When a Bankrupt’s Co-Owner Won’t Cooperate: Forcing the Sale of Jointly Owned Property

We recently wrote about the effect of bankruptcy on jointly owned Real Property.

When a joint owner of the property files for (or is forced into) bankruptcy, the trustee can ask the co-owner to either:

  • purchase the bankrupt’s interest in the property
  • join with the trustee and sell the property on the open market.


Note: These options may change, depending on how much of the property’s equity the bankrupt is entitled to.

So what happens when the co-owner won’t cooperate with the trustee?

Legal options to force the sale

Section 66G of the Conveyancing Act 1919 (NSW) (“the Conveyancing Act”) is a mechanism available to bankruptcy trustees who can’t reach an agreement with the co-owner/s to:

  • purchase the bankrupt’s interest in Real Property situated in New South Wales
  • sell that Real Property on the open market.

It allows a joint owner of Real Property (who owns at least a 50% interest) to approach the Court and seek orders to:

  • appoint a trustee (or trustees) for sale
  • sell or partition  the property.

What happens when you appoint a Section 66G Trustee?

A trustee in bankruptcy will generally achieve a better outcome for creditors if the co-owner/s agree to either purchase the bankrupt’s interest in the property or sell it. So appointing a Section 66G trustee is generally seen as a last resort.

If one is appointed:

  • The co-owners’ rights to deal with the property are effectively lost to the Section 66G trustee/s.
  • People residing at the property usually have to vacate it before it’s sold. If they don’t do this voluntarily, the Section 66G trustee/s may need to obtain vacant possession by:

o   asking solicitors to obtain Orders for vacant possession

o   having those Orders for vacant possession enforced.

  • The Section 66G trustee/s should do everything necessary to sell the property at the highest market value, including :

o   obtaining a registered valuation and market appraisals

o   instructing an agent and solicitor to act on the sale of the property.

Secured debts and the sale costs are paid out when the property reaches settlement, and any surplus sale proceeds are held by the Section 66G trustee/s to distribute in accordance with any Orders of the Court.

  • Additional costs are incurred (and effectively borne by the co-owners) for:

o   appointing the Section 66G trustee/s

o   the Section 66G trustee’s costs and sale expenses

o   any legal fees and court costs associated with making and finalising the appointment, such as obtaining Orders for vacant possession (if required) and final Distribution of sale proceeds.

We have a wealth of experience in Section 66G applications and appointments. So if your client is involved (or likely to become involved) in a Section 66G application, get in touch with us to talk about your situation.