When can it arise?
Where parties jointly own land, whether as join tenants or as tenants in common, one or more co-owners can apply to the Court for an order that the land be sold or partitioned (Property Law Act 1969 ss 126, 127). As tenants in common own distinct shares of the property, which may be unequal, the purpose of s 126, is to protect the interests of co-owners where disputes arise relating to how to deal with the land (Nullagine Investments Pty Ltd v Western Australian Club Inc (1992) 177 CLR 635 at 650 per Brennan J).
What orders can the Court make?
The Court can order either the sale or partition of the land. Sale is an alternative to partition and can only be ordered if a party specifically requests it (De Campo Holdings Pty Ltd v Cianciullo [1977] WAR 56 per Jones J). If a co-owner applies for partition, then there is no need to show the Court that a partition is better than a sale unless another co-owner requests a sale (De Campo Holdings Pty Ltd v Cianciullo [1977] WAR 56 per Jones J).
The Court must order a sale of the land instead of partition if requested by a party or parties who hold at least a half share of the property, unless there is a good reason to the contrary (Property Law Act 1969 s 126(1)). Therefore, the Court requires a ‘good reason’ in order to exercise its discretion to order a partition instead of sale in those circumstances (Nullagine Investments Pty Ltd v Western Australian Club Inc (1992) 177 CLR 635 at 666 per Toohey J).
However, there is no requirement that the party or parties seeking sale or partition hold a half interest in the land. The Property Law Act 1969 s 126(2) provides that the Court may, on the request of any party interested, direct a sale where:
- by reason of the nature of the land;
- the number of parties interested; or
- any other circumstance
the sale of land would be for the benefit of the parties interested.
What if I agree to purchase their share?
The Court may also, on request from any party interested, direct the land be sold unless some of the other parties given an undertaking to purchase the share of the party requesting a sale. Once such an undertaking is given the Court may direct a valuation of the portion of the land in question (Property Law Act 1969 s 126(3)). However, It is not open to a co-owner to attempt to defeat a Court ordered sale under s 126 by undertaking to purchase the share of the co-owner applying for the sale (Martin-Smith v Woodhead [1990] WAR 62).
Can you contract out of s 126?
The High Court decision of Hall v Busst [1960] HCA 84 is authority for the proposition that public policy favours the free alienability of private property, and thus, in some cases a contractual provision may be invalid if it operates as such a restraint.
For example, in in Elton v Cavill (No 2) (1994) 34 NSWLR 289, Young J found that a clause which required an owner to gain all of the other owners consent to the sale of his share, and such consent might be refused with no reason given, was an invalid restraint on alienation.
However, you may be able to contract out of s 126 if it is for a valid collateral purpose, which has an overriding public policy objective. Or, alternatively, if the contract does not entirely restrain alienation.
In Nullagine Investments Pty Ltd v Western Australian Club Inc (1992) 177 CLR 635, two tenants in common held equal shares in a property. The agreement between them contained a provision which prohibited each from disposing of their interest in the land without first offering it to the other for a price of 50% of the land value. The High Court held that the provision did not prevent one from making an application under s 126 as the provision referred to one party only disposing of their interest, and not to a situation under s 126 where the entire freehold was disposed of. However, the Court did not expressly decide whether an agreement which expressly contracted out of or prevented the application of s 126 would be invalid (at 661).