7 - Co-ownership

Question 1

What is co-ownership in land, and how is a trust of land created under concurrent ownership?

Answer 1

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

This form of ownership is common, as most couples (whether married or not) are joint owners of land, whether it’s freehold or leasehold.

Trust of Land: Section 1 of TLATA 1996 establishes a trust of land in cases of concurrent ownership.

This trust arises in three situations:
1. An express trust, where a landowner intentionally sets up a trust by transferring the title to trustees for the benefit of others, following s 53 LPA 1925 formalities.
2. An implied trust, where a person acquires an interest in land owned by another due to their conduct.
3. Co-ownership, where more than one person jointly acquires land.

Question 2

In co-ownership, what are the roles and rights of trustees and beneficiaries, and how do they relate to the sale of property?

Answer 2

Trustees:
- They are the legal owners, with their role being administrative only.
- Trustees do not have rights to benefit from the property and are not entitled to live there or take rent from it.

Beneficiaries:
- They are the equitable owners, entitled to occupy the property or receive rent.

When the property is sold:
- The trustees are responsible for executing the deed, transferring the legal title.
- Beneficiaries receive the proceeds of the sale.

This arrangement means that while trustees handle administrative duties, the property’s true value rests with the beneficiaries.

Question 3

Can a legal estate be created or held in an undivided share?

Answer 3

Section 1(6) LPA 1925 states that a legal estate is “incapable of subsisting or of being created in an undivided share,” which means:
- The legal estate must always be held as a joint tenancy.
- The joint tenancy in relation to the legal estate cannot be severed.

As a result, trustees of the legal estate must hold it as joint tenants.

Question 4

Who can act as a trustee of land, and what rules apply to minors under s 1(6) LPA 1925 and TLATA 1996?

Answer 4

Only individuals over the age of 18 can act as trustees (s 1(6) LPA 1925).
- If a legal estate is conveyed to a minor, this creates a declaration of trust, holding the land in trust for the minor (TLATA 1996, Sch 1, para 1(1)).
- If land is conveyed to a minor and an adult, it is vested in the adult in trust for the minor (TLATA 1996, Sch 1, para 1(2)).

Question 5

What are the rules regarding the maximum and minimum number of trustees allowed in land co-ownership?

Answer 5

The Trustee Act 1925, s 34(2), states there can be a maximum of four trustees.
- If property is conveyed to more than four people, only the first four named adults will serve as trustees.

There is no set minimum number of trustees, though it is usual to have two trustees to allow the mechanism of overreaching to function effectively.

Question 6

What powers do trustees hold under s 6(1) and s 11 of TLATA 1996 in relation to co-owned land?

Answer 6

Section 6(1): Trustees hold all the powers of an absolute owner, allowing them to:
- Sell or mortgage trust land
- Purchase land for a beneficiary’s occupation

Section 11: Trustees’ powers are limited by a duty to consult beneficiaries who are of full age and have an interest in possession (entitled to an immediate interest in the land).
- Trustees must consider the beneficiaries’ wishes, or if there’s a dispute, follow the majority’s wishes, based on the value of their combined interests.
- This duty to consult applies only to the extent that it is practicable and must align with the trust’s general interests.

Question 7

What are the two forms of co-ownership in land, and how do they differ?

Answer 7

Two Forms of Co-ownership:
- Joint tenancy
- Tenancy in common

Legal Estate Requirement:
- The legal estate must be held as a joint tenancy, per s 1(6) LPA 1925.
- Beneficiaries can hold their equitable interests either as joint tenants or as tenants in common.

Question 8

What is the right of survivorship in a joint tenancy, and how does it affect property ownership upon death?

Answer 8

Right of Survivorship:
- When a joint tenant dies, their interest automatically and immediately passes to the surviving joint tenant(s).
- This means the interest does not pass through a will or intestacy.
- Over time, as joint tenants die, the number of joint tenants decreases, leaving the final survivor as the sole owner.

Question 9

How does undifferentiated ownership function in a joint tenancy?

Answer 9

Undifferentiated Ownership:
- In a joint tenancy, all joint tenants are equally entitled to the whole property, with no division of ‘shares.’
- A joint tenant cannot specify a particular share of the property as their own; their interest is in the entire property.

Severance of Joint Tenancy:
- It is possible to sever a joint tenancy in equity, thereby converting the equitable interests into a tenancy in common.
- However, the joint tenancy of the legal estate itself cannot be severed to create a tenancy in common, according to s 36(2) LPA 1925.
- Severance applies only to the equitable joint tenancy, not the legal estate.

