The Perils of Co-ownership: What To Do When You Can’t Agree
You may have noticed recently that more and more people are turning to the idea of purchasing property with their family or friends as a more affordable option. For many, co-ownership maybe the only way to get on the first rung of the property ladder.
But what happens when one person wants to renovate the house or perhaps wants to paint the fence and the rest of the co-owners do not agree? Sometimes minor disagreements can result in major deadlocks between co-owners of property. Deadlocks between co-owners can be challenging to resolve especially when there is no co-ownership property agreement in place to offer a solution.
When there is no clear way forward, the Court has the power to intervene in certain circumstances. Under section 339 of the Property Law Act 2007 (the Act), the Court can:
- Make an Order for the sale of the property and division of the proceeds;
- Make an Order for the division of the property among the co-owners; and
- Compel one or more of the co-owners to buy the share of the other co-owner/s at a fair and reasonable price.
The factors the Court must take into account when making any division order specified above are listed under section 342 of the Act and include:
A) the extent of the co-owner’s share in the property (i.e. the person who has made the application for the order);
B) the nature and location of the property;
C) the number of other co-owners and the extent of their shares;
D) the hardship that would be caused to the applicant by the refusal of the order, in comparison with the hardship that would be caused to any other person by the making of the order;
E) the value of any contribution made by any co-owner towards improvements or maintenance of the property; and
F) any other matters the court considers relevant.
The Court also has the power to provide for any other steps or make any other orders the Court considers necessary as a consequence of making an order under section 339. There is no requirement that the division orders the Court makes can only be those that were specifically sought by a party. The Court has the ability to use its broad discretion to make a division order that differs from the orders that were specifically sought by the parties because it is more fair and reasonable in those particular circumstances.
While the Court’s ability to intervene and resolve issues between co-owners can be helpful, this option should be used with caution, especially in circumstances where the parties have reached a deadlock but do not want a division order because of the property’s sentimental value. This option could also backfire if the Court uses its discretion to grant an order that may not be what was intended by the parties. There is no guarantee that you will definitely get the division order that you are seeking from the Court.
For this reason, we always recommend entering into a property sharing arrangement when purchasing property as tenants in common. Having a co-ownership agreement in place is always beneficial because you can specify the dispute resolution methods within the agreement and you may be able to avoid significant Court costs. The agreement can be seen as a method of ensuring that your interests are safeguarded and there is a clear written process in place when the parties disagree on matters concerning the property.
Our previous article that highlights which terms to include in a co-owners agreement can be found here. If you would like to draft a co-ownership agreement but are unsure of where to begin, Franklin Law has a team of solicitors who specialise in property law and who can provide advice as to your specific situation and prepare an agreement which would suit your needs.
Written by Jasmine Daroch