What to do when a property co-owner won’t sell
What happens when you are a co-owner of a property and want to put it on the market, but the other owner refuses to sell?
This could happen after a marriage or de facto relationship breakdown, a business venture collapse or when one owner becomes bankrupt and the trustee of the bankrupt estate can’t reach an agreement with the other property co-owner.
Resolving co-owner property disputes
The best resolution in a property dispute involving joint owners could be for one owner to buy the other’s share of the property. However, where an agreement can’t be reached, a co-owner can apply to the Supreme Court for the appointment of a statutory trustee for the sale or partition of a property under Section 66G of the NSW Conveyancing Act 1919.
The exception is where there is a marriage or de facto relationship breakdown, in which case the Family Court is the best jurisdiction.
While there are costs involved in making the application to the Supreme Court, pursuing this course of action can avoid years of anxiety and financial loss caused by a dispute where one co-owner holds out and refuses to sell a property.
Applications to court to sell property can be refused in certain circumstances
The court may refuse an application under section 66G if there is evidence of a prior agreement between the property co-owners not to sell unless all owners agree.
An application may also be rebutted in family situations where one co-owner is providing care for another person, such as a parent looking after a child or someone caring for an elderly relative.
Role of court-appointed trustee in sale of jointly owned property
Once a trustee is appointed and the property is sold, the proceeds are held by the trustee and distributed in accordance with any orders from the court. Sometimes the money is distributed in proportion to the contributions each co-owner made in the original purchase or in improvements; at other times in proportion to the percentage of ownership shown on the title.
In one notable case, where a married couple were co-owners of a property and the husband became bankrupt, bankruptcy trustees were appointed to control his share. The trustees sought to implement section 66G to force the sale of the property. However, the wife claimed there was no equity in the property, valued at $1.7 million, as it was mortgaged to the bank for $1.64 million. (See Rambaldi [Trustee], in the matter of Atkinson [Bankrupt] v Woodward  FCA 1087).
The court ruled that a sale would return some money to creditors, including the bank, and the sale money (after costs) would be divided equally between the bankruptcy trustee and the wife.
Cross-claim can be submitted against section 66G application
In a recent matter, two people bought land together with the intention of subdividing it in the future. Some time later, a dispute between the co-owners arose regarding the boundary fence.
The parties were unable to resolve the argument or decide upon the future of the property. The dispute continued for a number of years until one owner filed a section 66G application to the Supreme Court to issue an order to appoint a trustee to sell the property.
The other owner brought a cross-claim, claiming the other owner had represented to him that the boundary fence would be paid for by his co-owner and not himself and that he would not have entered the contract to purchase the land if he knew he would have to pay for half the costs of the boundary fence.
Eventually, it was agreed by both parties that the subdivision would continue. However, the owner with the cross-claim did request that the other co-owner pay damages.
Understanding your rights as a property co-owner
While it’s always ideal to settle any co-ownership property dispute out of court through mediation, many matters of this nature do escalate. Before considering the best course of action for you, it’s important to obtain specialist legal advice that is tailored to your particular situation.