Should we appoint a Statutory Trustee?
With the cost of living ever increasing, it is an increasingly common occurrence for friends, family or business partners to purchase a property together. A motivating factor for purchasing a property with others doesn’t always last however, and as life changes, so do we and our desires, needs and circumstances. You may have jointly bought the property whilst on the same page as a friend, family member or investor and now, the parties are wanting to do different things with the property and cannot reach a compromise. For example, one party may wish to partition (subdivide) real property, whilst the other party may not.
This can be incredibly stressful but is not at all uncommon. It is a frequent occurrence for co-owners of a property to disagree as to what to do with the property, what price to sell it for, or even who to sell it to. This can often result in a standstill if the parties did not anticipate any deviations prior to the purchase and failed to implement a written agreement in respect of the parties’ rights and obligations as to the property. Thankfully, the Property Law Act 1974 (Qld) provides co-owners with legal options in the event that they are unable to agree on how to deal with the property.
One way to resolve such disputes is by applying to the Court to have a Statutory Trustee appointed in respect of the property.
What is a Statutory Trustee
A Statutory Trustee is a third party, appointed by the Court who will market and sell the property, and subsequently distribute the net proceeds of the sale to the co-owners.
The Process
In Queensland, section 38 of the Property Law Act 1974 allows a Statutory Trustee to be appointed by the Court. To apply, you must file an application to the Court supported by affidavit evidence and the consent of a statutory trustee who will act in the sale of the property.
Once appointed, their primary role is to realise the disputed property and distribute the sale proceeds to the respective owners. Generally, the process will entail:
- The Trustee will contact the respective owners and advise of their appointment and request from the parties any information or documentation they require;
- The Trustee will liaise with various real estate agents in order to obtain proposals on how best to market and sell the property, and what sale price they may expect to achieve;
- The Trustee will arrange for valuers to inspect the property and provide a valuation;
- A Real Estate Agent will market the property for sale;
- The Trustee will enter into a contract for sale with the successful interested party;
- The Property will settle and any parties owed monies will be paid from the proceeds of sale (such as mortgagees, solicitor fees, real estate agent commission etc);
- The Trustee will then remit the remaining funds to the respective owners.
Depending on the complexity of the property, a Statutory Trustee’s fees can be significant, and should be considered when determining whether or not to apply to the Courts for an appointment of one.
What If I don’t want a Statutory Trustee Appointed?
Generally, a section 38 application is difficult to oppose and the Court generally will grant the appointment of a Statutory Trustee. There are, however, grounds which provide a basis for opposing the appointment of a statutory trustee, such as:
- One of the co-owners holds the property as a trustee (as evidenced by a written trust document dealing with the entitlement to the property);
- There is a contract or agreement in place between the co-owners that deal with how the property is to be sold, for example, a right of refusal, or requiring a certain period of time before the property can be sold.
- An estoppel argument that one co-owner has exhausted their share in the property and no longer has any right to claim an interest in the property, for example, the other party may have drawn a large sum of money out against the property for their own benefit and has not repaid the sum;
- The equity of exoneration, where a co-owner may give a second mortgage against the property to start a business, the other owner has no interest/benefit in the business and the business subsequently fails and that co-owner is declared bankrupt – that co-owners trustee may seek to sell the house to pay the debt. The remaining owners may be able to argue that only that co-owner should bear the burden of the debt and they should be exonerated from it.
Next Steps
Property disputes are a complicated legal issue to navigate, and it’s one that could cost you significantly if you get it wrong! Whether you are considering purchasing a property with others and would like a properly drafted written agreement recording the co-owner’s rights and obligations, or if you’d like to apply or defend a section 38 Application.
Alternatively, if you are currently considering the forced sale of your co-owned property, or defending a section 38 Application, get in touch with one of our litigation lawyers today. Klein Legal are litigation and dispute experts and can assist you in avoiding a potential dispute by getting the right advice.
This is general information only and does not constitute legal advice.
If you or someone you know would like more information or require advice about anything raised in this article, please contact us on (07) 5458 6855 or email mklein@kleinlegal.com.au.