There are two options when owning property with others.  You can either own it as ‘Tenants in Common’ or ‘Joint Tenants’.

Tenancy-in-common ownership gives each co-owner title to and control over a fixed interest in the property. This makes it a flexible and autonomous way to own property. But what happens when the co-owners don’t agree? We discuss some options below.

Option 1: Enter into a Co-ownership Agreement

The co-owners should consider entering into a Co-ownership Agreement. This is a legal document that helps to record the procedure for managing the property, and can cover such things as:

  • division of any profits or losses realised from the rental of the property;
  • division and payment of the operating expenses of the property between the co-owners;
  • keeping of books and records;
  • the procedure for making decisions about the property (i.e. 50% vote, 75% majority vote or unanimous vote, depending on the nature of the decision); and
  • a dispute resolution process to resolve disagreements between co-owners.

Although it is preferable to sort out this type of detail from the get-go, it is never too late to enter into a Co-ownership Agreement.

Call us on 1300 654 590 if you’re interested in getting a Co-Ownership Agreement put in place.

Option 2: Third party property management

The simplest way to ensure that a rental property is managed properly is by appointing a third party property management agent. The agent can collect the rent and pay the expenses of the property on behalf of all the co-owners, and is required to keep adequate records (which can be accessed by the co-owners) so that the co-owners can be satisfied that everything is properly accounted for. There will be a fee for the agent’s services, which is usually a percentage of the annual rental income. However, it can be a small price to pay to save lots of time, stress and arguments.

Option 3: Separate management and rent payment

In the alternative to a third party agent, co-owners have the right to manage their respective ‘interests’ in the property separately. However, you need to first check that any Tenancy Agreement gives you the flexibility to direct the tenant to make separate rental payments.

This approach also has several practical considerations that need to be taken into account, such as:

  • whether the tenant is willing to pay different percentages of the rent into the separate accounts of the co-owners;
  • who the tenant is to go to when there are maintenance issues; and
  • how the owners’ expenses will be paid (for example, by payment towards each invoice in the proportion that corresponds to each co-owner’s ownership interest).

Option 4: Court application

A “last resort” option is to apply to the Court for sale of the property (either in whole or in part). For example, in South Australia an application can be made under Part 8 of the Law of Property Act 1936 (SA).  Similar provisions apply in each other state.

The Court may order either the sale of the entire property (and the proceeds will be divided amongst the owners in their relevant proportions), or the purchase of a co-owner’s share in the property by an interested party (e.g. another co-owner).

The major disadvantage of this option is the cost of making an application to the Court. However, in a scenario where the co-owners are in ‘deadlock’ over the property, an application to the Court may be the only alternative.

If you would like some guidance or advice in relation to a tenancy-in-common dispute that you are currently facing, or would like us to assist in preparing a Co-ownership Agreement, please call us on 1300 654 590.

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