Making the decision to buy a property with another person is one of life’s significant moments.

And that’s fantastic.

But not everyone acquires a property with someone else out of choice. For example, you may end up as a co-owner of a property because you have inherited it from a parent or other relative.

Even if you did make the choice to acquire a property with someone, things change.

So what if you want ‘out’?

If you haven’t put into place any documentation to deal with how you exit the property, or you just received the property under a simple Will, then you’re in a bit of a pickle… How do you resolve a situation where one of you wants to keep the property, but the other wants to sell up?

We will run you through a couple of ways to resolve things in NSW.

The Court’s power to order partition or sale

If you find yourself locked into a property disagreement, relief can be found in New South Wales under the Conveyancing Act 1919 (NSW). This Act provides a mechanism called a ‘statutory sale‘.

Under s 66G of the Conveyancing Act 1919, a co-owner of a property can apply to have a trustee (i.e. third party) appointed to sell or partition the property, subject to any encumbrances.

Note that ‘partition‘ is something less than a sale of the property. A partition involves breaking up the legal ownership of the property so that each ‘co-owner’ is the sole owner of a defined portion of the land. For example, partition could involve a duplex being divided into separate strata or community units, or a large parcel of land being subdivided into separate blocks.

Before ordering a partition, the Court will want to see valuation evidence as well as evidence that the proposed partition is workableAs you can probably imagine, partition is often not a workable option, especially when the block consists of a single house.

Due to the practicalities of most properties being a single dwelling that is not ‘partitionable’, a sale is usually the only way to resolve the dispute. In this case, the Court will order the sale of the whole property.

Once the property is sold, the proceeds are held by an appointed trustee and distributed according to Court orders. The orders are likely to require that any mortgage be paid out, along with any other charges on the property. The trustee’s expenses and land agent’s fees are also likely to be paid from the proceeds. The left-over proceeds of the sale are then distributed according to the title interests. A single co-owner may be allowed to purchase the property on terms agreed to by the Court.

How can I avoid having to go to Court?

Our golden rule? Where possible, talk about it. Communication is key to avoiding (and resolving) disagreements.

If you want someone to talk for you, then give us a call. When people realise that there is a court process to achieve a fair sale of the property, they often then agree to do this voluntarily to avoid the unnecessary court costs.

Having the foresight to plan for a potential disagreement regarding your property is the best way to avoid costs and avoid inflaming an often delicate relationship! This was demonstrated in a recent NSW case where, despite there being legislative relief available to the parties, the court required the parties to follow the terms of their co-ownership agreement before an order could be made under section 66G.

If you are a parent considering leaving a property to your children, then you should include provisions in your Will that provide an orderly mechanism for your children to sell their interests in the property.

It’s never too late to enter into a co-ownership agreement

We can assist you put in place a tailored and comprehensive property co-ownership agreement that reflects your particular circumstances. We can also review and update your estate planning documents to ensure you don’t put your children in the position of having to go through this process.

Ideally you would agree with your co-owners how you are going to exit the property well before you sign on the dotted line to buy. But it is never too late to agree on a sensible way forward with your co-owners.

If you are thinking about acquiring a property with someone, then call us now to get a co-ownership agreement in place.

If you already own a property with someone and want out – call us to work out a strategy.