Do you co-own property with another person or are you considering such a purchase?
There are many things to consider when determining whether you should purchase property with another person but one of the most important, and often overlooked, considerations is what should occur when one party wishes to sell the property and the other does not.
Section 38 of the Property Law Act 1974 (Qld)anticipates such a dispute and provides that a co-owner may make an application to the court seeking to appoint a statutory trustee to sell the property whether the other co-owners agree or not.
The application is accompanied by a supporting affidavit and the consent of a statutory trustee (usually a solicitor or accountant), and is traditionally difficult to oppose. If the application is granted, the property in question may be sold either by auction or private treaty.
Proceeds from the sale will be divided between the co-owners in the proportion of their ownership, after mortgagee loans, solicitor’s fees, real estate agents commission and other costs have been paid.
As the decision to buy and sell property is often determined by an individual’s personal and financial situation and strategies, the decision as to whether to sell is something you want to ensure you have control over.
To ensure that you have control and certainty when purchasing property as a co-owner, we recommend entering into an agreement with the other owners outlining how the property is to be dealt with and eventually sold. Examples of what the agreement should anticipate are:
- how the property purchase is to be funded (ie initial funding vs ongoing costs);
- the proportions in which the property is to be owned;
- how the property will be used, maintained, managed etc.;
- whether there is to be a first right of refusal and at what price;
- how long the property must be owned before it can be sold and conversely, the maximum amount of time the property is to be owned before it must be sold; and
- the method by which the property is to be sold.
Unfortunately, a lot of property deals end in disputes between co-owners as they didn’t take the time to reach and record an agreement and understanding prior to purchasing the property. Taking the time to put in place a document that governs the transaction can save a significant amount of time and energy down the track and could potentially save relationships from breaking down unnecessarily.