Co-Ownership of Property: Why Documentation Matters
In the current housing supply crisis, many people—particularly family members—see buying a property together as a means of getting into the rising property market.
In most cases, especially in a rising market, this arrangement works out well. After a few years, the property appreciates in value, and the parties can share a profit. However, when relationships break down, and there is no formal agreement about what should happen, the parties can end up in costly litigation.
Co-ownership of property documentation is essential in these arrangements to avoid future disputes.
Recent Decisions
In the recent decision of Joudo v Joudo [2024] NSWCA 258, Ms. Ravina Joudo (the Appellant) purchased a property in her own name at 25 Robey Avenue, Middleton Grange (the Property). Ms. Maria (Marie) Joudo and Mr. Ronnie (Ronnie) Joudo (the Respondents) are the Appellant’s brother and sister-in-law. They resided in the Property from about December 30, 2011, until its sale on July 17, 2023. A breakdown in their relationship led to proceedings.
Ravina commenced proceedings seeking repayment of rental arrears by Marie based on an oral lease agreement.
Joint Endeavour
Justice Pike (the primary judge) rejected the existence of any oral lease arrangement and found that the parties had, around February 2010, engaged in a joint endeavour regarding the Property. Ravina offered to purchase and build the Property for Marie and her family to live in, while making mortgage repayments, on the condition that Ronnie and Marie would assist with construction, pay utilities, and maintain the Property (the Joint Endeavour).
- Mortgage Repayments: His Honour found that the Joint Endeavour was subsequently modified to include Ronnie’s contributions in the form of various mortgage repayments.
Constructive Trust
The primary judge determined that the Joint Endeavour had failed. He ordered that the net sale proceeds of the Property be held on a constructive trust to repay both the Respondents and the Appellant for their contributions, with the remainder divided equally.
Distribution of Sale Proceeds:
- $220,880.03 was ordered to be repaid to Marie and Ronnie, reflecting their mortgage repayments and contributions to the Property’s construction.
- The sum was reduced by $72,240.30, representing market rent for the Respondents’ occupation of the Property from April 15, 2021, to July 17, 2023.
- $305,610.26 was ordered to be repaid to Ravina.
Appeal Grounds
Ravina appealed, arguing that:
- The arrangement between the parties did not constitute a joint endeavour justifying a constructive trust.
- Even if the Joint Endeavour warranted a remedial constructive trust, the declaration of such a trust was flawed as it did not account for the Respondents’ rent-free occupation of the Property.
Outcome of Appeal:
- The appeal was dismissed. The court found mutual economic benefit for both the Appellant and the Respondents.
- The court emphasised that “common benefit” does not have to be financial to justify a constructive trust.
Key Takeaways for Co-Owners
This decision highlights the importance of having co-ownership of property documentation to prevent future disputes. A well-drafted co-ownership or joint venture agreement should include:
- Valuation and Sale Terms: Define clear terms for the valuation and sale of the property.
- Profit Distribution: Outline how proceeds are to be divided.
- Pre-emptive Rights: Address the rights if one party wishes to sell.
Without a comprehensive agreement, co-owners risk costly and uncertain litigation.
Need assistance for a co-ownership agreement ? We can assist in preparing co-ownership or joint venture agreements that clearly outline each party’s responsibilities and reduce the risk of litigation. Our team specialises in crafting legally sound documentation to protect your property investment. Contact us today to schedule an appointment and secure your property interests.
The blog published by Rostron Carlyle Rojas is intended as general information only and is not legal advice on any subject matter. By viewing the blog posts, the reader understands there is no solicitor-client relationship between the reader and the blog published. The blog should not be used as a substitute for legal advice from a legal practitioner, and readers are urged to consult RCR on any legal queries concerning a specific situation.
