When there are disputes over whether land should be sold, it is at the court’s discretion to make an order for the land to be sold immediately, upon a condition being met or that the resisting party does not have to sell until they are ready. [1]
The same rules apply for express and implied co-ownership cases.
The court must consider the (original) intentions of the parties, the (ongoing / current) purpose of the trust holding the property, the welfare (not simply the existence [2]) of any minor in occupation [3] (or who might reasonably be expected to occupy the property as their home) and the interests of any secured creditor. [4] The court may also consider other factors. [5]
Most often, the court orders a sale, especially where creditors are involved.
Disputing the Sale of Land between Co-Owners:
Where there is disagreement over whether land should be sold, either of the co-owners (or lenders) can seek a binding court order in their favour.
When there are express co-owners, they’ll have a joint legal tenancy.
Where there are implied co-owners, the disputing party will probably have an overriding interest.
The court’s declaration could resolve what the parties’ respective beneficial entitlements are, or it could also resolve a dispute over whether the land should be sold.
In Mortgage Corp v Shaire, S and F lived together in S’s formed marital home. Each had a beneficial interest and S’s former spouse had sold their share of the house for £15,000. The property was later subject to a mortgage executed by S and F. After F died, S realised that F had forged her signature on a number of documents, including the mortgage charge. S defaulted and MC sought sale.
The court postponed making an order of sale, dependant on whether S and MC can come to an agreement on paying interest.
Pressure from Creditors:
Oftentimes, a third party with a secured interest in the land (such as a mortgage lender) wants the land to be sold due to default on repayment, but there is resistance from the co-owner(s).
‘a powerful consideration is and ought to be whether the creditor is receiving proper recompense for being kept out of his money, repayment of which is overdue’ [6]
Where there are strong reasons against immediate sale, the court is more likely to postpone sale rather than rule against it.
In Edwards v Lloyds, the court postponed the sale for 5 years because an immediate sale would be ‘unacceptably severe’ on the welfare of 2 children.
In Natwest v Rushmer, the court ruled to postpone the sale because the defendant was involved in a separate court case. If he were to win this other case, he would benefit from a large damages award, which would cover his debts. When he lost the other case, the court ordered the sale.
Bankruptcy / Insolvency:
Where a co-owner has gone bankrupt, the court’s considerations do not apply. [7]
If, a year after bankruptcy, the trustee in bankruptcy petitions for a sale of the bankrupt’s home, ‘the court shall assume, unless the circumstances of the case are exceptional, that the interests of the creditors outweigh all other considerations.’ [8]
However, the presence of exceptional circumstances do not bar the court from bar the court from making an order for sale. These exceptional circumstances are merely a consideration.
In Re Citro, the court ruled that hardship, eviction and relocation (to a smaller house etc.) do not qualify as exceptional circumstances since they are the normal ‘melancholy consequences’ of bankruptcy. Circumstances must genuinely be out of the ordinary, not merely unfortunate.
In Claughton v Charalamabous, the sale was postponed indefinitely because the bankrupt persons (60yo) wife was severely disabled, and their house had been adapted to accommodate her disabilities.
In Re Raval, the sale was postponed for an extra year because the bankrupt persons wife suffered from schizophrenia and medical evidence suggested that forcing her to leave their home quickly would worsen her condition.
Human Rights Concerns:
It has been suggested that the Insolvency Act engages ECHR Art 8 (Private and Family Life) because it defines the exceptional circumstances too narrowly and limits the court’s discretion. [9]
The rights of the bankrupts would have to be assessed proportionate to those of the creditors, but the current law favours creditors.
It is the current position of the courts that the Act is Convention compatible. [10] The Supreme Court has not ruled out the possibility of successfully challenging the Act on the basis of the ECHR.
‘It is possible to envisage a proportionality challenge before the judge being based on exceptional personal circumstances…’ [11]
Resources:
References:
[1] The Trusts of Land and Appointment of Trustees Act 1996, s14 [2] White v White [2003] EWCA Civ 487 [3] EG: Re Ever’s [1980] 1 WLR 1327 [4] The Trusts of Land and Appointment of Trustees Act 1996, s15 [5] Putnam & Sons v Taylor [2009] EWHC 317 [6] Bank of Ireland v Bell [2001] FLR 809 (Gibson LJ) [7] See n19 (The Trusts of Land and Appointment of Trustees Act 1996, s15) [8] Insolvency Act 1986, s335A(3) [9] See obiter comments in Barca v Mears [2004] EWHC 2170 [10] Nicholls v Lan [2006] EWHC 1255 (Ch); Ford v Alexander [2012] EWHC 266 (Ch) [11] Hounslow LBC v Powell [2011] UKSC 8 at [91] (Lord Phillips)
Cases Mentioned:
Mortgage Corporation v Shaire [2001] Ch 743
Edwards v Lloyds [2004] EWHC 1745
Natwest v Rushmer [2010] EWHC 554
Re Citro [1991] Ch 142
Claughton v Charalamabous [1999] 1 FLR 74
Re Raval [1998] 2 FLR 718
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