It can be difficult to get onto the property ladder and therefore many people decide to purchase a property with a friend, rather than spending money on rent.
This arrangement is increasingly popular as property prices have risen steadily over the last 10 years. However, whilst the arrangement opens up exciting opportunities for buyers to get onto the property ladder; it can also come with its own issues.
One party wants out of the arrangement
The most common issue we see is that one of the friends no longer wants to continue with the arrangement. This can be for a variety of reasons, perhaps they are now in relationship and want to purchase a property with their partner; they may wish to relocate; or the friends may have simply fallen out.
So if you have purchased a property with a friend and now want to sell – what can you do?
If you are the one who wants to sell their share, in some circumstances you may be able to agree with the other co-owner(s) that the property is sold. Perhaps you agreed at the time of the purchase what would happen under those circumstances, but more often than not, one of the owners does not want to sell, and the relationship between the owners has broken down with no agreement to fall back on.
Can I force my friend to sell?
In most circumstances the answer is yes. You may apply to the Court for an Order for Sale. Such orders are commonly obtained in circumstances in which the relationship between the co-owners' has broken down and one party wishes to release their "equity" by selling their property. Such claims are brought under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA).
Pursuant to Section 14 of TOLATA "any person which is a trustee of land or has an interest in property subject to a trust of land may make an application to the Court" ... relating to the exercise by the trustee of any of their functions" and "declaring the nature and extent of a person's interest in property".
The effect of Section 14 is that a property owner may apply to the Court for an Order that declares the extent of the parties' individual ownership of the property and orders that the property be sold. This is known as an Order for Sale.
I put in more money than my friend and we can't agree on who gets what – what can I do?
Property in co-ownership will either be registered as being held (i.e. owned) as "joint tenants" or as "tenants in common". The former equates to the parties holding the property together as one single owner on trust for each other. If one party dies, the other retains ownership of the whole property. In these circumstances each owner would have a claim for 50% of the ownership of the property. The latter equates to the property being owned jointly in specific shares which usually are specified in the contract to purchase the property (commonly referred to as "the Transfer"). Therefore the parties will have a claim to a specific share of the property.
The Court's presumption will always be that the parties are each entitled to 50% of the ownership of the property unless the Court can be persuaded otherwise. If the parties have purchased the property as "tenants in common" in unequal shares (and for example the Transfer specifies that the property is held in a split of 70:30), the Court will consider this sufficient evidence to persuade them to depart from the assumption that the property is owned equally and order that the proceeds, following sale of the property, be distributed in unequal shares. An examination of the facts and documents surrounding the parties' purchase of the property will be required before one owner can consider issuing a claim for an order for the sale of the property in unequal shares.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
