does not control. The impact of the collective energy performance diagnostic and the energy audit on the lettability of lots is detailed in our article on the operability of an income-producing building.

Two strategies are then in tension. One is to isolate the sound building legally, that is, to leave the perimeter of the original association by means of a split. The other is to have the failure dealt with collectively by a professional appointed by the court, an interim administrator (administrateur provisoire) or an ad hoc agent (mandataire ad hoc), in order to restore financial balance and recover charges. The two routes are not mutually exclusive: the second may lead to the first, since the law allows the interim administrator to apply itself for the division of the association.

Splitting a co-ownership: the technical condition governs everything

Division of the land, a precondition of admissibility

Article 28 of the Law of 10 July 1965 allows a split where the building comprises several buildings and division of the land is possible. The two conditions are cumulative, and they are technical before being legal. A complex made up of several buildings located on a plot that can be divided into as many independent land units is eligible. A single building, even with several staircases, is not. A complex whose buildings rest on a common base, a continuous underground car park or a shared slab runs into the impossibility of dividing the land, unless recourse is had to a division into volumes, which falls under a different mechanism and a different negotiation.

The first step of a split strategy is therefore not the general meeting: it is the technical and land audit. A land surveyor (géomètre-expert) to verify the divisibility of the land unit and prepare the survey document, a technical firm to identify the shared common equipment, and a contradictory survey of the networks. The points that kill a split project are always the same: a single boiler room serving several buildings, a transformer station, shared risers, a single fire-service access, a waste room required by the municipality, internal roads and buried networks.

Where division of the land creates servicing constraints, a durable contractual regime must be built: rights of way (servitudes de passage), subsoil easements, shared courtyard arrangements, an agreement allocating the operating costs of an item of equipment that remains shared, or the creation of a union of associations (union de syndicats) endowed with legal personality on the basis of Article 29 of the 1965 Law. This structure must be drafted before the meeting, because it conditions the vote: the co-owners of the deteriorated building will not accept a split that would deprive them of access to the boiler room or of servicing to their building.

Majorities and the double deliberation

The Article 28 procedure rests on a deliberation in two stages. The co-owners whose lots make up the building or buildings concerned first meet in a special meeting and request the creation of a separate association. That request is then put to the general meeting of all the co-owners, which rules by the Article 26 majority, that is, a majority of the members of the association representing at least two thirds of the votes.

That majority is the real obstacle. It is calculated on all the co-owners, and not only on those present or represented. An investor holding the majority of the shares (tantièmes) but a minority of the heads may fail on the first limb of the test. Conversely, in a complex where the lots of the deteriorated building are highly fragmented and absenteeism is massive, the majority-in-number condition becomes difficult to meet, not through opposition but through inertia. The different majority regimes of the Law of 10 July 1965 are presented in our article on the cases where unanimity is required to amend the co-ownership rules.

Three operational consequences follow. First, ownership must be mapped lot by lot, distinguishing owner-occupiers, landlords, unsettled estate joint ownerships (indivisions successorales) and lots whose owner cannot be found. Second, a split is won through preparation of the vote, that is, through a quantified demonstration that the operation is neutral or favourable for the co-owners of the retained building, in particular through the chosen allocation of the existing liabilities. Third, it is often more effective to acquire a few strategic lots upstream than to argue an abusive refusal for two years.

What the split does not wipe out

A split redistributes powers, not debts. The project must expressly provide for the allocation of the assets and liabilities of the original association: cash balance, works fund built up, claims against debtor co-owners, supplier debts, works contracts in progress, insurance and maintenance contracts, and pending litigation, including recovery proceedings. Without a clear provision and accounting discharge, the split is prolonged in litigation between the two new associations over the allocation of a works invoice voted on before the division.

Nor does the split extinguish security interests. A mortgage granted by contract over a lot in favour of its owner's lender follows the lot. The association's claim for charges is secured by a special statutory mortgage (hypothèque légale spéciale), the special real-property privileges having been converted into statutory mortgages by Order No 2021-1192 of 15 September 2021 reforming the law of security interests, in force since 1 January 2022. A creditor for charges therefore remains armed, but it must identify which of the two associations holds the claim after the division.

Finally, division of the land falls within town planning law. Depending on the configuration and the intention to build, the operation may be classified as a subdivision (lotissement) within the meaning of Article L. 442-1 of the French Town Planning Code and require a prior declaration, or even a development permit. This point must be cleared before the general meeting, failing which a split may be voted on but be impossible to carry out.

Timetable and cost: thinking in quarters and accounting years

A successful split follows a chronology in which each step conditions the next:

• audit of land and technical divisibility, identification of shared equipment;
• survey document and plot division project by the land surveyor;
• drafting of the new descriptive statements of division and co-ownership rules, and of the easement agreements or of the union of associations;
• closing of the original association's accounts and proposal for allocating assets and liabilities;
• clearance of the town planning authorisations required for division of the land;
• special meeting of the co-owners of the building or buildings concerned;
• general meeting of the whole association ruling by the Article 26 majority;
• registration with the land registration service (service de la publicité foncière) and setting up of the new associations, taking out of policies, appointment of property managers.

