Forcing a Sale - Article 495A

Article 495A

Article 495A of Malta’s Civil Code (Chapter 16 of the Laws of Malta) is a targeted procedural and substantive mechanism designed to break deadlock in coownership, when a proposed sale of property held in common is supported by the majority but resisted (or cannot be practically obtained) from the minority. It sits within Title V (Community of Property) and operates as an exception to the ordinary expectation that co-owners must agree on acts of disposal, by allowing judicial intervention where the specific conditions found in the law are met.

Basically, the purpose of the law is to allow the majority of owners (in terms of share of the property) to ask the court to authorise the sale of the property as desired by that majority.

The legal trigger

The operative rule is introduced by the heading “Where co-owners fail to agree in respect of a sale of a thing held in common.” Article 495A(1) first delineates its scope by stating (in part) that it applies “[e]xcept in cases of condominium or necessary community of property”. Therefore, this law cannot be utilised to for instance sell a common part in a block of apartments.

It then sets cumulative preconditions. Among the most important are that “co-ownership has lasted for more than three years” and that “none of the owners has instituted an action before a court or other tribunal for the partition of the property held in common”. Only when these conditions are satisfied, and “the co-owners fail to agree with regard to the sale of any particular property”, that the majority coowners can force the hand of the minority.

The substantive safeguard

Article 495A(1) requires the court, before authorising a sale, to be satisfied that “none of the dissident co-owners are seriously prejudiced thereby”. Not every prejudice claimed by the minority will suffice, but only that prejudice that is deemed to be serious. Usually, in practice, this would refer to the price, and the court will usually appoint an architect to establish the value of the property being proposed to be sold, so that the court can decide whether the price proposed by the majority is in any manner seriously prejudicial to the minority.

Upon the finding that there is no serious prejudice, the court may “authorise the sale in accordance with the wish of the majority of co-owners”, while expressly requiring that regard be had to “the value of the shares held by each co-owner”.

The procedure

The process is initiated by application. Article 495A(2) provides that the request “shall be made by application” and must be accompanied by: (i) a declaration of the owners who agree to the sale; and (ii) a prospectus showing “the number and value of the shares” and “the terms and conditions under which the sale is to take place.” The application must also indicate “the date on which the co-ownership arose” and “the circumstances thereof.”

The application must be served on dissenting co-owners and on curators appointed to represent “co-owners who are unknown or who cannot be traced”, and the registrar must publish a copy “in the Gazette and in one daily newspaper.” Where a co-owner is said to be unknown or untraceable, article 495A(4) requires confirmation to that effect on oath by one of the applicants.

The dissenting co-owners and curators may, within twenty days of service, oppose the sale by stating the “serious prejudice” they may suffer.

If the court authorises the sale, the court can confirm the price proposed, or it may determine the price (or other consideration) itself.

Finally, article 495A(9) preserves a safety valve: if “more than one co-owner opposes” or if the court rejects the application under subarticle (7), it may order “sale by licitation” under articles 521 and 522 of the Civil Code.

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Dr Carlos Bugeja is Partner at PROLEGAL Advocates.

Disclaimer: This article is not to be construed as being legal advice, and is not to be acted on as such. Should you require further information or legal assistance, please do not hesitate to contact Dr Carlos Bugeja at carlos@prolegal.mt.