Sale of co-owned property

In the case in the names ‘Galea et vs. Dr Joseph Ellis pro et noe’

(Court Application Number 530/2017) decided on the 27 June 2018 by the First Hall of the Civil Court (hereinafter ‘the Court’), presided over by Justice Anna Felice, a number of co-owners (hereinafter “the Applicants”) instituted a lawsuit against another five co-owners (hereinafter “the

Respondents”) requesting the Court to authorise the sale of the property held in common in terms of Article 495A of the Civil Code (Chapter 16 of the Laws of Malta).

Article 495A sub-articles (1) to (3) provide as follows:

(1) Except in cases of condominium or necessary community of property, where co-ownership has lasted for more than three years and none of the owners has instituted an action before a court or other tribunal for the partition of the property held in common, and the co-owners fail to agree with regard to the sale of any particular property, the court shall if it is satisfied that none of the dissident co-owners are seriously prejudiced thereby, authorise the sale in accordance with the wish of the majority of co-owners regard being had to the value of the shares held by each co-owner.

(2) The request to the court shall be made by application which shall be accompanied by a declaration of the owners who agree to the sale as well as a prospectus showing the number and value of the shares held by each of them as well as the terms and conditions under which the sale is to take place. The application shall also indicate the date on which the co-ownership arose and the circumstances thereof.

(3) The application shall be served on the co-owners who do not agree with the sale as well as on curators to be appointed by the court to represent such of the co-owners who are unknown or who cannot be traced. The registrar shall cause a copy of the application to be published in the Gazette and in one daily newspaper.

The above-quoted article provides a legal remedy where coowners fail to agree in respect of a sale of a property held in common and grants the co-owners holding the majority of shares in the property the right to request the Court to authorise the sale notwithstanding the opposition or lack of consent of the other coowners holding minority shares.

In the present case, the Applicants filed a court application confirming that they co-owned a property together with the Respondents and that they wished to sell the said property in accordance with the terms and conditions set out in the promise of sale agreement that they had entered into with third parties. The Applicants also declared that they held the majority of the shares in the property whilst the Respondents held minority shares and that they had co-owned the property for a number of years in access of three years.

The Applicants had attempted to contact the Respondents (and their heirs) however these were unreachable and they could not confirm whether the heirs had accepted the inheritance or otherwise. For this reason, the Applicants requested the Court to appoint curators to represent the Respondents who could not be traced and/or were unknown, in the lawsuit and ultimately on the deed of sale.

The Applicants further requested the Court to authorise the sale of the property in question

in accordance with the promise of sale agreement and in terms of Article 495A; to establish a time and date when the sale had to take place; to appoint a Notary for the said purposes and finally to authorise them to deposit the proceeds of the sale due to the Respondents in Court, with costs against the Respondents.

Quoting the case in the names Abela vs Micallef Stafrace noe

(decided on 30 June 2011), the Court observed that the aim behind Article 495A is to facilitate the transfer of property when situations arise where co-owners holding the minority of shares in a property, for some reason or another, cannot appear or refuse to appear for the transfer of the property. The court further observed that such a mechanism is indeed a type of forced sale and for this reason the law establishes a number of requisites that need to be fulfilled for the Court to authorise such sale and this to ensure that no abuse or serious prejudice is caused to the coowners holding the minority of shares.

The Court proceeded to detail the conditions which must be fulfilled for an action in terms of Article 495A to be successful and in doing so also quoted a recent judgment decided on 30 April 2018 in the names Abela vs Bartolo et. For the Court to authorise the sale the law establishes the following requirements:

Co-ownership between all the parties has lasted for at least three years1;

None of the co-owners instituted an action before a court or other tribunal for the partition of the property held in common;

The co-owners have failed to agree with regard to the sale of the property in question either because any of the co-owners refuse to appear or are not able to appear on the deed of sale;

The will of the majority of the co-owners having regard to the shares in the property held by them is to sell the said property;

None of the dissident co-owners will be seriously prejudiced by the sale of the property. In assessing whether there would be serious prejudice to any of the coowners Article 495A(6) provides that the Court may take into consideration all relevant factors including the value of the property and the price of the sale, and may for this purpose order that the property be appraised.

It should also be noted that the law establishes that when a lawsuit in terms of Article 495A is instituted the court application must be accompanied by a declaration of the owners who agree to the sale as well as a prospectus showing the number and value of the shares held by each of them and the application must also indicate the date on which the co-ownership arose and the circumstances thereof. The application would also have to detail the terms and conditions under which the sale is to take place, and normally the promise of sale agreement is attached to the court application to fulfil this condition. Moreover any declaration that any co-owner is not known or cannot be traced must be confirmed on oath by at least one of the applicants.

In the present case the Court observed that all the conditions of Article 495A were satisfied and that no opposition on the part of the Respondents was made and for these reasons proceed to order the sale of the property held in common in accordance with the conditions established in the promise of sale agreement and to determine the time and date for the transfer to take place, appoint a Notary for the said sale and a curator to appear for and on behalf of the Respondents and also ordered the Applicants to deposit the proceeds of the sale due to the Respondents in Court. As regards the costs, the Court ordered that these be borne by all the parties to the case regard being had to the value of the shares held in the property by each of them.

Dr Rachel Genovese is an Advocate at GANADO Advocates.

Here reference is made to Article 495B of Chapter 16 of the Laws of Malta which details the changes brought about by Act No. XIV of 2016 and establishes inter alia that as from 1st April 2016 the period of ten years previously provided for in article 495A(1) (prior to its amendment) shall no longer apply and that Article 495A as amended shall apply in respect of all co-owned property which on or after the 1st April 2016 shall have been held in common by the co-owners thereof for a period of at least three years.