Real estate agents, brokers and other professionals involved in property transactions can be placed in difficult situations when joint owners of a property are in a dispute throughout the sales process. With emotions running high and money on the line, it is often the case that disputes involving the sale of a property are ventilated before the Courts. Unfortunately, it is often the other stakeholders in a sale, such as an agent trying to have a contract signed or waiting for commission to be paid after a settlement, that end up in the crossfire. Attwood Marshall Lawyers Commercial Litigation Senior Associate Georgia Taylor looks at what property professionals should – and should not do – when dealing with warring co-owners.
Summary
In a society with a divorce rate nearing 50 per cent and publicised property market volatility, experienced property professionals would have dealt with the often difficult nature of selling a property with co-owners at odds. Luckily, disputes involving separated couples are often supervised by lawyers and dealt with through court orders under the Family Law Act 1975 (Cth). These court orders usually prescribe a process for the engagement of an agent, valuations and a sale price, the mode of sale, what happens if a party refuses to sign, and even what solicitor acts on the sale.
However, people from all walks of life can co-own real property. They may be family such as a parent and adult child, or siblings, or they may be partners in a business venture, where two or more individuals or companies own property for development or other business reasons.
Parties who decide to co-own property typically don’t put that agreement in writing and have too much faith in the designation of their name on the title to worry about the finer details of how that property should be managed, particularly in the event of a dispute.
Usually, the lack of written agreement comes down to two parties not foreseeing any future disputes arising. They may believe that should they need to sell the property they will trust each other to make a joint and amicable decision.
Even when a written agreement has been entered into, it is not uncommon for disputes to arise where one party contends that what was reduced to writing was not accurate or there is a disagreement as to how a particular clause may be interpreted.
All these issues lead to terse and highly emotional exchanges that may obstruct any potential sale or put the parties in breach of their contractual obligations should there already be a buyer ready to proceed with the purchase of the property.
Dealing with warring co-owners
All too often, real estate agents, brokers and other industry professionals are left trying to conduct their ordinary obligations while facing the added stress of their clients not agreeing on essential terms or in in critical moments (e.g., signing a contract).
One owner may want to sell their share of the property, but the other owner does not want to change the current situation and/or refuses to cooperate with a sale or will not buy the other co-owner out. There could be a co-owner who lives in the property and is refusing to vacate, which can add extra pressures come settlement time.
The owners may disagree on the valuation, with one owner in particular putting pressure on their agent to change the listing price or reserve price prior to an auction.
The parties involved often hold self-serving and starkly contrasting views on aspects of their ownership, how the asset should be sold, differences in each party’s contributions towards the property and more importantly how the proceeds of sale ought to be distributed.
This is of course a difficult situation for any person to find themselves in, and at Attwood Marshall Lawyers – where we practice in property disputes every day – we have seen all manner of instances where professionals get caught in the crossfire.
As an agent, you may be tempted to follow the instructions that you receive from one of the (probably more forceful or vocal) co-owners, but it’s important to remember that you act on behalf of all the owners of the property.
In many cases, the parties are unable to agree on these issues and it can only be resolved by a Court appointing a trustee to sell the property on behalf of the parties. In NSW, this application is made under S. 66G of the Conveyancing Act and in QLD under S.38 of the Property Law Act. Although this process can be costly, quite often it is the only viable way forward because it effectively takes the matter out of the hands of the warring owners and provides an independent person to handle the sale. This includes all matters peripheral to the sale, including the engagement of the agent and mode of sale etc. In most cases a lawyer is appointed as the trustee and that firm will handle all necessary legal work involved with the sale and compliance with the Court orders.
However, in the absence of such an order, there are some things you can do to make sure you cover your own backside and limit the scope for disagreement.
Common mistakes that can lead to litigation
- Not following the terms of a court order: In particularly volatile situations the Court may have already intervened in a dispute, or the parties may have come to terms on how a property is to be sold. This agreement or order will be in writing and set out clear terms of how the parties are to act and how a property is to be sold. As a property professional, knowing those terms and ensuring the parties are abiding by them is one sure fire way to mitigate the potential for any dispute. We caution against changing or otherwise deviating from the terms of what has already been agreed, and, if necessary, obtain your own independent legal advice from a lawyer experienced in litigation matters.
