“Let us buy a house together.”
“Our late father left a house for my brother and me.”
These are some of the common conversations prior to a co-proprietorship.
In brief, ‘co-proprietorship’ means the holding or ownership of property by two or more people (or bodies) together. Some may call it joint ownership or co-ownership of property, but they all have the same meaning.
This article explores a few aspects that we should know about co-proprietorship in Malaysia.
Before we start, it must be highlighted that for co-proprietorship formed in consideration of marriage, parties’ rights should be considered under the Law Reform (Marriage and Divorce) Act 1976 instead of the law set out herein.
In Malaysia, it is important to know that co-proprietorship runs in the form of tenancy in common.
‘Tenancy in common’ means that each co-proprietor’s shares will be divided and treated as separate from the outset.
Without an agreement to the contrary, Section 343(1) of our National Land Code 1965 provides the following in respect of co-proprietorship in Malaysia:-
(a) The co-proprietors’ shares shall be deemed to be equal. This means that each co-proprietor has an equal share to the house.
(b) The co-proprietors shall each be entitled to possession and enjoyment of the property as a whole.
In other words, each co-proprietor has full accessibility to each and every corner of the house. In view of this, it can be understood why it is virtually impossible for the share to be sold to a third party.
(c) On the death of any of the co-proprietors (or, in the case of a corporate body, its dissolution), their share will be dealt with in accordance to their will or the laws of intestacy.
It is therefore advisable that all co-proprietors write a will when the property is held jointly to ensure that an executor can be appointed as soon as possible, and to pass the interest in the property to the intended beneficiary.
The Alternative Option: Co-proprietorship Agreement
Other than as set out by the law, co-proprietors certainly have other options, for instance, to fix the shares in accordance to each capital contribution, or when one wishes to realize their shares in the property.
To do this, parties may have it stated in a separate Co-proprietorship Agreement or even in a declaration of trust.
This is to avoid any future disputes, as having an agreement of sort will make it easier to persuade the court that different shares should be recognized, bearing in mind that the potential cost of going to court to argue for different shares or to terminate a co-proprietorship before one is able to realize the share.
In addition, we also suggest that the agreement or trust to provide for:-
(a) parties’ portion in payment for loan installments, maintenance or service charges, and other outgoings;
(b) terms on decision making, selling price, partitioning and so on;
(c) death of one of the co-proprietors and the share does not pass to the legally designated beneficiary; and
(d) calculation of the share of rental income and proceed of sales.
Court to facilitate termination of co-proprietorship
This should be the last resort.
Section 145 of the National Land Code 1965 provides an alternative approach that allows any of the co-proprietors to apply to the court for termination of co-proprietorship and to sell off the property in the manner as the court will decide.
For example, there are some cases where one party wanted to partition the land in order to develop his own portion of land, but he/she received no consent from the remaining co-proprietors.
Such issues would eventually have to be resolved via the lengthy and costly process of the court, since there is no agreement between the parties.
In summary, purchasing a house together is indeed a joyous occasion, but it can also bring about hassles which could frustrate us in the future if preventive measures are not taken seriously.
Hence, communication between co-owners (and a carefully drafted Co-proprietorship Agreement) is essential before we sign ourselves up as co-proprietors.
About the Author:-
This article is written by Chia Swee Yik, Partner of this Firm (+60128282198, firstname.lastname@example.org) and Jamie Pua Jing Man, Legal Associate of this Firm (assisted by paralegal, Ho Zhi Qian) who have provided practical advice on property transaction.
Feel free to contact us if you have any queries.