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Joint Ownership Dissolving

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Customer Query:

This matter relates to two sisters who had been left a property as Tenants in Common in equal shares. One sister wished to liquidate her share of the asset, the other did not.

It is a legal opinion obtained reflecting the course of action recommended to be taken. Note it is an opinion only relating to this particular case but does explain the Partition Act to some extent.

I refer to our lengthy conference in relation to the difficult problems that have come out of the joint inheritance of you and your sister.

I have attached a copy of the Partition Act. As the Partition Act is a relatively simple Act, I think you will be able to read it through, and follow it quite easily, although some of the language is quite old fashioned.

1. Notes on the Application of The Partition Act

1.1 This form of advice is not intended to be an analysis of every situation in relation to partitioning of land when co-owners wish to bring their co-ownership to an end, however, it is intended to give you a general guide to the things you should be aware of in bringing co-ownership to an end under the provisions of that Act.

1.2 It is important that you receive advice on the rights of Co-owners of property, specifically arising out of a desire or need to divide a property or allotment among co-owners; or to put an end to that community of ownership; or as a method of forcing a sale and obtaining your share of the proceeds of sale.

1.3 The persons concerned must be Co-owners in the full sense of the law, in that they have joint or communal interests in the whole property concerned, to varying degrees, according to the settlement or purchase by which they became Co-owners. What this means is that the Act applies to you and your sister by virtue of the “settlement” when you and she received the property as tenants in common in equal shares as a specific bequest under your father’s estate. Based on what you have told me, and the objective evidence shown on the title of your ownership, the Act has application to your circumstances.

1.4 It is important that, for the Partition Act to apply, the owners must have true Co-owners in the legal sense, that is, joint tenants or tenants-in-common of the whole and not owners of separate parts of say a piece of land where the boundaries have been "lost". You comply in this sense as your are tenants in common in equal shares. Although a division of the land has been talked about, it has never been put into effect.

1.5 At common law, it was always the case that severance or partition of "estates" of Co-ownership could be effected by agreement between the Co-owners. Difficulties arose when one or more Co-owners sought to enforce against the other or others (whatever the separate interests) to bring about division, or sale, of the property notwithstanding resistance or dissent by the other(s).

1.6    The procedures that were available prior to The Partition Act 1869 were generally unworkable and The Partition Act was enacted by the Parliament of Tasmania to give power to the Supreme Court of Tasmania, by an action for partition, (a)    to order a sale; and (b)    to distribute the proceeds of the sale of the property concerned. These remedies are available, instead of the division of the actual property.

1.7 Under the Act, any party who has a "legal interest" in the property may make application to the Court for an order for sale. In this sense you have an interest in the property by being a tenant in common in equal shares. When that application is made the Court must give consideration to the nature of the property, the number and kinds of persons concerned, the absence or otherwise of some of those people or any other appropriate circumstance. It is difficult to see that the Court would have any difficulty in this area as your sister is alive and living in _______ and is not difficult to contact by service of documents.

1.8 If, in the opinion of the Court, a sale, and a distribution of the sale proceeds would be more beneficial to the parties, the Court can make an order for such sale, unless the other party or parties undertake(s) to purchase the share of the party seeking the Order.

1.9 There is no general restriction on who may bid at a sale by auction ordered by the Court but those who have an interest must seek the leave of the Court to make a bid and may only do so upon terms fixed by the Court.(Section 6). What this means, for you and your sister, is that in the almost certain event of the Court order and auction, there might be restrictions on your sister’s capacity to bid at the auction.

1.10 Any party who has an interest as a basis on which partition may be claimed, may serve a writ requesting the Court to exercise it's powers under the Act on any one or more of the other parties interested and is not required to serve all parties. The Court has power to order enquiries in relation to the matters it has to consider; if it makes an order for sale, notice of the order must be served on all the parties concerned.

1.11 Other provisions of the Partition Act specifically provide for the application of the Trustee Act 1898 and the Settled Land Act 1884 to monies arising from sales of property and preservation of the money value of interests in it. Although it is unlikely that these provisions will have any effect on you and your sister’s interest in the land unless an unlikely event were to happen and one of you were to die during the dispute matter.

2. What is the best practical way to move forward?

2.1 As I see it, the way forward is simply this:

(a) leave things as they are – this is no solution at all as your father has now been dead for ___ years, everybody needs to move on;
(b) proceed under The Petition Act – this is a solution that should not be used until you have attempted to discuss things with your sister as this would put a wedge between you and it would be a pity to use what is a rather heavy solution when it ought to be possible to negotiate a reasonable solution with your sister if she acts reasonably;

(c)    come to an agreement as to what your half is worth quickly, obtain that money from her and transfer the benefit and burden of the land to her – this is the best and cheapest solution and is most likely to result in retaining good family relationships;

2.2 In dealing with the matters set out in 2.1, I think that you should consider the following issues:

One sister buys the other out after receipt of a current valuation.

(c)    If your sister is not prepared to come to an agreement with you, then eventually her actions will force you into taking an action under the Partition Act. That will involve considerable legal expense on both sides. Your sister would not be able to use the family solicitors, _____ as her personal adviser, as they have inherent long term knowledge of the property, and would have to refer your sister to other solicitors because of their conflict of interest. Likewise for you for that reason.
When you then decide on the necessity to proceed, what happens is that a Court action is commenced, and almost inevitably a judge would order an auction of the property.

It is my experience that most people faced with a Partition Action, actually agree to the property being auction on a co-operative basis, where they are unable to purchase the other party’s interest, as it saves the enormous expense of taking and defending a Partition action.

I never like to see people waste money on actions of these sorts, and hopefully your sister will see the merit in a co-operative form of auction, or a purchase from you. But if she did not, then you would, of necessity, take action against her under the Partition Act.

3. Conclusion

The most important aspect of the above advice for your present purposes is that if your sister as a co-owner refuses to purchase your interest in the property then you can apply to the Court for an order by the Court to sell the property and thereby release your funds.

Our Thoughts:

to be aware of the difference between Joint Tenants and Tenants in Common. Refer to the Glossary page for a description of each.