Deciding to purchase property with another person is likely to be one of the most significant financial decisions you may make in your lifetime.
Unfortunately, things do not always go to plan and it may be the case that one of you wants ‘out’. If you have not put into place appropriate documentation to deal with disagreements about property, such as a ‘property co-ownership agreement’, then you may find yourself stuck between a rock and a hard place. How do you resolve a situation where one of you wishes to keep the property, but the other wants to sell up?
Thankfully, there is some relief to be found in South Australia under the Law of Property Act (SA).
Court’s power to order a ‘partition’ or ‘sale’
The Supreme Court of South Australia has the power to order either a ‘partition’ or ‘sale’ of a property on application from an ‘interested party’, (s.69 of the Law of Property Act). An ‘interested party’ is someone with a legal or equitable ownership interest in the property.
Partitioning a property
Turning first to ‘partition’. The Court can terminate co-ownership by dividing or ‘partitioning’ the property into two or more ‘pieces’ of property, so that each co-owner then becomes the sole owner of a defined piece. For example, partition could involve a duplex being divided into two separate strata units, or a large block of land being subdivided into two or more lots.
Before you can push for partition you will need to provide the Court with valuation evidence, as well as evidence that the proposed partition is feasible. But as you can imagine, partition is often impracticable and therefore not a feasible option. For example, when the property is a single house.
Sale of the property
If the Court finds that a sale of the property is more practical than a partition, it is empowered to order the sale of the property instead. If an interested party requests a sale of the property rather than a partition, the Court will usually direct a sale (under s.70 of the Act), unless it sees a good reason not to do so.
To meet the pre-conditions for a sale, a party must:
- Be interested to the extent of ‘one moiety’ (being a portion) in the property; and
- Request that the Court order the sale of the property and a distribution of the proceeds.
The Court will then consider the facts put forward, such as the individual circumstances of the parties, and whether a co-ownership agreement has been put in place. Usually the Court will then order the sale of the property.
How can I avoid having to go to Court?
Having the foresight to plan for a potential disagreement about your property is the best thing you can do to avoid having to go to court (and possibly inflame an already delicate relationship!) Not only will you save yourself the stress of going through the court process, you will also save yourself court-related costs, as well as legal fees.
We can assist you to put in place a tailored property co-ownership agreement. You can put a co-ownership agreement in place at any time, before or after you purchase the property. But it’s better to put one in place as soon as you have decided to buy a property with someone else.
Our co-ownership agreement governs everything, from who pays for household costs to how any future sale price is determined. Importantly, the document also covers several common ‘exit scenarios’ and the process to be followed if life takes a turn you don’t expect and you need to sell. We can also tailor the document to your specific circumstances.
If you currently co-own a property and need some legal advice about a disagreement with a co-owner, call us on 1300 654 590.
Some super useful resources!
Check out these useful resources about owning property with others:
We also think this detailed article is worth reading: Co-buying property with friends