Summary
- A tenant in common owns a defined share of property and can sell or transfer that share without the other co-owner’s consent.
- However, one co-owner cannot unilaterally sell the entire property without agreement from the others.
- If co-owners cannot agree, a court may order a partition or sale of the property, often through appointed trustees.
- This guide explains tenant in common rights for business owners and property investors in Australia, prepared by LegalVision, a commercial law firm that specialises in advising clients on property and commercial matters.
- It outlines legal options, court involvement and practical considerations when disputes arise between co-owners.
Tips for Businesses
Document co-ownership arrangements clearly from the outset. If disputes arise, assess whether selling your share or seeking a court-ordered sale is commercially viable. Consider legal costs, timing and relationships before taking action, and obtain legal advice early to understand your options.
A tenant in common can own a distinct share in property but cannot force a sale without legal intervention if co-owners disagree. Where disputes arise, the court can order a sale or partition to resolve the deadlock. This article explains the rights of a tenant in common and explores issues that may arise when one co-owner wants to sell the property.
This guide will help you to understand your options when you purchase a business with leased premises.
Defining Tenant in Common
When parties own property as tenants in common it means that two or more people co-own a property in defined shares that they can dispose of as they wish. The individual interests may be unequal.
Should the co-owners sell the property, they should distribute the proceeds accordingly. This also means that an individual co-owner can sell their interest in the property to another person, rather than both having to sell the entire property to a new owner.
Tenants in common are also defined by having no right of survivorship. This means that if one co-owner dies, their interest in the property will not automatically transfer to the other co-owner. Instead, the will of the deceased co-owner dictates where this interest goes. The will could say it goes to the other co-owner, or that it goes to someone else.
Property Rights of a Tenant in Common
Delineation of Boundaries
Delineation means how the co-owners physically divide up the property. For example, whether 50% ownership means each takes possession of one half of the property. However, this is not necessarily the case that co-owners have rights to a specific boundary of the property according to their share. Separate agreements or contracts usually exist, delineating ownership and responsibilities.
Granting Interests to Other Parties
Each co-owner can grant interests in the property to another person (by sale or transfer). However, interests can only be granted on the basis that they do not interfere with the rights of the other co-owner. If the grant of interest interferes with the rights of the other co-owner, both co-owners must agree on the grant of interests.
Sole Occupation of Land
If one co-owner solely occupies the property, they usually do not have to pay rent to the other co-owner. However, there may be an agreement between the co-owners that requires one to pay the other. Payments may occur when:
- one co-owner has specifically excluded the other from accessing the property; or
- the occupying co-owner seeks compensation for improvements they make to the property.
Dealing with the Whole of the Property
There is no right of survivorship for tenants in common. Consequently, a co-owner can deal with their share in the property as they like. However, as each owner has the same rights to possess the property, there may be restrictions from dealing with the entirety or whole of the property. For example, a co-owner with 30% share in the property cannot subdivide their 30%, as the subdivision affects the other co-owners’ rights to possess and use of the whole of the property. Instead, in this case, each co-owner would have to agree on the subdivision.
When a Tenant in Common Wants to Sell the Whole Property
A tenant in common may want to sell the property for a myriad of reasons, perhaps due to a breakdown in the relationship with their co-owner. They can sell the property in one of two ways — by partition or by sale. Both the partition and sale process involves the appointment of a statutory trustee.
Whether they can do either depends on where the property is located, as each state and territory has different property laws. In New South Wales, for example, a tenant in common needs to apply to the Supreme Court of New South Wales requesting an order for the property to be partitioned or sold.
Although there are similar provisions in other states and territories in Australia, if there are issues between the co-owners in a property and a sale cannot be agreed, it is important to consider obtaining legal advice to discuss your options.
Partition
A partition refers to the division of the property, making each co-owner the single owner of a delineated section of the land. Therefore, partitioning the land terminates the relationship of co-ownership. However, courts do not typically grant partitions, particularly in the case where an outright sale of the property is more beneficial for the co-owners.
Selling the Property
Selling the property allows each tenant in common to benefit from the sale money. There is a deduction of any costs (e.g. an existing mortgage) and then the sale money is distributed to the co-owners. The distribution of the sale money depends on the share each co-owner has in the property.
Key Takeaways
Two or more individuals can own real property as either joint tenants or tenants in common. As a tenant in common, it is important to be aware of your rights in the property you co-own. For example, you have the right to possess and enjoy the whole of the property. You can also sell or transfer your property rights. However, in Australia, this largely depends on the location (state or territory) of your property.
LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced leasing lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 1300 544 755 or visit our membership page.
Frequently Asked Questions
Can you sell only your share as a tenant in common?
Yes, you can sell your individual share without selling the whole property. However, you must ensure the sale does not interfere with the other co-owner’s rights to possess and use the property.
Do all co-owners need to agree to sell the entire property?
Yes, all co-owners must usually agree to sell the whole property. If you cannot agree, you may need to apply to the court to force a sale or partition.
What happens to sale proceeds between co-owners?
The sale proceeds are divided according to each co-owner’s share. After deducting costs such as mortgages or expenses, each party receives their proportionate entitlement.
Is partition or sale more common in disputes?
Courts usually prefer ordering a sale rather than partitioning the land. This is because selling the property often provides a more practical and beneficial outcome for co-owners
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