connected talent
Forcing the sale or partition of a
property that you own with someone
else?
04 September 2015
You own a property with one or more people. The other co-owners of a property are not providing
you information you have requested. Or the co-owners are not accounting to you for your share of
the rental profits. Or the relationship you have with the other owners has simply broken down.
These are common situations where the ongoing co-ownership of property is no longer viable.
Section 66G
There is process of applying to the Supreme Court of New South Wales for the appointment of
statutory trust for the sale or partition of a property under section 66G of the Conveyancing Act
1919 (the Act).
The section states that where a property is held in co-ownership, the Court may on the application
of a co-owner, appoint trustees to sell or partition the property subject to any encumbrances on
the property (such as a mortgage or outstanding land tax). The Court order, if made, is for the
appointment of a statutory trustee for sale or partition.
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Co-ownership is defined as “ownership whether at law or in equity in possession by two or more
persons as joint tenants or as tenants in common”.
“Partition” terminates co-ownership. By partition, each co-owner becomes the sole owner of a
specifically ascertained portion of the land and their interests in the land become divided. Partition
might involve a duplex being divided into strata units or a large block of land being subdivided.
Partition is usually impracticable and valuation evidence is desirable, as well as evidence that the
proposed partition is feasible. The onus of showing that partition is more beneficial than sale, rests
on the co-owners that desire it.
The trustee that the Court can appoint is:
1. a trustee company alone;
2. a trustee company with one or two individuals; or
3. two or more individuals not exceeding four people.
The trustees may include some of the co-owners. The Court will prefer a trustee that is
independent, as free as possible from any conflict and that possesses appropriate skill and
experience. The trustee for sale must sell the property for the best price that is reasonably
obtainable. They must also sell as expeditiously as possible but in accordance with their duty to
achieve the best price. A trustee should obtain a valuation, advertise adequately and engage
competent agents.
The Court may allow another co-owner to purchase the property at auction or otherwise and on
such terms as the Court deems reasonable. However, that co-owner cannot be appointed as
trustee for the sale.
Once the property has been sold, the money is then to be held by the statutory trustee for sale
and distributed in accordance with any orders of the Court, which would normally pay out any
mortgage and charges on the property as well as the costs and expenses of the statutory trustee
for sale, legal fees and an agent’s commission. The legal rights of any exiting lessee or tenant
must be respected.
The sale proceeds will be distributed in accordance with the title as indicated by the certificate of
title.
Available defences
A defence to an application is to show that the plaintiff only holds a bare legal title and that the
defendant has an absolute beneficial title. The proceedings then become an Equity case
concerning the establishment of a resulting or constructive trust.
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The only other real dispute could concern the proportions in which the net proceeds of sale should
be divided where it is alleged that the beneficial title is held in different proportions from that
shown on the certificate of title.
Further, a Court may refuse an application under special circumstances. For example, if all the
owners had previously agreed not to sell the property unless all owners agreed to it or if there are
contractual or fiduciary obligations which the Court finds should be honoured.
A party opposing a sale or partition has the onus of dissuading the Court from ordering a sale or
partition, whichever is sought. The Court cannot refuse an application simply on the grounds of
hardship or unfairness.
In reality, the proceedings are generally not resisted. They are usually brought to confront a
reluctant co-owner with the realities of his or her position. As it is much cheaper for the co-owners
to co-operate, a properly advised co-owner will, upon service of proceedings, co-operate with the
plaintiff in the sale of the land and the distribution of the proceeds. Wherever possible, parties
should be advised to agree on a regime for the marketing and sale of the property in order to
minimise costs which will include the costs of the trustees (usually accountants) charged with the
sale of the property.
Costs
In the case of MacDonald v MacDonald [2009] NSWSC 794, the Court stated:
“The usual order that is made concerning costs of an application… is that the costs of the
parties be paid out of the proceeds of sale, and where there is unsuccessful opposition by
one or more of the co-owners, that the costs of the successful plaintiff be paid out of the
share to which the opposing co-owners would be entitled”.
If the other co-owners decide not to contest the matter, then is it likely that the Court will order that
each party pay their own costs from their own share of the sale proceeds. However, if the
application is contested and the other co-owners are unsuccessful, the Court will likely make an
order requiring the co-owners to pay a portion of the plaintiff’s costs (referred to as your costs on a
party and party basis) from their own share of the sale proceeds.
Prior to commencing proceedings, a person would be best placed to write to the co-owners first
threatening to make such an application to the Court. The matter may also resolve without the
need for commencing proceedings. An alternative outcome could be that the other co-owners
might offer to buy the aggrieved person’s share of the property.
If you find yourself in a scenario like the ones described above, you may wish to apply to the Court
seeking orders for the appointment of a statutory trustee for sale or partition. Our Wills & Estates
Team
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would be happy to assist you with such an application.
Michael Henley, Partner
Sydney
Christine McPhillips, Special Counsel
Sydney
Luke Friedman
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