The sequence is not measured in weeks. The annual general meeting requires a convening notice in the form and within the time limits of Decree No 67-223 of 17 March 1967, the closing of accounts follows the accounting year, and land registration and cadastral formalities add their own delay. Several financial years must be allowed between the decision to launch the operation and the effective start of the separate associations, and more if litigation challenging a meeting intervenes.

The cost is concentrated on technical and notarial services: land surveyor, drafting of the deeds, property manager's fees for rendering accounts, land registration formalities and, where applicable, procedural costs. No standard amount can seriously be put forward, because the determining item is the complexity of dividing the land and of dealing with common equipment, not the size of the complex. The economic choice is, however, simple to frame: the cost of the split is to be compared with the discount the market applies to a lot located in a co-ownership in difficulty, and with the loss of rent on an asset that has become unlettable for want of works being voted on.

When the meeting refuses: the remaining routes

A refusal by the general meeting is not the end of the matter, but it narrows the options considerably.

Challenge of the meeting's decision is confined to a short time limit. Article 42 of the 1965 Law requires the dissenting or absent co-owner to act within two months of notification of the minutes. That time limit is a guillotine: once it has passed, the decision can no longer be challenged, including as to its consequences for the investor's strategy. Any split policy must therefore include rigorous monitoring of the date on which minutes are notified, exactly as a forfeiture period is monitored.

On the substance, the refusal may be challenged as an abuse of majority where it is contrary to the collective interest of the association and pursues the personal interest of the majority to the detriment of the minority. The exercise is demanding in the case of a split, because the majority may legitimately invoke the loss of pooled charges. Success requires a documented economic demonstration, not a statement of principle.

Two other levers deserve examination. The union of associations under Article 29 makes it possible to organise the management of common equipment without dissolving the original association, and sometimes serves as a negotiating stage towards a later split. Above all, where the co-ownership is genuinely in difficulty, division may be requested by the interim administrator appointed by the court, including in the absence of division of the land, on the basis of Article 29-8 of the Law. This route changes in nature: the split is no longer an act of collective will but becomes a recovery instrument decided by the judge on the report of a professional.

Ad hoc agent for a co-ownership: the enforceable diagnostic tool of Article 29-1 A

Before interim administration, the law provides for an alert. Article 29-1 A of the Law of 10 July 1965 requires the property manager, where unpaid sums reach 25% of the sums due as provisions under the forecast budget and for works, to apply to the court for the appointment of an ad hoc agent. The threshold is lowered to 15% for co-ownerships of more than two hundred lots. The property manager's default is not an obstacle: the court may also be seised by co-owners together representing at least 15% of the votes, by the State representative in the département, by the public prosecutor, by the mayor of the municipality or by the president of the public body for inter-municipal cooperation.

The creditor has its own way in. Where invoices for subscription and supply of water or energy, or invoices for works voted on at a general meeting and carried out, remain unpaid for six months, and after a payment order (commandement de payer) has been served without result, the creditor may itself apply for the appointment of an ad hoc agent. For a service provider or contractor left unpaid by a drained association, this option is often worth more than another formal notice: it brings a third party mandated by the court into the association's accounts.

The ad hoc agent analyses the association's financial situation and the condition of the building, then delivers a report within three months of appointment, renewable once by the court. The report sets out the agent's recommendations for restoring financial balance and ensuring the preservation of the building. The report is communicated to the property manager, the co-ownership council and the public authorities concerned, and is brought to the attention of the general meeting.

For an institutional co-owner, the interest is twofold. The report is an enforceable document, drawn up by a professional appointed by the court, which documents the real level of unpaid charges, the condition of the structure and the funding requirement. It makes it possible to move beyond the debate at the meeting and put figures on the table. It then prepares, where appropriate, the application for appointment of an interim administrator.

Interim administration of a co-ownership: transfer of powers and stay of proceedings

Conditions and referral

Article 29-1 of the 1965 Law allows the court to appoint an interim administrator where the association's financial balance is seriously compromised, or where the association is unable to provide for the preservation of the building.

The court rules on two alternative criteria: the financial balance of the co-ownership association is "seriously compromised", or the association finds itself "unable to provide for the preservation of the building" (Article 29-1, first paragraph, of Law No 65-557 of 10 July 1965).

The application may be made in particular by the property manager, by co-owners representing at least 15% of the votes, by the public prosecutor, by the mayor, by the president of the public body for inter-municipal cooperation or by the State representative, and also by the ad hoc agent in light of its report. The appointment is made for a period that may not be less than twelve months, which reflects the intention of the legislature: interim administration is a recovery, not a protective measure lasting a few weeks.

