Can I buy-out my co-owner’s share if they want to sell?
23 May 2019
This month, the High Court handed down judgment in the case of Kingsley v Kingsley.
The case concerned a family farm in Hertfordshire, which had been passed down through the generations and which was jointly owned by a brother and sister. The brother died, and upon his death, his share in the farm passed to his widow. His widow wished to release her equity in the property and so issued a court claim for an order for the sale of the farm on the open market. This was resisted by the sister of the deceased, as co-owner, who wished to continue the farming business and who sought an opportunity to acquire her brother’s interest in the farm, at a specified value, prior to any sale on the open market.
The court gave the sister the right to buy-out her brother’s estate at a particular price (which was determined by the court during the case) within a two-month period.
The question of whether one owner should be given the right to buy-out the other is often controversial. The owner wishing to sell (the widow of the brother, in this case) usually argues that the only way to establish the property’s true value is to sell it on the open market, whereas, if one party is allowed to buy the property at a particular price, the property’s value is never tested. This may mean that the property is sold to the co-owner too cheaply. (It may also mean that the price fixed by the court is too expensive, although the co-owner wishing to buy the property has the option in that case not to proceed with the purchase.)
Given the above risks, the court has previously said that allowing one party an exclusive right to buy-out the other is an ‘unusual’ order to make. The case of Kingsley suggests that the court is increasingly willing to make such orders, however. It is particularly noteworthy that the property in the Kingsley case was relatively unusual and high-value (a farmhouse with over 100 acres of farm land valued at over £3m), yet the court still gave one of the co-owners the right to buy the property before being marketed for sale on the open market.
In doing so, the court considered the competing valuation evidence and determined the price to be paid by the sister for the property. It recognised that only a sale on the open market would provide the definitive test of what the farm was actually worth, but concluded that it was not constrained to seek the very best price for the property, provided the court was satisfied that the risk that full value would not be obtained was sufficiently low. Given the nature and value of the property, it would appear likely now that, far from being an ‘usual’ order to make, co-owners are much more likely to be given an exclusive right to buy-out their fellow owners.
Nevertheless, these cases remain very fact specific, and litigation is always risky when you are asking the court to exercise its discretion. A future case might, therefore, depart from the ruling in Kingsley, depending on the facts. For example, it was noted in Kingsley that the purpose of the property was to enable the farm land to be farmed by members of the Kingsley family. As such, the sister’s desire to continue farming the land may have been given greater weight than the widow’s desire to achieve ‘top dollar’ for her share in the land, given the widow’s interest was purely financial.
The content of this article is for general information only. If you require any further information in relation to property disputes of this nature, please contact Laura Tanguay on +44 (0)1473 299188. Law covered as at May 2019.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at May 2019.