- Not taking instructions from the correct party: In irresolvable disputes, the Court has powers to appoint independent trustees to sell property. If this is the case, the independent trustees will be instructing any agent, valuer, or broker on the terms of how a property is to be sold. It is important to ensure that you are only taking instructions from the trustees appointed and not the co-owners who have by order of the Court either lost and/or agreed to give up their rights to have a say in how the property is to be sold. Any input from the registered owners is only to be taken by the trustees appointed, and we recommend ensuring that you keep a clear delineation between the registered owners and the persons who are appointed to sell the property.
- Not taking instructions from all owners at the start: If it is the case that parties have decided to list the property for sale on a “it’s too hard” basis, this is where you will find that there may be one owner with a contrasting view which can lead any party astray. When it comes time to sign a contract, accept or reject an offer, sign an appointment form, or pay the all-important marketing fee or commission, one owner may pull back completely or not provide clear instructions. To avoid this, it is vital that clear expectations are set at the beginning of the transaction. Take reserve price minimums, set up the appropriate agency forms and ensure that all parties are on the same page as to how the property is to be sold and for what price. If you can’t do this at the start, it is less likely to come together when the deal is on the table.
- Not taking instructions in writing: As an all-encompassing rule, instructions should be taken in writing, separately from each owner. When any transactional business relationship builds, there is often a party that takes the lead on negotiations or is more forceful in terms of contact and expectations. Don’t let this resolve fool you into believing that these instructions and terms are being dictated to you by all owners. That is simply not the case. Before any offer is rejected, reserve set or negotiation kicks off, ensure that you have the instructions in writing from all parties at each stage. Keep a record of those instructions and relay them to each owner.
Other common mistakes and how to address them:
- Not providing advice or confirming offers in writing: It is important to have a paper trail of your joint communications with the owners. Try and email or text in a group setting, so that there is no instance where one party may not have all of the information you want to convey.
- File notes: if you have a phone call, write down the date, time and take a note, or better yet, confirm it in writing after the phone call.
- Legal advice: if your co-owners are beyond sensible discussion or agreement, you should suggest separate legal representation to lawyers experienced in this area (not conveyancers or simple property firms) and take instructions directly from their lawyers. You may also need your own legal advice as the agent in the transaction – sometimes this can give you an unbiased and independent position that will help resolve the matter.
Attwood Marshall Lawyers – helping agents resolve co-owner disputes
At Attwood Marshall Lawyers, we have a dedicated team of lawyers who practice exclusively in dispute resolution and commercial litigation, including property disputes in all states and territories of Australia.
We know that there can be high emotions when dealing with co-owners of a property that disagree, and our solicitors are here to help you navigate and resolve the dispute, reminding you of your legal obligations and duty of care as an agent, as well as giving you the support you need to handle the issue at hand. You are also in a unique position to remind co-owners that they should obtain legal advice if they haven’t already. This can greatly expedite the resolution process, fostering effective communication among all parties and emphasizing the goal of achieving a resolution.
Please contact our Commercial Litigation Department Manager, Amanda Heather on direct line 07 5506 8245, email aheather@attwoodmarshall.com.au or free call 1800 621
We also have a dedicated team who practice exclusively in property, conveyancing, and commercial matters and who can help mitigate the chances of a dispute arising in the first place. Whether you are a buyer, seller or agent, Attwood Marshall Lawyers can review Contracts of Sale, negotiate special conditions, ensure a transaction is not in breach of any laws or regulations, and advise on next steps if someone’s rights are compromised.
For help and advice relating to a property matter, contact our Property and Commercial Department Manager, Jess Kimpton, on direct line 07 5506 8214, email jkimpton@attwoodmarshall.com.au or mobile 0432 857 300.
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