What are the rights as between co-owners of property, if one does more work than the other?

Let us assume that there are two co-owners who contributed to the purchase price of land. They purchased the property as tenant-in-common. Accordingly, at the time of the purchase, the land is legally owned by the parties as tenants-in-common in equal shares.

As the owners are not carrying on a business together with a view to profit, the relationship between them is not a partnership, and therefore the rules set out in the Partnership Act (NSW) do not apply.

At common law, a co-owner of property who incurs expenditure in improvements, repairs or maintenance on the property has no claim for reimbursement against the other co-owners unless they have expressly or impliedly requested or agreed to that expenditure.

The position is different in equity (the rule of fairness). A claim by a co-owner for contribution for expenditure on repairs or improvements which increased the value of the property can be made, but only when the co-ownership comes to an end. This right is not dependent on the expenditure being made at the request of the other co-owner. The ownership relationship between the parties must have ended.

What amount is the co-owner entitled to?

The co-owner is entitled to the lesser of:

1. the amount of expenditure incurred on improvements or repairs; and,

2. the amount by which such expenditure increased the value of the property.

Expenditure on maintenance or repairs that do not add to the capital value of the land cannot be claimed.

The guiding principle in equity is that following partition or sale, a co-owner should not take benefit of an increase in the value of the land without making an allowance for what has been expended by the other co-owner or co-owners in order to obtain an increase in value.

What about the co-owner’s time and effort?

The allowance given for improvements or repairs which enhance the value of the property is limited to expenditure made by a co-owner. Thus far, it does not extend to their time and effort.