Statutory Trustee Appointments: Navigating Co-Owner Disputes and Property Sale

When disputes arise between co-owners, selling a property can become a complex challenge. In such cases, the court may appoint Statutory Trustees to oversee the sale and ensure a fair distribution of proceeds.

In this article, we explore the role of Statutory Trustees, how appointments occur under different legal frameworks, and a real-world case study demonstrating how this approach can lead to practical and equitable outcomes.

What is a Statutory Trustee Appointment?

A co-owner can apply to the court to appoint Statutory Trustees to manage the sale of real property, particularly where there is a dispute between co-owners.

Generally speaking, the Statutory Trustees handle all aspects of the sale process, including:

• Securing the property.

• Obtaining a valuation.

• Engaging a real estate agent.

• Maintaining insurance on the property.

• Selling the property by auction or private treaty.

• Distributing the net proceeds to the co-owners as agreed or ordered by the court.

How Does This Appointment Occur?

It is important to note that different states have different rules. In Queensland, orders can be made pursuant to section 38 of the Property Law Act 1973 (Qld) that statutory trustees be appointed over the land on the application of any 1 or more of the co-owners.

Some common scenarios include:

• Family Inheritance: When family disputes over an inherited property arise.

• Divorcing Spouses: When spouses cannot agree on managing shared properties during a divorce.

• Bankruptcy Proceedings: When a non-bankrupt spouse can’t afford to purchase the Bankrupt Trustee’s share or is uncooperative.

This article primarily deals with the application of a co-owner; however, it should be noted that a creditor can also apply to the court to appoint Statutory Trustees over real property where:

• Credit Agreement Clause: The creditor includes a clause in the credit application signed by the debtor, stating that in the event of a default, the creditor has a charge over the debtor's interest in any real property they own.

• Default and Caveat: Upon default, the creditor secures their interest by placing a caveat over the property.

• Court Application: Within three months, the creditor must commence proceedings to enforce their charge, demonstrating to the court the relevant charging clause and the default and requesting the appointment of a statutory trustee.

Common Court Orders

The powers of the Statutory Trustees are set out in the court orders and vary from time to time. Some comment orders sought include:

• Appointment of Statutory Trustees to the property.

• Co-owners vacating the property.

• Securing and selling the property by the Statutory Trustees.

• Co-owners being entitled to make offers on the property for consideration by the Statutory Trustees.

• Distribution of sale proceeds:

• Payment of all rates, selling, conveyancing, and court costs.

• Full payment of any mortgages.

• Remaining funds returned to the co-owners.

The court can also determine the proportion of the interests each co-owner has in the net proceeds to be returned.

Case Study

In a recent case:

• a block of units was jointly owned by four family members: Son A, Mum, Daughter and Son B.

• a residential property was jointly owned by three of the four family members, Son A, Daughter and Son B.

Son A was the applicant. Mum, Daughter and Son B were the respondents.

Upon our appointment, the following was revealed:

• Mum was elderly and residing in the residential property.

• Mum, Daughter and Son B wanted to buy out Son A’s ownership interest in the residential property so that Mum could continue living there for the rest of her days.

• Mum, Daughter and Son B did not have immediate access to the funds to buy out Son A’s ownership interest in the residential property.

We sold the block of units first and split the net proceeds equally among the four family members. The net proceeds received by Mum, Daughter and Son B were sufficient to buy out Son A’s ownership interest in the residential property at a mutually agreeable price.

Lessons Learned

We could have taken immediate action to sell both properties. However, this would have displaced Mum. By selling the block of units first, Mum, Daughter and Son B obtained access to the funds to buy out Son A’s ownership interest, avoiding real estate agent commission and other sale costs. Mum got to keep living in the residential property and Son A received a greater return than had we immediately sold the residential property on the open market.

Worrells is ready to help your clients navigate this process. If you or your clients need assistance, feel free to reach out to your local Worrells office for a confidential and complimentary consultation.