Undivided estates: a new era in estate partition?

The Council of Ministers approved a set of measures aimed at:

i) Resolving deadlocks between heirs regarding the division of land and real estate;

ii) Strengthening the deceased’s freedom in succession planning, allowing them to determine, in a binding manner, the assets that will form part of each heir’s share of the estate;

iii) Creating a mechanism for the sale and division of jointly held real estate: the Special Procedure for the Sale of Real Estate Included in an Undivided Estate.

In practical terms, unless an agreement to maintain the estate undivided has been formalised, a single heir will be able, on their own initiative, to promote the sale of an urban or rural property. For this purpose, it will be sufficient for the heir to express their intention, thereby initiating judicial sale proceedings without the consent of the remaining heirs.

According to the proposal, this special procedure will be treated as urgent and may take one of two forms:

i) It may be initiated independently, without depending on inventory proceedings; or

ii) It may be joined to inventory proceedings already pending, except where such proceedings are being conducted before a notary’s office.

This mechanism may be initiated two years after the opening of the succession.

The procedure is structured in two phases:

1. Declaratory phase

This phase is intended to verify whether the requirements for the sale are met and to establish the base price for the sale of the property. For this purpose, the applicant must submit, together with the initial application, expert valuations supporting the proposed value.

2. Enforcement phase

This phase corresponds to the actual sale of the property, with electronic auction being established as the standard method of sale (pursuant to Article 837 of the Portuguese Code of Civil Procedure), which may only be set aside where justified reasons exist.

As regards territorial jurisdiction, the proposed measures point to the court of the place where the succession was opened, even in cases where there are, or may be joined, assets forming part of other undivided estates.

The proposal also provides for the creation of the role of an executor with powers to divide the estate, who will be granted authority to liquidate, administer and divide the estate.

Under the proposal, this executor may proceed with the division after the assets of the estate have been identified and valued and the relevant liabilities have been settled. With regard to indivisible real estate, and in the absence of an agreement as to its allocation, the executor may proceed with its sale, either directly or through the new special procedure for the sale of real estate included in an undivided estate.

With the aim of addressing the absence or ineffectiveness of fixed deadlines for completing the division of estates, as well as the costs associated with court proceedings, the proposed measures also provide for the introduction of a procedural regime for succession arbitration. It is also envisaged that the deceased may determine, by will, that recourse to this mechanism will be mandatory.

According to the Explanatory Memorandum, these measures are intended to promote a faster and more effective resolution of disputes relating to the division of jointly held assets and to strengthen the deceased’s decision-making autonomy in determining the effects of their own succession.

In short, the reform aims to reduce deadlocks in the division of estates, accelerate the circulation of inherited assets and provide greater freedom of decision both to heirs and to the deceased.