Falling out with a co-owner: a ‘real’ property mistake
We all make mistakes in life. Sometimes we make big ones – we buy property with someone that we should not have and become stuck holding part of a piece of land as co-owner with a person we no longer talk to and who doesn’t pay the mortgage.
This scenario of course can arise frequently in family court proceedings and the Family Law team at Lynn and Brown navigate the issue daily. We also see the issue commonly on the civil side of the law in the Commercial and Dispute Resolution team. Most often land has been bought collectively between friends or family members and those relationships have later turned sour. One party wants to sell the land, another wants to hold it. A third has gone AWOL and have not been seen or heard from in years.
Nobody likes to consider that friendships and relationships might breakdown and so there is almost never an agreement entered into prior to purchase which outlines the nature of the investment or the procedure for dealing with a disagreement when one occurs.
While a well-constructed contract is the best way to deal with the issues, thankfully, there are options available even in the absence of a written agreement. Section 126 of the Property Law Act provides an avenue for co-owners to force a sale or a partition (that is a sort of ‘division’) of co-owned land through application to the Supreme Court of Western Australia.
If a co-owner, or collection of co-owners, hold 50 per cent or more of the legal title in a property then that owner (or owners) can apply to the Supreme Court for an order that the land be sold or divided in the shares that each party owns. The court is obliged to grant the order for sale unless it “sees good reason to the contrary”.
If you are a co-owner (or owners) with less than 50 per cent of the title, you still have options available, however, the court is not bound by the same obligation to force the sale. The court will direct a sale where, by reason of the nature of the land, the number of parties interested or any other circumstances, the sale of the land would be beneficial to the interested parties.
When an order for sale is made, the owners objecting to the sale may elect to purchase the share of the party looking to force the sale. If the other owners are not willing to purchase, the Court then has wide powers to make orders about how the sale of land will proceed. These orders might include directions about which party controls the sale, any valuations that are required, a minimum price for the sale or the appointment of real estate agents and auctioneers.
Seeking these further orders is important in an application under section 126, as it is one thing for a party to successfully apply for land to be sold, but quite another thing for the sale price, the method of marketing and sale and acceptance of offers to be either agreed or determined by the court.
We have had a lot of experience with this, so we know what to expect. We use this knowledge to prepare your case and avoid unexpected problems arising during the dispute. Having a clear plan of sale either by documented agreement or court order is vital in ensuring the sale proceeds smoothly.
If you are looking to purchase property with a friend or family member then please contact us for legal advice. The preparation of an appropriate co-ownership agreement can save significant stress, time and money down the line if there were ever to be an issue arise between owners. It can also avoid problems that can arise between co-owners during their ownership of the property, including but not limited to maintenance costs, utilities costs and use of the property. If you are the co-owner of a property stuck in a situation where your fellow co-owners have different needs to your own then we can assist with negotiating a smooth, amicable transition or alternatively seek orders for sale with the Supreme Court.
About the authors:
Ben is a Perth Lawyer and Associate at Lynn & Brown Lawyers. He was admitted into the Supreme Court of Western Australia in July 2013, and specialises in both commercial and dispute resolution matters.
Steven is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.