Both routes lead to the same result: each of you becomes the sole owner of one property. An exchange agreement suits the case where two co-owners exchange shares in two things and nobody else is involved. An agreement dissolving and settling co-ownership is more flexible: it can cover all the co-owners, the division of a thing, compensation and differing values, and if you cannot agree, the court will decide. Encumbrances survive either route, and you should have the tax consequences calculated before signing.
Siblings inherit a house and a separate plot of land from their parents, each taking a half. One wants to live in the house, the other to build on the land. Joint ownership of two things can be converted into sole ownership of one each by two types of contract that are often confused: an exchange agreement, or an agreement dissolving and settling co-ownership in undivided shares.
An exchange of shares
On an exchange, the parties exchange one thing for another, and each of them is the seller as regards what it gives and the buyer as regards what it receives (Section 611 of the Civil Code). In our example, one sibling gives his half of the land for the half of the house that belonged to the other. Each therefore answers as a seller for the share exchanged, and where the shares differ in value, the difference is settled by a balancing payment. Both are transferors, so their signatures on the agreement must be officially certified, unless the agreement takes the form of a notarial deed or of an agreement authorised by a lawyer (Section 42(3) of the Land Register Act).
Where a thing has several co-owners and a share is being transferred, the others have a pre-emption right, unless the transfer is to a close person (Section 140); siblings are close persons (Section 116). Where two co-owners exchange their shares with one another, the question of the pre-emption right does not arise.
An agreement dissolving and settling co-ownership
The second route is to dissolve the co-ownership and settle it:
Co-owners may agree on the dissolution of co-ownership and on a mutual settlement; where the subject of co-ownership is immovable property, the agreement must be in writing.
— Section 141(1) of Act No. 40/1964 Coll. (unofficial English translation)
The agreement is concluded between all the co-owners and can deal with several things at once: who is to receive what, division of the land by a survey plan, monetary compensation and when it falls due. The co-owners’ signatures on the agreement must likewise be certified for the Land Register (Section 42(3)). The decisive difference from an exchange is that the agreement is not the only option: if the co-owners do not reach agreement, the court will dissolve and settle the co-ownership on application, having regard to the size of the shares and to the effective use of the thing (Section 142(1)). An exchange cannot be ordered by a court.
How to choose
An exchange suits the case where there are two co-owners, they are exchanging shares in two things of roughly equal value and they wish to settle nothing else. A settlement agreement is preferable where there are more co-owners, where a thing must be divided, or where someone is to receive money rather than a thing. If land is to be divided, the survey plan must be in place before signing, because the agreement must identify the new plots precisely. On either route it is worth having the values of the properties substantiated, so that the balancing payment or compensation does not later become a reason for a dispute. On either route, encumbrances remain: a security right operates against the acquirer as well (Section 151h(1)), and the settlement may not be to the detriment of those entitled to rights attaching to the property (Section 142(3)). The agreement goes to the Land Register under a single application for registration, which must cover all the properties and all the legal acts arising from it (Section 30(5) of the Land Register Act).
The tax consequences of each route are assessed separately. For an exchange, the Income Tax Act treats non-monetary consideration obtained by exchange as income as well (Section 2(c) of Act No. 595/2003 Coll.); the details, including exemptions, are examined in the question on an exchange agreement for immovable property. The calculation for your particular case should be made by a tax adviser before signing.
How we can help
We compare both routes against your title sheets and prepare the one that fits: an exchange agreement or an agreement within our settlement of co-ownership in undivided shares service. If a mortgage attaches to one of the shares, see also the question on encumbrances in a settlement of co-ownership.
This answer provides general information on the law as at 12 September 2026. It does not constitute legal services or replace an assessment of an individual case. The details of your situation may differ. Book a consultation to discuss them.
