SINGAPORE – Property disputes involving just two people are already hard and expensive to untangle, but when there are four in the mix battling over a $2.4 million house, the saying “too many cooks spoil the broth” comes close to describing the havoc.
The central stumbling point with property, as these folk know all too well, is that bricks and mortar can’t be offloaded as easily as cash or shares.
If one joint owner of a property disagrees with the others, the situation can get ugly fast, especially when there are multiple owners.
In this case, all was well when the house was owned in equal shares by two siblings. The problem started to brew after they died and they each willed their half-share to more relatives.
The daughter of one of the original owners ended up with a 35 per cent share, while her brother had 25 per cent. Two of their aunts (sisters of the two original owners) ended up with the rest, one owning 10 per cent the other 30 per cent.
The dispute was ignited when the aunts said they wanted to sell the house and distribute the proceeds according to their shares. Their niece and nephew objected as they were still living in the property.
One of the aunts went to the High Court to apply for an order forcing the other owners to sell.
High Court Judge Chua Lee Ming granted the application and made two important observations that all owners should know so that they can avoid being caught in similar disputes.
Court will intervene in deserving cases only
The buying and selling of property should be done amicably among the parties concerned; the courts will generally not intervene unless there are valid reasons.
This is to avoid a headlong rush to court by co-owners who disagree on how even straightforward things should be done.
Take a recent case of two co-owners who went to court to force the sale of an HDB flat in the open market after a third co-owner wanted more time to buy out their shares.
The High Court did not grant the order, noting that the buyer’s request was not unreasonable and that all three of them should resolve the dispute amicably.
Judges trying to arrive at a fair decision will look at the state of the property and whether the co-owners’ relationship has deteriorated so badly that a clean break would be preferable. Such cases usually involve co-owners who steadfastly refuse to sell and, if they get their way, the other owners would not be able to cash out their shares.
That said, the courts will safeguard the interests of occupants, especially when children are involved. So parents in many matrimonial disputes who have custody of the children usually get to retain their homes while their spouses get paid for their share.
Similarly, if owners state in their wills that their homes cannot be sold so that their spouses can live there until they die, the courts are likely to respect such a decision.
In the case outlined earlier, Justice Chua found that it warranted a clean break and ordered the sale of the house because the aunts were of advanced age and entitled to cash out and spend the proceeds bequeathed to them by their late siblings.
He ruled that it was neither right nor just to allow the younger co-owners to continue enjoying the use of the house when they would be able to buy their own homes with their shares of the sale proceeds.
Co-owners will not be forced to buy over properties
If two co-owners are willing to sell the property, it’s hard to imagine why anyone would object if there is a buyer offering the market price.
But some family fights are so bitter that the opposing camps cannot even agree on how sale transactions should be carried out.
Transactions involving one party willing to buy out the other are usually allowed so long as the purchase price is fair.
Justice Chua noted that a distinction should be drawn between allowing a co-owner to compulsorily buy another co-owner’s share at a price below the market rate, and giving a co-owner the right of first refusal to purchase the remaining share based on the best price obtainable.
There is nothing wrong in allowing a buy-out based on market prices because the seller would not be out of pocket as he or she would get the same amount even if the property was sold to other people.
But Justice Chua said the court could not allow a co-owner to compulsorily acquire another co-owner’s share at an unfair price as it would be unjust.
“A co-owner is entitled to sell his share in the property at the best price obtainable,” he noted.
“Forcing him to sell his share to another co-owner at valuation would clearly prejudice him if the valuation price was lower than what the property could fetch in an open market sale.”
So in this case, if the niece and nephew wanted to buy their aunt’s share, they could do so by paying the market value but they could not get a court order to force the sale at a lower price.
One of the aunts had asked the court to grant their niece and nephew the right to buy their shares but the judge noted that it was unnecessary to consider such an order because both the younger co-owners did not express any interest in buying the aunts’ shares.
In fact, the niece noted that she did not have enough money to pay off her aunts.
As a result, the court allowed the aunt’s application and ordered a sale of the house on the open market at or above the then valuation price of $2.4 million. The proceeds would then be distributed to the four co-owners, based on their respective shares.
The main take-away from this case is that it may not be prudent to split a property into multiple shares because disputes are bound to happen if a co-owner does not see eye-to-eye with the others.
Also, it may not be financially wise to give young adults small shares in properties because it deprives them of the chance of applying for an HDB flat or buying a private home without having to pay the additional buyer’s stamp duty as first-time owners.
So instead of gifting part-shares of a property, it may be better to state in wills that such real estate be sold and the proceeds be distributed according to the shares of the beneficiaries.
While there is no guarantee that the beneficiaries won’t fight over unequal shares of their inheritance, they would at least be saved from having to go to court to apply for the property to be sold.
“Source:[When a $2 million house has too many owners] © Singapore Press Holdings Limited. Permission required for reproduction”
