Do you co-own property that you could partition?

Do you co-own property that you could partition?

Jessica Diep

There are many benefits of partitioning land. Partition is where parties (often parents and children) can come together to develop land into more valuable uses, either for lifestyle (adjacent occupation of families) or for profit. Partitioning allows development to occur without additional stamp duty imposts (other than nominal duty) or capital gains tax imposts until the co-owner later takes steps in relation to their post-partition property. Thus the timing of the partition is key as it will affect whether or not ad valorem or nominal duty is paid on the transfers.

Partitioning refers to jointly held land (whether as joint tenants or tenants in common) being transferred to one or more of the co-owners of the land. That is, it is a ‘partition’ of the co-owner’s interests in the land, and involves the disposal by each co-owner of their interest in one of the blocks to the other co-owner, and a corresponding acquisition by each co-owner from the other co-owner of their interest in the land.

The partitioning of land should not be confused with the subdivision of land (which can occur as a torrens title subdivision of land or strata title subdivision of a building). In practice, partitioning may involve the subdivision of the land into smaller lots before the land is capable of being transferred to one or more co-owners, but the partition process is essentially the transfer of the divided parts of the land between co-owners.

A partition of land can be effected voluntarily between the co-owners or even by a court order for partition. For example, under s 66G(4) of the Conveyancing Act 1919 (NSW) provides that if, on an application for the appointment of trustees on statutory trust for sale, any of the co-owners satisfies the court that partition of the property will be more beneficial for the co-owners interested to the extent of upwards of a moiety in value than sale, the court may appoint trustees of the property on statutory trust for partition. The Courts may apply their powers to order a statutory trust for partition for part only of the property and a statutory trust for sale of the balance.

History shows that, despite the significant costs of the s66G application and of the trustee’s effecting the sale, it is difficult to resist a s 66G application. Although, on order of the court under s 66I of the Conveyancing Act 1919 (NSW) the co-owners may bid at the auction, it is a particularly expensive way to obtain the entire interest in the property. If at all possible, agreement between the co-owners before court adjudication is the commercial outcome.

If you require any assistance with your property transactions Maclarens Lawyers have a substantial and experienced team of lawyers and conveyancers who would be happy to help you with all of your property needs from development, partitions, third party or related party transfers to a variety of lease transactions. Contact us today on mail@maclarens.com.au.