Contexts in which property may be co-owned include:
- A domestic or matrimonial relationship;
- An interpersonal relationships (i.e ownership between friends);
- Parental relationships; and
- sibling relationships.
People caught up in the excitement of purchasing a new property seldom consider what might happen if the relationship between co-owners deteriorates in the future.
What if one co-owner wants to sell the property and the other does not?
Where there is no written agreement and the parties cannot come to a commercial arrangement for the sale, one co-owner can apply to the Supreme Court of NSW under section 66G of the Conveyancing Act 1919 (NSW) (the Act).
What are the implications of a section 66G application?
Where owners cannot agree on the terms of sale of a property, an application may be made to the Supreme Court to appoint a trustee to oversee the sale. Unless the appointment would be inequitable, an order under section 66G of the Act is considered almost ‘as of right’: it is very hard to defend the application and the court will likely force the sale of the property.
What would the court consider inequitable?
It is very difficult for a respondent to defend a section 66G application by establishing inequitable grounds. Possible grounds include where a contractual or proprietary right exists.
What happens when a property is sold under section 66G?
Once the property is sold, the sale proceeds are placed in a trust and the proceeds of sale are distributed amongst the co-owners. Their respective proportions will ultimately be decided on the basis of the contributions made by the co-owners.
The legal costs of the section 66G applicant are generally deducted from the sale proceeds of the property.
What if a co-owner has made greater contributions or improvements to the property?
When determining a division of sale proceeds, the court has regard to any increase in a property’s value as a consequence of one co-owner’s expenditure. When one co-owner’s expenditure on improvements has enhanced the property’s value, they should be entitled to reimbursement for their expenditure. However, the reimbursement will be valued at the lower of what they have expended on the property and the increase in value of the property.
Contributions to the property include:
- Renovations;
- Council and water Rates;
- Home insurance payments;
- Mortgage repayments; and
- Rent (if a co-owner lives in the property at the exclusion of the other co-owner/s).
An equitable accounting process may be required to ensure that, when the sale of the property is ordered, the co-owner who made greater contributions to the property receives a greater share of the proceeds of sale.
Drafting a co-ownership deed including a mechanism for the sale of the property would likely avoid any costly disputes in the future
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Contact us now for free no obligation initial telephone advice about filing an application pursuant to section 66G of the Conveyancing Act.
