Where co-owners are in the process of selling co-owned land and have reached a consensus as to the various aspects of the sale, this transaction can often be smoothly completed.
Unfortunately, however, situations can arise where co-owners are in dispute over certain elements of the sale or, more significantly, whether the land should even be sold.
As explained by VCAT, there are several situations which can cause dispute in relation to the selling of co-owned land. These include, but are not strictly limited to, circumstances where:
One co-owner wants to sell land or goods but the other co-owner does not agree.
Co-owners agree to the sale of land or goods but cannot agree on how to sell the land or goods. For example, they may disagree over auction or private sale, the listing price, the terms of sale, the selling agent or the choice of conveyancer.
Co-owners cannot agree on how the net proceeds of sale should be distributed between them after sale.
One co-owner wants the other co-owner to account to them for rent received or to pay compensation for expenses incurred.
One co-owner wants the land or goods to be divided differently to what is shown on the certificate of title or other documentation.
Critically, VCAT offers a dispute resolution mechanism for co-owners who are disputing one or more of the above matters. It should be noted, however, that an applicant must be deemed to constitute a ‘co-owner’ (at the time of the application) to make an application to VCAT under the Property Law Act 1958. For instance, disputes based on how much money other co-owners should receive after co-owned land has been sold (and the parties are no longer co-owners) will not likely form the basis for an application.
VCAT Orders:
Part IV of the Property Law Act 1958 (‘the Act’) governs the nature and content of orders which VCAT can make in relation to sale disputes between co-owners.
Under s228(2) of the Act, VCAT may order:
(a) the sale of the land or goods and the division of the proceeds among the co-owners; or
(b) the physical division of the land or goods among co-owners; or
(c) a combination (a) and (b).
VCAT’s first port of call is, typically, to order that the land be sold as provided for in s228(2)(a) of the Act. However, VCAT may also consider that it would be more ‘just and fair’ to make an order pursuant to s 228(2)(b) or (c).
When considering whether such orders would be more ‘just and fair’, VCAT will take into account:
The use being made of the land or goods;
Whether it is practical for the land or goods to be divided; and
Any links or attachments to the land or goods such as whether the land possesses a special value to one or more of the co-owners.
If VCAT ultimately considers it ‘just and fair’, the types of orders which can be made include:
(a) that the land or goods be physically divided into parcels or shares that differ from the entitlements of each of the co-owners; and
(b) that compensation be paid by specified co-owners to compensate for any differences in the value of the parcels or shares when the land or the goods are divided in accordance with an order under paragraph (a).
Meanwhile, should they deem it appropriate, VCAT is empowered under s232 of the Act to make orders pertaining to how the land ought to be sold (including private sale or auction), that an independent valuation of the land take place or that a sale be completed within a specified time frame.
Additionally, there are a variety of orders which VCAT can make under s233 of the Act to compensate co-owners with respect to any sale proceeds. These includes that:
(a) compensation or reimbursement be paid or made by a co-owner to another co-owner or other co-owners;
(b) one or more co-owners account to the other co-owners in accordance with section 28A; or
(c) an adjustment be made to a co-owner's interest in the land or goods to take account of amounts payable by co-owners to each other during the period of the co-ownership.
These particular orders are commonly relevant in circumstances where one co-owner has reasonably spent sums of money that have improve the land. Nonetheless, VCAT will also take into account factors like:
any costs reasonably incurred by a co-owner in the maintenance or insurance of the land or goods;
the payment by a co-owner of more than that co-owner's proportionate share of rates (in the case of land), mortgage repayments, purchase money, instalments or other outgoings in respect of that land or goods for which all the co-owners are liable; and
damage caused by the unreasonable use of the land or goods by a co-owner.
To speak to one of our lawyers regarding your sale of co-owned land, please contact us on 03 9450 9400.