Ideally, when you own property with another or others (outside of a marriage relationship), before you and the other or others bought the property you entered into a formal agreement covering matters incidental to your co-ownership, such as who is liable to pay for repairs and maintenance, what happens if an owner does not comply with that owner's obligations and what happens if an owner wants to sell that owner’s interest or the whole property.
Where there is no agreement covering the issue and an owner wants out, that owner can be in a difficult situation.
Historically a co-owner of a property not wanting to continue owning the property with another or others could apply to the court for an order that the property be sub-divided and each owner become an owner of a sub-divided part. That was called “partition”. That was fine if you co-owned a farm in Devon; not so much if you co-owned a flat. Partition has become even more problematic with the development of planning laws.
To overcome that problem various legislation has been passed given a co-owner certain rights to seek a sale of the property, rather than having to seek to partition it ie sale in lieu of partition. In Western Australia that legislation is contained in an act called the Property Law Act.
The sale is sought by court action commenced in the Supeme Court of Western Australia.
The Property Law Act provides for three scenarios with different outcomes, being:
1. Any party interested in property may apply to the Supreme Court for a sale of the property and the court may, if it thinks fit, direct that the property be sold, unless the other parties interested undertake to purchase the share of the party requesting the sale.
2. Any party interested in property may apply to the Supreme Court for a sale of the property and the Supreme Court may, if it thinks fit, order a sale, notwithstanding the dissent or disability of any other party having an interest, where it appears to the court that by reason of:
(a) the nature of the property; or
(b) the number of the parties interested in the property; or
(c) the absence or disability of any of those parties; or
(d) or any other circumstances
the sale of the property would be for the benefit of the parties interested.
3. Any party or parties interested with at least a half share in a property is or are entitled as of right to obtain from the Supreme Court an order for the sale of the property, whether or not the other party or parties interested are opposed to the sale, unless the court forms the view that there is good reason to order actual partition instead of the sale of the property.
A person usually will have an “interest’ in a property by being a co-owner. People can co-own property as joint tenants or tenants in common. If there are two co-owners and they are tenants in common in equal shares, then each has at least a half share in the property and can seek a sale under the third scenario.
For the purposes of sale in lieu of partition a non-owner, such as a bank with a registered mortgage on the property, can also be considered to be a “party interested”. It might be that a person with a non-registered interest can also be a “party interested” eg a beneficiary of a trust of which a registered owner is trustee.
In the first and second scenarios the court can make an order for sale, but does not have to do so. In the third scenario, the court must make an order for sale unless the court forms the view that there is good reason to order actual partition instead of the sale of the property. Such a situation will rarely be encountered. Therefore, generally where a person with at least a half interest in a property commences an action in the Supreme Court seeking an order for sale, the court process will usually be fairly straightforward, and the matter can determined and the order obtained, without the need for a trial.
However, there can be some obstacles that arise. For example, whilst an owner seeking a sale is legally registered as the owner of at least a half share in a property, it might be argued by another owner that the extent of that ownership is in fact less than half because of some equitable claim to which that share is subject, such as where there has been contributions made for the purchase of the property disproportionate to the extent of ownership.
If such an argument does not prevent a sale, it can still leave open a dispute about who is entitled to what from the nett proceeds from the sale of the property.
Another issue of uncertainty is the extent to which an owner can contract out of the owner’s right to seek a sale under the Property Law Act.
Moral: Have an agreement with the other owner or other owners, at least.