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Property co-ownership can make great financial sense. As well as allowing for a bigger budget, co-owners can split both the upfront and ongoing running costs.
However, if circumstances change, for example, a married or de facto couple separate, a friendship breaks down, or a business partnership shifts or turns sour, a co-owned property can become a significant source of contention.
Ideally, co-owners will eventually come to an agreement, for example deciding to sell the property or one party buying out the other. Unfortunately, this isn’t always the reality, with parties often becoming deadlocked in a property ownership dispute.
In these situations, Section 66G provides a powerful resolution.
What is Section 66G?
In NSW legislation, Section 66G is contained in Division 6, Part 4 of the Conveyancing Act 1919 titled ‘Statutory trusts of property held in co-ownership’.
Section 66G is a legal tool for resolving co-ownership disputes by application to the Supreme Court. Essentially, it forces the sale when one or more of the owners are uncooperative – and where they’re fighting between themselves.
Under Section 66G, a co-owner can apply to the Court to appoint a trustee to hold the property on a trust for sale or on a trust for partition. This works to force the sale of the property even when one or more parties may object to it.
Trust for sale – A trust for sale is where the trustees are directed to sell the property and hold the money in trust until it can be distributed to the parties following any court orders.
Trust for partition – A trust for partition essentially puts an end to co-ownership by subdividing a jointly owned property. New property titles are then converted from joint ownership into separate ownership.
While sale may typically be viewed as the best option, partition is sensible where the value of two parts would be more than the value of both sold together. It may also be chosen based on non-financial reasons, such as emotional investment.
What power does the Court have under Section 66G?
Section 66G has broad application, meaning that the Court can compel a party to agree to the sale even when they object.
Notably, the Court’s power under Section 66G is discretionary. This means that they hear each application on a case-by-case basis. Typically, however, an order will be made unless it would be inequitable to do so.
For an order to be considered inequitable, it must be inconsistent with a property (proprietary) right or a contractual or legal trust obligation. However, proving this inconsistency requires a great deal of evidence.
Hardship or unfairness are insufficient reasons for the Court to refuse a Section 66G joint property application.
What’s the role of a 66G trustee?
Once the Court appoints a trustee, the trustee holds legal power. Their duty is to sell the property to the best of their ability at the best possible price. This process typically involves engaging other parties, including:
- Real estate agents
- Valuers
- Lawyers
Once the joint property is sold, the proceeds are distributed to the co-owners in line with their interests in the property, minus any mortgage or charge present on the Certificate of Title.
What are the conditions for a Section 66G application?
To apply for a 66G, the party applying must be able to prove the following:
Recognised co-ownership
The common forms of co-ownership recognised in Australia are:
- Joint tenancy –Under joint tenancy co-ownership, co-owners have a right of survivorship. This means when one dies, the property passes by way of survivorship to the remaining tenant/s.
- Tenancy in common –Tenants in common are viewed as having separate
but undivided shares in the property. This means they possess the property at the same time in the proportion noted on the title register. In this instance, when one dies, their interest passes to the beneficiaries in their will.
Real property co-ownership of at least 50%
Section 66G as a legal tool only applies to co-owned real property. This is defined as property consisting of land or buildings (real estate).
66G doesn’t apply to other types of co-owned property, including other tangible goods (shares, yachts) or intangible goods (intellectual property, trademarks).
In addition, to apply for 66G, the party must own at least 50 per cent of the real property in question.
What costs are involved with a 66G?
Taking advantage of the 66G mechanism has significant costs attached. This includes the legal costs of the initial application, as well as the trustee’s fees and disbursements.
Fees are generally taken out of the proceeds from the sale that each co-owner will receive. This amount is dependent on the contributions each co-owner has made to the property.
66G: A powerful but last resort solution
While 66G is a powerful legal tool in property co-ownership disputes, because of the costs associated with it, it’s always best that parties work hard to try and come to an agreement themselves or with the help of legal mediation.
Ideally, co-owners should draw up a co-ownership agreement before purchasing a joint property. This helps lay out each party’s rights and responsibilities and provides a mechanism to value and sell the property or resolve property disputes.
We are qualified and experienced trustees for the sale and partition of land. If you have a client caught in a property dispute, contact us today to arrange a confidential consultation. We solve complex financial problems and can support them through the process.