When property co-owners go to war

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People own property (real estate) together for a range of reasons.

The most common scenario is a de facto couple and/or husband and wife who buy a family home in joint names to live in.

Other times friends, business associates or family might pull their funds together to jointly purchase a property for investment purposes.

People often inherit property together as well – for example, parents who leave the family home to their children in equal shares.

Most of the time if one of the co-owners wants to sell their share in a property, all of the owners come to an agreement which can include:

1. Selling the property on the open labour market and each owner taking their share as cash.

2. One or more co-owner buying the other co-owner out and owning a greater share of the property as a result.

What happens if one co-owner wants to sell however, but the other co-owner/s refuses to cooperate with a sale on the open market and cannot or will not buy the other co owner out?

There are two main contexts in which this situation arises.

The first is in the case of a family law breakdown. If parties to a de facto relationship or marriage own real estate together, the Family Court has powers to make Orders for the disposition of property including a sale, if parties to the relationship cannot agree as to how the property is to be divided or if one party is simply refusing to cooperate with a sale and refusing to buy the other party out.

This usually involves an application to the Family Court seeking Orders with respect to the disposition of the property and all other matrimonial assets.

The other context in which this arises is in relation to co-owners who are not party to a de facto relationship or marriage.

The Court recognises a person’s right to dispose of an asset and not be held hostage by a co-owner who refuses to sell or buy the other co-owner out.

This situation often comes up when a co-owner is living in the property and quite likes the fact that their mortgage repayments are subsidised and/or the costs of the property are shared with the other co-owner and doesn’t want that to change. This often comes up in scenarios where a child of a deceased person has lived with the deceased for a long time in the relevant property but upon their death now has to share the property with the other beneficiaries of the deceased’s Will. Sometimes the recalcitrant co-owner simply does not want to be disturbed. Other times they can’t afford to buy the other beneficiaries out, so bury their heads in the sand in the hope that they will be able to remain in the property indefinitely.

People in this situation are able to avail themselves of section 66G of the Conveyancing Act 1919 (New South Wales). Section 66G provides a mechanism under which a co-owner can make an application to the Supreme Court to appoint an independent third party known as a trustee to step in and sell a property on behalf of the owners.

If Trustees for sale are appointed, the transaction is essentially taken out of the hands of the warring co-owners. The Trustee handles all aspects of the sale, taking into account the wishes of the co-owners where possible. The Trustees then deduct all appropriate expenses from the sale proceeds, including any mortgage, legal costs, trustee fees and real estate agents costs.

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