Owning property with another person can provide many benefits, including shared financial responsibility and increased borrowing capacity. However, disputes between co-owners can arise when circumstances change, relationships break down or owners disagree about how the property should be managed.
A co-owner is a person who owns an interest in property together with one or more other people. Co-owners generally hold property as either joint tenants or tenants in common. The way property ownership is structured can have significant legal consequences, including how the property can be sold, transferred or dealt with after the death of an owner.
If you are involved in a dispute with another property owner, our experienced property lawyers can provide advice about your rights, obligations and available options.
Joint tenants vs tenants in common
The type of ownership recorded on the property title determines the rights each owner has and what happens to their interest in the property.
Joint tenants
Joint tenants own the property together as a whole. Each owner has an equal interest in the property, rather than a separate identifiable share.
A key feature of joint tenancy is the right of survivorship. If one joint tenant dies, their interest automatically passes to the remaining owner or owners. The deceased owner cannot leave their share of the property to someone else in their Will.
For this reason, joint tenancy is commonly used by spouses and de facto partners who want ownership to automatically pass to the surviving partner.
Tenants in common
Tenants in common each own a specific share of the property. These shares can be equal or unequal depending on the agreement between the owners and their contributions.
Unlike joint tenants, a tenant in common can generally sell, transfer or leave their share of the property through their Will.
Tenants in common arrangements are often used by family members, friends or business partners who purchase property together.
Why do co-owner property disputes occur?
While co-owning property can be beneficial, disagreements between owners can create significant financial and personal stress.
Co-owner disputes often arise because of:
- relationship breakdowns between owners;
- business disputes between co-owners;
- financial difficulties affecting one owner;
- disagreements about selling the property;
- disputes about mortgage repayments, maintenance costs or renovations;
- different views about how the property should be used or developed; or
- disagreements about each owner’s financial contributions.
For example, one owner may believe they are entitled to a larger share because they contributed more towards the purchase price, loan repayments or improvements to the property. Another common dispute occurs when one owner wants to sell while the other wants to retain ownership.
Understanding each co-owner’s legal rights and responsibilities is an important first step in resolving a property ownership dispute.
What remedies are available in a co-owner property dispute?
The appropriate solution will depend on the circumstances of the dispute, the type of ownership structure and the contributions made by each owner.
Common issues that arise between co-owners and possible remedies include:
Changing the way property is owned
Sometimes a dispute relates to the way the property is held rather than the property itself. For example, co-owners may wish to change from a joint tenancy to a tenancy in common.
A joint tenancy can be severed, which changes the ownership structure to a tenancy in common. This allows each owner to hold a separate share of the property and deal with that share independently.
Severing a joint tenancy usually involves lodging the required documentation with the relevant land titles authority. A property lawyer can assist with preparing the necessary documents and advising on any potential stamp duty or taxation consequences.
A joint tenant may be able to sever the joint tenancy without the agreement of the other owner. However, the process can involve complex legal considerations, and owners should obtain advice before taking action.
When co-owners cannot agree to sell the property
One of the most common co-owner disputes occurs when one owner wants to sell the property and another owner does not.
If the owners cannot agree on selling the property or one owner buying out the other’s share, a party may apply to the Court for orders dealing with the property.
In many cases, the Court may order the sale of the property rather than a physical division of the land. This is because dividing a property into separate portions is often impractical.
If the Court orders a sale, a trustee may be appointed to manage the sale process. After paying any mortgage or other registered interests, the remaining funds are distributed between the co-owners based on their legal interests and the circumstances of the matter.
Stamp duty and taxation issues may also need to be considered before deciding how to resolve the dispute.
When one co-owner excludes another from the property
Each co-owner generally has a right to access and occupy the property, regardless of their ownership percentage.
If one co-owner prevents another owner from accessing the property, the excluded owner may have a claim for compensation, including an occupation fee.
Examples of excluding a co-owner may include:
- changing the locks to prevent access;
- refusing reasonable access to the property; or
- circumstances involving family violence that prevent another owner from occupying the property.
When a person contributes to property but is not listed as an owner
In some situations, a person may contribute financially or otherwise to a property but not appear on the title as an owner.
Examples of contributions may include:
- paying the deposit for the property;
- making mortgage repayments;
- funding renovations or improvements; or
- making significant non-financial contributions in certain circumstances.
These contributions may create what is known as an equitable interest in the property. This means the person who contributed may have a recognised interest despite not being listed as a legal owner.
The extent of that interest will depend on the circumstances, including the nature and value of the contributions made.
If the parties cannot reach an agreement, a Court may determine whether a beneficial interest exists and what share of the property the person is entitled to.
How can co-owner disputes be prevented?
The best way to minimise the risk of a future dispute is to obtain legal advice before purchasing property with another person.
When buying property together, your lawyer can help you understand the differences between joint tenancy and tenancy in common and advise which ownership structure may best suit your circumstances.
If you are purchasing property with someone other than a spouse or de facto partner, you should consider entering into a property ownership agreement.
A property ownership agreement can clearly set out important arrangements, including:
- each owner’s share of the property;
- responsibility for mortgage repayments and expenses;
- how maintenance and repairs will be managed;
- how profits from the property will be divided;
- whether one owner can purchase another owner’s share; and
- what happens if one owner wants to sell their interest.
Having these arrangements documented early can help avoid misunderstandings and provide a clear process if circumstances change in the future.
Conclusion
Disputes between co-owners can become complicated, particularly when owners disagree about selling the property, financial contributions or how the property should be managed.
The way a property is owned can have a significant impact on each owner’s rights and available options. Obtaining legal advice early can help co-owners understand their position and explore practical solutions.
The experienced property lawyers at Somerville Laundry Lomax can provide advice about co-ownership arrangements, property disputes and the options available to resolve disagreements.