Dirt fights – when co-owners of land disagree

Buying land together with family, friends or business partners is common when people want to get into the property market.  What motivated their decision to buy property together doesn’t always last.
 
So what happens when co-owners of land can’t agree on what to do with the land?
 
In Queensland, the Property Law Act 1974 (Qld) (the Act) provides co-owners with legal options in the event they cannot agree on what to do with the land.
 
When real property (i.e. land) is owned by two or more persons, including companies, family, friends or romantic partners, and they cannot agree whether to sell it, subdivide it, or even on the sale price, any co-owner can apply to the Court to appoint a Statutory Trustee for Sale or Partition of the land under section 38(1) of the Act.
 
If a co-owner wishes to force a sale of the land, the law is on their side.  The right to sell real property is an inherent right of ownership and it is well settled that there is practically no defence to an application to appoint a Statutory Trustee for Sale where one co-owner wishes to sell and the other co-owner/s do not agree.
 
If a Statutory Trustee for Sale is appointed, then he or she will market and sell the land and subsequently distribute the net sale proceeds to the co-owners.
 
While the Court has discretion to refuse an application to appoint a Statutory Trustee for Sale in appropriate circumstances, generally, the only reason the Court will do this is where one of the co-owners wishes to partition (i.e. subdivide) the land and that co-owner can prove that partition is more beneficial to all of the co-owners than sale.  While ‘beneficial’ in this context does not only refer to monetary value, it is the main consideration. 
 
Accordingly, if a co-owner wishes to partition land and the others don’t agree, then the value of the land sold as is must be compared with its value if subdivided.  If the total value of the subdivided lots are more than the value of the land if left intact, then an application to appoint a Statutory Trustee for Partition is likely to be successful.
 
If land is to be partitioned, then:

1. it must be subdivided in such a way as to reflect each co-owner’s interest; or
2. if it is to be subdivided in a way that does not reflect the co-owners’ respective interests, the co-owners who receive a portion of the subdivided land smaller than their interest must receive monetary compensation.

The process to apply to the Court for appointment of a Statutory Trustee for Sale or Partition takes around two months.
 
Key Takeaways

1. While the options under the Act may be available, we recommend that co-owners of land attempt compromise to avoid the time and cost associated with an application to the Court.  In saying that, if such an application became necessary as a result of a co-owner’s unreasonable conduct, the Court may order the unreasonable co-owner to pay the applying co-owner’s legal costs; and
2. If you are thinking about buying a property with someone else, you should consider what is to happen if one of you wishes to sell or subdivide and the other does not.  If you decide to protect against that risk, you can enter into an agreement with your co-owner/s that records each party’s rights and obligations in the event of such a dispute – with a view to hopefully avoid such a dispute.

If you would like to document such an agreement, are dealing with a difficult co-owner who does not want to compromise, or you have been threatened or served with an application made pursuant to section 38(1) of the Act, our Litigation + Dispute Resolution team is experienced in these matters and will be able to assist.