Disputes between Co-owners of property are not uncommon. Most of us have at least known someone who has encountered problems with co-owned property. Take the following archetypical example:
- The last survivor of your parents have passed away leaving the family home or a cherished holiday house to you and your siblings.
- For the first few years you manage the property together, but eventually differences of opinion arise: should the property be sold as soon as possible? Are there repairs that need to be carried out? Can all the co-owners contribute equally to the costs of maintaining the property? What about improvements? At what time of year will each co-owner use the property? What if one party wants to sell and the other parties don’t want to buy out?
The situation is often exacerbated by the fact the parties involved are not aware of who has the legal ‘high ground’ and do not understand their position. Ultimately, one party may want out, and the other party may be unwilling or unable to cooperate.
Appointment of a Statutory Trustee to Sell the Property
Section 38 of the Property Law Act 1974 (Qld) allows a co-owner to apply to the Court for an order appointing a trustee to sell the property, and distribute the proceeds in accordance with an order from the Court. This right is considered the ultimate and decisive remedy of a co-owner locked in dispute with other owners. There is similar legislation in other Australian jurisdictions.
The appointed trustee for sale is often an experienced and independent professional. Although there will be upfront legal costs and the trustee’s costs of acting, these costs need to be weighed against the ongoing costs of indecisive negotiations, which may last years.
Most co-owners are not aware that they have this right (and of course many co-owners don’t appreciate that the other co-owner has this right). Although the prospects of the application depend on the specific facts of the case, there are generally very high prospects of success.
There is almost practically no defence to an application under Section 38, however there are circumstances which could obstruct an order being made. For example, there may be a pre-agreed dispute resolution mechanism in place, or the responding co-owners may have made an open offer to purchase the applicant co-owner’s interest on arms-length terms, bringing into question the need for the application.
There is also an advantage to being the initiating co-owner in an application for sale because the usual position is that your legal costs of the application will be paid from the sale proceeds before the balance is divided between the co-owners. In addition, you will have ‘first say’ on who the trustee for sale will be (although other co-owners may put their owner preferences forward).
Disagreements about historical contributions towards the maintenance of the property can also be resolved as part of the orders.
Going to Court to resolve a dispute can irretrievably damage the relationship between the parties. This is of serious concern when the co-owners are family members who have otherwise enjoyed very good relations until that point.
We recommend that co-owners seek legal advice at the earliest opportunity. This will ensure they understand their rights and obligations and develop a plan for the future of the property and a possible dispute resolution mechanism. Understanding the legal position and having a plan from the beginning can also reduce misunderstandings if an application to Court is eventually required.
There are specific rules under the Family Law Act 1975 (Cth) that apply to property disputes involving de facto or married couples and the legal process can be very different. Therefore, the advice of a lawyer specialising in family law is essential.
These issues need to be considered carefully when developing an estate plan. If you own real property, and plan to leave that property to several different beneficiaries after you die, you also need to consider the likely fate of the property and the financial position and motivations of the beneficiaries.
If you have any questions about resolving a co-owner dispute, or developing a plan to manage co-owned property, please contact our office on 07 3876 5111 to arrange a consultation.
Daniel Dash is part of the commercial law team and has significant exposure working with individuals and business owners on a range of matters including business sales, property disputes, estate disputes, shareholder agreements, intellectual property, litigation and taxation matters.