2. Co-Ownership and Trusts

Question 1

DEF: Co-Ownership

Answer 1

Co- ownership is where more than one person owns land at the same time (ie concurrently).

Question 2

When does a ‘trust of land’ arise?

Answer 2

A trust of land will
arise in the following situations:
1. a landowner intentionally sets up a trust of their land by transferring title to the land to trustees for the benefit of others (an express trust following the formalities in s 53 LPA 1925);
2. a person acquires an interest in land owned by another due to their conduct (an implied trust – see 2.4); or
3. land is acquired by more than one owner jointly (co- ownership).

Question 3

How must the legal estate be held?

Answer 3

The legal estate must be held as a joint tenancy

Question 4

Can the joint tenancy of the legal estate be severed?

Answer 4

No

Question 5

Who can be a trustee of land?

Answer 5

Anyone over the age of 18 (s 1(6) LPA 1925)

Question 6

If someone tried to convey a legal estate to a minor, what would happen?

Answer 6

This would be a declaration of trust that the land is HELD for the minor. If the land was conveyed to a minor AND adult, the land would be vested in the adult and in trust for the minor.

Question 7

How many trustees can there be (min/max) for a trust of land?

Answer 7

Maximum of four trustees. If there are more than 4, first 4 named adults will be the trustees. There is no minimum (best to have atleast 2 for overreaching purposes)

Question 8

As a trustee over land, what can trustees do with the land?

Answer 8

• Anything an absolute owner could (ie sell or mortgage or purchase)
• This is limited by their duty to consult beneficiaries who are of full age with an interest in possession
• Must comply as far as is practicable
• If beneficiaries not in agreement, must comply with the majority wishes

Question 9

Two forms of Co-Ownership

Answer 9

(1) Joint tenancy
(2) Tenancy in common

Question 10

How can the equitable interest of a property be held?

Answer 10

Either joint tenancy or tenancy in common

Question 11

If one joint tenant dies, what will happen to their interest in the property?

Answer 11

The right of survivorship: their interest passes to surviving joint tenant(s)

Question 12

DEF: Undifferentiated Ownership

Answer 12

Joint tenants are jointly entitled to the whole of the property (no such things as shares)

Question 13

DEF: Severance

Answer 13

Converting a joint tenancy in equity to a tenancy in common (can never be done for legal estate)

Question 14

If one tenant in common dies, what will happen to their interest in the property?

Answer 14

There is no right of survivorship, their share passes with their estate by their will or the intestacy rules
- # of beneficial tenants in common can increase
- their shares can be unequal

Question 15

DEF: Undivided Shares

Answer 15

Each owner of the property (as tenants in common) has a distinct share in the land, but there is no physical division of the land to this effect
- share can be equal or unequal

Question 16

How can we determine whether the property is held by joint tenancy or tenancy in common in equity?

Answer 16

Four Tests:
1) Are all four unities present?
(2) does the deed transferring the land to the co-owners contain an express declaration
(3) does the deed transferring the land to the co-owners contain words of severance?
(4) Does equity presume a tenancy in common?

Question 17

DEF: Four unities test

Answer 17

If all four unities are present, it is likely there is a joint tenancy in equity:
(1) Unity of Possession
(2) Unity of Interest
(3) Unity of Title
(4) Unity of Time

Question 18

DEF: Unity of Possession (four unities test)

Answer 18

There will be unity of possession if each co-owner has the RIGHT to possession of all the land.
- Actual possession not required
- This unity required for both joint tenancy and tenancy in common in equity

Question 19

DEF: Unity of Interest

Answer 19

each co- owner must have identical rights over the land. This is the hallmark of a joint tenancy. A tenancy in common can have unequal shares and,
therefore, no unity of interest.

Question 20

DEF: Unity of Title

Answer 20

each co- owner must have acquired their interest from the same document. For example, the same transfer or conveyance.

Question 21

DEF: Unity of Time

Answer 21

The co-owners receive their interests at the same time

Question 22

If all four unities are present, what does this indicate about how the equitable interest is held? What next?

Answer 22

Can be either a joint tenancy or tenancy in common (necessary to consider next test)

Question 23

If only the first of the four unities are present - what does this indicate about how the equitable interest is held?

Answer 23

Joint tenancy

Question 24

Second Test: does the deed transferring the land to the co-owners contain an express declaration?

Answer 24

Express declarations of trust are conclusive (even if there are unequal contributions)
- transfer document sets out how property is to be held
- eg ‘transferred into their joint names and express beneficial joint tenants in equity’

Question 25

Third Test: does the deed transferring the land to the co-owners contain words of severance?

Answer 25

Words of severance = any words that indicate co-owners are to have a distinct shares - 'i grant xyz to be divided equally between my children' - 'to A and B in equal shares' If none of this - need to do fourth test

Question 26

Fourth Test: When does equity presume a tenancy in common?

Answer 26

(1) presumption that co-owners are joint tenants in equity (equity follows the law) (2) Rebut presumption if: i. property acquired for business use ii. unequal contributions to the purchase price (equity presumes tenancy in common) iii. Post-acquisition money management (eg. one person provides far greater share of finance for the home)

Question 27

How can a joint tenancy be severed in equity?