The useful effects for an asset holder

The interim administrator receives all or part of the property manager's powers, whose mandate ends by operation of law to that extent. The court may also transfer to it all or part of the powers of the general meeting, with the exception of those reserved by law for the most serious decisions under Article 26. This is the most powerful effect of the mechanism for a deadlocked investor: the works needed to preserve the building cease to depend on a majority that cannot be found.

Article 29-3 of the Law also provides for a freeze on liabilities, at the request of the interim administrator. The court may suspend the due date of claims other than public and social security claims, for a period of up to twenty-four months, interrupt or prohibit legal actions by creditors whose claim arose earlier and which seek payment of a sum of money or termination of a contract for non-payment, and stay or prohibit enforcement measures and distribution procedures. The logic is the one familiar to creditors from the stay of individual actions in collective proceedings, transposed to the co-ownership association.

Creditors must understand this symmetry before acting. A recovery strategy begun late against an association on the brink of interim administration may be neutralised by a decision of suspension. Conversely, a creditor that has secured its title and taken its measures before the decision is in a very different position. Choosing the moment is here the first lever.

The interim administrator may also, where the financial situation or the condition of the building justifies it, ask the court for division of the association on the basis of Article 29-8, including in the absence of division of the land. In the most deteriorated complexes, this route is often the only realistic way of isolating a recoverable building. It fits together, in the territories concerned, with the operations for requalification of deteriorated co-ownerships provided for in Articles L. 741-1 et seq. of the French Construction and Housing Code, whose national-interest component mobilises expropriation and public-sector carrying of the property. Law No 2024-322 of 9 April 2024 on accelerating and simplifying the renovation of deteriorated housing and large development operations broadened this toolbox, in particular as regards collective financing of works and the treatment of unfit buildings.

The creditor for charges: which lever, within what time, with what ranking

The co-ownership association is itself a creditor, and the institutional co-owner that pays its charges is in effect funding the defaulters. The recovery chain must be activated in order.

Article 19-2 of the 1965 Law provides for acceleration of the debt: failing payment of a provision that has fallen due, and after a formal notice that has remained without result for thirty days, the provisions of the forecast budget not yet due become immediately payable, as, depending on the case, do the sums remaining due for works voted on. The property manager may then apply to the court for a title covering the whole debt, and not only the unpaid quarter. The tool is formidable, provided the formal notice is irreproachable in its form and date. The stages of the property manager's recovery of unpaid co-ownership charges are dealt with separately in our article on that procedure.

The claim for charges is then secured. Since the reform of the law of security interests by Order No 2021-1192 of 15 September 2021, the association has a special statutory mortgage over the lot for payment of charges and works, which replaced the former special real-property privilege. Articles 19-1 and 20 of the 1965 Law complete the system in the case of transfer: on the sale of a lot, an objection duly lodged by the property manager against the price makes it possible to capture the sums due, the notary being required to inform the property manager and to retain the funds. In a deteriorated complex, the transfer of a lot is often the only real opportunity for recovery: missing it is a management failure.

On the lender's side, the ranking analysis must take account of the situation of the association. An institution financing the acquisition of lots in a co-ownership whose unpaid charges are approaching the Article 29-1 A thresholds must assess three risks: competition from the association's statutory mortgage over the financed lot, the unforeseen call for funds for works that impairs the borrower's repayment capacity, and the devaluation of the base of its security through a ban on letting or a dangerous-building order. The information exists: the national register of co-ownerships established under Articles L. 711-1 et seq. of the French Construction and Housing Code, the minutes of meetings, the statement of unpaid charges and, where it exists, the ad hoc agent's report.

The choice: split, restore or sell

Three configurations call for three distinct decisions.

Where division of the land is technically possible, the building held is self-sufficient as to networks and the Article 26 majority is attainable, the Article 28 split is the most protective route over the long term, because it removes decision-making dependence. The project must then be run as an operation, with a timetable, a budget and prior negotiation with the pivotal co-owners.

Where division of the land is impossible or the majority is out of reach, the point is no longer to leave but to regain control. The pairing of ad hoc agent followed by interim administration makes it possible to substitute a court decision for collective inertia, to freeze liabilities temporarily and, where appropriate, to obtain a judicial division that the meeting refused. This route involves accepting a loss of control in favour of a professional appointed by the court, and a long processing time.

Where neither a split nor a recovery is credible, because the ownership structure is too fragmented and the need for works out of proportion to the value of the lots, the honest choice is to sell, building in the discount, rather than to fund indefinitely a complex that one will not restore alone.

On the substance, the lesson is a single one: the operability of an asset held in co-ownership is not secured at acquisition, it is secured over time, by controlling majorities and by monitoring two indicators, the association's rate of unpaid charges and the progress of the multi-year works plan.