Forced Sale of Property, Section 66G Application27 August 2023 in Property Dispute Lawyers
Co-Ownership Disputes: Section 66G of the Conveyancing Act
Disputes often arise when co-owners of a property disagree on the property’s future. In particular, when one party wants to sell and the other does not. Where there is no agreement in place and parties are not able to come to a commercial arrangement for the sale, one party can apply to the Supreme Court under Section 66G of the Conveyancing Act 1919 (NSW). This provision grants the Court the authority to appoint a trustee responsible for impartially overseeing the property’s sale when a consensus cannot be reached.
Following a Section 66G application, unless deemed inequitable, the Court is inclined to issue an order for the trustee’s appointment. This means that the Court strongly leans toward enforcing the sale even if one party objects. Establishing “inequitable” grounds to counter the application is challenging and requires strong evidence. In the case of Tory v Tory, the Supreme Court of NSW stated that an application to appoint a trustee will only be denied when it is ‘inconsistent with a proprietary right, or contractual or fiduciary obligation’. For instance, the existence of a co-ownership deed that specifically excludes Section 66G’s application could be grounds for inequity.
Upon a successful sale under Section 66G, the net sale proceeds are placed in trust, awaiting distribution among the co-owners. This distribution aligns with each co-owner’s contributions, including any allowance for payment of encumbrances. Additionally, the legal costs incurred by the co-owner initiating the Section 66G application are generally deducted from the sale proceeds.
Courts emphasise that the distribution of sale proceeds should acknowledge any value increase brought about by one co-owner’s expenditures. This implies that if the property value has risen due to investments like renovations, the co-owner making the contribution should be reimbursed. This equitable accounting process extends to various types of contributions, such as mortgage repayments, home insurance payments, council and water rates and rent when one co-owner exclusively occupies the property. This repayment is determined based on the lower of their expenses on the property and the property’s increased value.
Initiating a Section 66G application will involve expenses, largely from Trustee fees and related expenses. Typically, these fees are deducted from the property’s equity, effectively reducing the eventual proceeds each co-owner receives from the sale.
Given these financial considerations, it is important to explore alternative dispute resolution methods, such as mediation. This approach, whether between the co-owners themselves or through legal representation, can mitigate the need for court intervention and its associated costs.
How can BSM help?
Handling property disputes, especially where properties are jointly owned by family or friends, can be highly stressful. Brander Smith McKnight’s lawyers can ensure you understand your rights in relation to your property. Our approach in the first instance involves negotiating to reach a mutually agreeable solution. Where that fails, our experienced lawyers will offer professional advice and guide you through the entire process which may include a section 66G application.
To avoid legal disputes altogether, our lawyers can also draft co-ownership deeds at the time of purchase, ensuring a clear understanding of each party’s responsibilities concerning the property, including potential sale mechanisms.