Answer 27

(1) Written Notice (2) Alienation (acts operating on the joint tenant's share) (3) Mutual Agreement (4) Course of Dealing (5) Bankruptcy (6) Homicide (7) Post-acquisition money management

Question 28

Requirements for severance by written notice to be effective

Answer 28

Notice need not be signed but: - must use appropriate wording expressing desire to end JT IMMEDIATELY - be received by all the other joint tenants or DEEMED to have been received (handed to recipient or posted)

Question 29

JT trying to sever by written notice: sending by Registered Post

Answer 29

Notice seemed to be sufficiently served if not returned undelivered

Question 30

JT trying to sever by written notice: sending by Ordinary Post

Answer 30

Sufficiently served if it is left at the last known place of abode or business in the UK of the person being served

Question 31

DEF: Severance by Alienation

Answer 31

This is a unilateral act - JT disposes of their interest by sale, gift, lease or mortgage - Complies with rules in s 53(1) LPA 1925 (be in writing and signed) - Could also be a contract provided it complies with s2 LPMPA 1989 and can be specifically enforceable - Can dispose of interest to stranger or joint tenant

Question 32

DEF: Severance by mutual agreement

Answer 32

This requires the joint tenants to act together (either expressly or by implication) to sever the joint tenancy in equity or where the parties agree to deal with the land in a certain way and that method of dealing would have the effect of severing. An oral agreement will suffice and the agreement does NOT need to be carried through to performance. The significance of the agreement is not that it binds the parties, but that it expresses an intention to sever the joint tenancy.

Question 33

DEF: Severance by mutual conduct / course of dealing

Answer 33

The joint tenants do not have to agree to do something to sever, but must show through their conduct (in relation to the land and each other) that they clearly regard themselves as owning distinct shares.The parties must behave in a way that shows they assume they are tenants in common over a significant period of time

Question 34

DEF: Severance by Bankruptcy

Answer 34

(involuntary alienation) - assigns equitable interest to joint tenant's trustee in bankruptcy - Once bankruptcy discharged, equitable interest reverts to the co-owner who will continue to hold it as tenant in common

Question 35

DEF: Severance by Homicide

Answer 35

If one joint tenant unlawfully kills another, the right of survivorship should not apply

Question 36

DEF: Severance by post-acquisition money management

Answer 36

If no express declaration of beneficial interest for joint tenants (1) starting point: equity follows the law (2)Rebutted if common intention as to shares are different at the time of acquisition or later, can be deduced objectively by conduct, court will decide what is fair wrt whole course of dealings - 'ambulatory constructive trust'

Question 37

Effect of severance where there are two joint tenants

Answer 37

Both become tenants in common in equal shares

Question 38

Effect of severance where there are more than two joint tenants

Answer 38

The co-owner who severs becomes a tenant in common, the others remain joint tenants (shares proportionate to number of joint tenants) - If severance occurs, co-owners contributions to purchase price are irrelevant

Question 39

When do resulting trusts arise

Answer 39

(1) a person (not holding legal title to the property) makes a contribution to the purchase price (2) no evidence that contribution was intended as a gift or a loan and (3) contribution is all or part of purchase price at date of acquisition (not subsequent) - Person holds a beneficial interest in the property

Question 40

Two ways a constructive trust can be created

Answer 40

(1) Agreement + Detrimental Reliance (2) conduct + direct financial contribution

Question 41

DEF: Detrimental Reliance

Answer 41

Reliance on the agreement to their detriment or significant alteration of position - must be solely related to the agreement not other motives (ie. love and affection)

Question 42

CICT: If there is no agreement, how can a common intention be established

Answer 42

By conduct: - payment towards purchase price initially OR - payment of mortgage payments by non-owning party (anything less than direct financial contributions are insufficient)

Question 43

Requirements for Co-owned land to be sold

Answer 43

All trustees need to execute the deed transferring the legal estate

Question 44

What can a co-owner do if they want to sell the property but the other co-owners do not?

Answer 44

Apply to court for an order under s 14 TLATA Court has wide discretion to make an order: a. relating to the exercise by the trustees of any of their functions; or b. declaring the nature or extent of the person's interest in property

Question 45

Examples of disputes which fall under s 14 TLATA

Answer 45

a. disputes about the size of co-ownership interests b. disputes regarding occupation of the land c. authorising transactions without the consent of all trustees

Question 46

What factors does the court need to consider when making an order under s 14 TLATA?

Answer 46

s 15: a. intentions of the person / persons who created the trust b. purposes for which property is held c. welfare of any minor occupants (or those who might reasonably expected to occupy) d. Interests of any secured credit of any beneficiary AND e. wishes of beneficiaries entitled to an interest in possession in property subject to trust or of the majority

Question 47

What potential orders could the court make under s 14 TLATA?

Answer 47

1. Refuse a sale 2. Order a sale 3. refuse a sale but make an order regulating the right to occupy the property 4. Exceptional cases: partition the co-owned property

Question 48

When would the court order to refuse a sale under s 14 TLATA in a co-ownership dispute?

Answer 48

If the purpose of acquisition can still be fulfilled

Question 49

When would the court order to order a sale under s 14 TLATA in a co-ownership dispute?

Answer 49

If purposes for which property has been acquired have failed (eg. failed business)

Question 50

When would the court order to refuse a sale but make an order regulating the right to occupy the property under s 14 TLATA in a co-ownership dispute?

Answer 50

Where a relationship has broken down as a consequence of one partner's violence towards another - May order occupying spouse to pay rent to the person who has been excluded from occupation by the violence (VERY RARE)

Question 51

If four individuals purchase land with the intention of running a business from such land - how are the legal / equitable interests held?

Answer 51

1. Legal held as JT 2. Equitable held as TiC