Property Sharing Agreements - Forcing a Sale

26 September 2021

When you’re buying a property as tenants in common (see the article Joint Tenancy vs Tenancy in Common - here), it’s particularly important that you have a property sharing agreement that includes provisions on what to do if your property sharing relationship breaks down. Here we’ve put together a scenario about what could happen if there’s a difference of opinion between tenants in common.

Peter Walden and Humphrey Wallace own a commercial building together as tenants in common. They each own a one-half share. Peter Walden wants to retire, sell his share of the property, and go on a cruise around the Bahamas. However, Humphrey Wallace doesn’t want to sell his share as the property market is in a bit of a slump and doesn’t think they will get the best price for the property. Humphrey unfortunately doesn’t have the equity to buy Peter’s share. Can Peter force Humphrey to sell?

The short answer is yes, Peter can force a sale of the property he holds with Humphrey. Peter can apply to the court under s341(1) of the Property Law Act 2007. The court has the power to order the sale of the property as a whole, in part, or require the co-owner to purchase the other co-owner’s share. However, the court must consider many factors when making its decision; it will not always order in favour of the co-owner wishing to sell. Applying to the court for relief can be a costly and often drawn-out process.

Peter and Humphrey could have avoided the costly court process if they had put in place a property sharing agreement when they bought their property. A property sharing agreement deals specifically with various matters relating to the property, such as who pays outgoings (e.g., rates and insurance), what happens if one party wants to sell their share of the property, and how the property is to be valued if a share or the whole of the property is sold.

It’s essential that when you’re considering buying property with someone else, you get legal advice and give serious consideration to a property sharing agreement. If Peter and Humphrey had done this, it could have saved them both a lot of stress and expense.

Odette Cottle is part of our Corporate & Commercial team at Norris Ward McKinnon.

Corporate & Commercial Team