Mastering shared property ownership: a comprehensive guide by Birketts and Citystay Property Agents. Part 3

Part 3 – Acquiring a co-owner’s share of joint property 

This is the third of a four-part series, a joint effort between Birketts and Citystay Property Agents, aimed at guiding you through the complexities of shared property ownership. In this article, we: 

• Outline the court’s powers to grant one owner the right to purchase their co-owner’s share in joint property, under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA). 

• Delve into issues surrounding valuation, which commonly arise when co-owners attempt to settle on a price as part of a buy-out.  

• Provide useful advice on how to approach the process and discuss the role that estate agents can play in it. 

The power of the court 

As explained in our previous article, where joint property is being sold, consent must be obtained from all of the legal owners. This applies not only to open market sales but also to buy-outs between co-owners (where one party buys out the other’s interest, a formal conveyance of the property is necessary, just as in a sale on the open market).  

Given the owners must consent, disagreements can arise. If one owner wants to buy the entire property but the other refuses to cooperate with a buy-out, a deadlock occurs. This reluctance to engage may stem from animosity between the parties following relationship breakdown or legitimate worries about obtaining the best price for the selling owner’s share. 

In such situations, either party can seek a resolution through the court. Under Section 14 of TOLATA, the court has authority to step in and decide the property’s fate. This includes granting one party the right to buy the property before it is advertised on the open market.  This is, however, a discretionary remedy available to the court, so there is no guarantee that the court will order a buy-out in your specific case. 

If the court is minded to award a right to buy (known as a ‘right of pre-emption’), the court will move to determine the property’s value and thus the price to be paid for the outgoing owner’s share. It will do this in reliance on expert valuation evidence. 

Conflicts about valuation 

The question of whether one owner should be given the right to buy-out the other is often controversial. One owner will typically argue 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, or that the price fixed by the court is too expensive (although the co-owner wishing to buy the property usually has the option in that case not to proceed with the purchase). 

Given these risks, the court has previously said that allowing one party an exclusive right to buy-out the other is an “unusual” order to make. Nevertheless, it is evident that the court often exercises these powers, where it is satisfied that the risk of market value not being obtained is sufficiently low. The nature and value of the property will be relevant factors in these deliberations. If the property is unusual, with limited comparables, it will be harder for the court to determine the price to be paid. In that case, the court may be nervous about awarding a buy-out, and  an order for sale on the open market will be more likely (with or without a right for the owners to bid for the property alongside members of the public). 

Practical means to resolve the conflict out of court 

Given the risks and costs of litigation, a negotiated solution is likely to be the best option for both parties. To assist with negotiations, a valuation report should be obtained. This should ideally be on a joint basis, with both parties feeding into the process and agreeing not only the identity of the valuer but the instructions to be given to them. 

An estate agent must approach the handling of a sale under TOLATA from an ethical and transparent standpoint. The goal should be to achieve a satisfactory outcome for both parties, and not to prioritise the needs of the agency itself.  

Given the sensitivity of the process, estate agents must respectfully engage with both parties to achieve an agreeable outcome for both owners. Initially, this can be done by communicating in an open and transparent manner with all parties at all times. Taking the time to understand the desired outcomes of both parties is the first and most important step in this process. Clearly and concisely walking all parties through evidenced based valuations enable the estate agent to navigate a potentially emotionally charged situation regarding the value of the property.  

Similarly, once a valuation is agreed, the agent must remain impartial, taking an ethical position throughout. Managing viewings and providing timely and honest feedback to all parties can help to move through the process without animosity, with the goal of securing the swiftest and most satisfactory outcome. 

All this should be considered best practice from any estate agent, acting with diligence and empathy throughout.  

At Birketts, our dedicated Home Ownership Disputes Team regularly advises clients on buy-outs of joint property under TOLATA. We work with expert, local agencies such as Citystay Property Agents to give clients the best support possible.  

Citystay Property Agents are a full-service residential estate agency based in Cambridge. Our fresh perspective is built upon a customer centred approach, ensuring the best outcomes for all of our clients.