What are my options for owning and managing property jointly? How can I avoid disputes with my co-owner?

What are my options for owning and managing property jointly? How can I avoid disputes with my co-owner?

There are two options when owning property with others.  You can either own it as ‘Tenants in Common’ or ‘Joint Tenants’.

Tenancy-in-common ownership gives each co-owner title to and control over a fixed interest in the property. This makes it a flexible and autonomous way to own property. But what happens when the co-owners don’t agree? We discuss some options below.

Option 1: Enter into a Co-ownership Agreement

The co-owners should consider entering into a Co-ownership Agreement. This is a legal document that helps to record the procedure for managing the property, and can cover such things as:

  • Division of any profits or losses realised from the rental of the property;
  • Division and payment of the operating expenses of the property between the co-owners;
  • Keeping of books and records;
  • The procedure for making decisions about the property (i.e. 50% vote, 75% majority vote or unanimous vote, depending on the nature of the decision); and
  • A dispute resolution process to resolve disagreements between co-owners.

Although it is preferable to sort out this type of detail from the get-go, it is never too late to enter into a Co-ownership Agreement.

We can advise you on your options and prepare a Co-Ownership Agreement that clearly sets out where all owners stand. Call us on 1300 654 590 or email us if you’re interested in getting a Co-Ownership Agreement put in place.

Option 2: Third party property management

The simplest way to ensure that a rental property is managed properly is by appointing a third party property management agent. The agent can collect the rent and pay the expenses of the property on behalf of all the co-owners, and is required to keep adequate records (which can be accessed by the co-owners) so that the co-owners can be satisfied that everything is properly accounted for.

There will be a fee for the agent’s services, which is usually a percentage of the annual rental income. However, it can be a small price to pay to save lots of time, stress and arguments.

Option 3: Separate management and rent payment

In the alternative to a third party agent, co-owners have the right to manage their respective ‘interests’ in the property separately. However, you need to first check that any Tenancy Agreement gives you the flexibility to direct the tenant to make separate rental payments.

This approach also has several practical considerations that need to be taken into account, such as:

  • Whether the tenant is willing to pay different percentages of the rent into the separate accounts of the co-owners;
  • Who the tenant is to go to when there are maintenance issues; and
  • How the owners’ expenses will be paid (for example, by payment towards each invoice in the proportion that corresponds to each co-owner’s ownership interest).

If you need advice on third-party property management, call us on 1300 654 590 or email us. We can explain your rights and obligations. 

Option 4: Court application

A ‘last resort’ option is to apply to the Court for sale of the property (either in whole or in part). For example, in South Australia an application can be made under Part 8 of the Law of Property Act 1936 (SA). In New South Wales, an application can be made under section 66G of the Conveyancing Act 1919 (NSW).  Similar provisions apply in each other state.

The Court may order the appointment of an independent person (a trustee) to sell the entire property (with the costs of the sale and proceeds ordinarily being divided amongst the owners in their relevant ownership proportions), or alternatively the purchase of a co-owner’s share in the property by an interested party (e.g. another co-owner).

The major disadvantages of this option are the cost of making an application to the Court and each owner’s loss of control over the sale process if the Court appoints a trustee to sell the property. However, in a scenario where the co-owners are in ‘deadlock’ over the property, an application to the Court may be the only alternative.

If you would like some guidance or advice in relation to a tenancy-in-common dispute that you are currently facing, or would like us to assist in preparing a Co-ownership Agreement, please call us on 1300 654 590 or email us. We have guided several people through these processes and we can assist you to move forward with confidence.

Click here to find out more about how we can help you manage and protect your Property.

Some super useful resources!

Check out these useful resources about owning property with others:

Buying a property with others – what to include in your Co-Ownership Agreement

Co-Ownership Agreements v Binding Financial Agreements – buying a property with your other-half

Podcast: Buying property with family and friends – property co-ownership

Forcing a sale of property in NSW

Forcing a sale of property in SA

We also think this detailed article is worth reading: Co-buying property with friends

 

The information contained in this post is current at the date of editing – 14 August 2024.

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​​Caveats are not security interests​

​​Caveats are not security interests​

You have loaned someone money in relation to a property, and in return the borrower has agreed to give you an interest in the property. You lodge a caveat, but you are worried about whether you are properly protected if the borrow does not repay you.

Caveats are a protective mechanism that play an important role in property law. However, a caveat is not a ‘security interest’ in the traditional sense, and it is important to consider whether a caveat is the appropriate tool to safeguard your interest.

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