Question 10

What distinguishes a tenancy in common from a joint tenancy in terms of survivorship and ownership?

Answer 10

No Right of Survivorship:
- In a tenancy in common, a tenant’s share passes to their estate upon death, not to the surviving co-tenants.
- As a result, the number of beneficial tenants in common may increase over time.

Undivided Shares:
- Each tenant in common holds a distinct share in the land, which can be equal or unequal, though the land is not physically divided.
- A tenant in common can specify their portion, e.g., ‘my half,’ unlike in a joint tenancy where shares are not delineated, and joint tenants are entitled to the property as a whole.
- A tenancy in common is a distinctly quantified share in the whole property, but the holder cannot say that any particular part is theirs: hence, ‘undivided’ share.

Question 11

How can it be determined if the equitable interest in property is held as a joint tenancy or a tenancy in common?

Answer 11

There are several tests to determine if the equitable interest is a joint tenancy or a tenancy in common:

First Test - Four Unities:
A joint tenancy in equity requires the presence of all four unities:
- Unity of possession: All co-owners have a right to possess the whole property (necessary for both joint tenancy and tenancy in common).
- Unity of interest: All co-owners have identical rights over the land, distinguishing joint tenancy from tenancy in common, which can have unequal shares.
- Unity of title: All co-owners must have acquired their interest through the same document.
- Unity of time: Co-owners must have acquired their interests at the same time. In other words, the co-owners’ interests must all take effect (vest) at the same time).

If all four unities are present, there could be a joint tenancy in equity; if not, a tenancy in common is likely.

Question 12

How does an express declaration in a deed influence the type of co-ownership in equity?

Answer 12

An express declaration of trust in the deed (per s 53(1) LPA 1925) is conclusive in determining co-ownership.

This declaration clarifies the nature of the equitable interest regardless of each co-owner’s financial contribution, as seen in Goodman v Gallant [1986].

Examples of declarations:
- “Transferred into their joint names as express beneficial joint tenants in equity.”
- “Conveyed to them as express beneficial joint tenants in equity.”
- “The transfer contained a declaration that all four owners were beneficial joint tenants.”

Example: Mohammed and Fatima hold their property as joint tenants in equity despite unequal contributions, due to an express declaration of trust in a deed.

Question 13

What do words of severance in a transfer deed indicate about co-ownership?

Answer 13

Words of severance are any wording in the deed that implies distinct shares indicates a tenancy in common.

Examples of severance language:
- “Divided equally between them.”
- “To A and B in equal shares.”
- “Between A and B.”
- “Half to A and half to B.”

If such words are present, it shows an intent for separate shares, establishing a tenancy in common in equity.

Question 14

When does equity presume a tenancy in common, and how can this presumption be rebutted?

Answer 14

Equity presumes a joint tenancy in equity (following the legal estate) as established in Stack v Dowden [2007].

This presumption can be rebutted in specific situations:
- Business Use: If acquired for business, co-owners likely want their interest to go to their estate rather than business partners upon death.
- Unequal Contributions: Where one co-owner contributes significantly more to the purchase, equity presumes a tenancy in common, with shares reflecting contributions.
- Money Management Post-Acquisition: In a trust of the home, the presumption for a joint tenancy in equity can be rebutted in exceptional cases, e.g., if one party pays the majority of mortgage and outgoings (Stack v Dowden).

Example: In the absence of these rebutting factors, equity will follow the law, treating the equitable interest as a joint tenancy.

Question 15

What is severance of a joint tenancy in equity, and how can it be achieved?

Answer 15

Severance is the method by which a joint tenancy in equity is converted into a tenancy in common.

It applies only to equitable interests and does not sever the joint tenancy of the legal estate.

Severance must occur inter vivos, meaning it must take place during the lifetime of the co-owner; a will cannot effect severance as it only takes effect upon death (Carr v Isard [2006] EWHC 2095 (Ch)).

Severance of a joint tenancy can be achieved by:
- Formal severance by written notice
- Informal severance

Question 16

How is formal severance by written notice achieved under s 36(2) LPA 1925?

Answer 16

A joint tenant can sever their share of the joint tenancy by issuing a written notice to the other co-owners indicating their intent to sever.

This can be stated expressly or impliedly, and:
- There is no specified form for the notice, and it does not need to be signed.
- Severance by written notice is a unilateral act, not requiring the consent of other joint tenants.
- Note: There are no statutory formalities applied to a notice in writing.

For the severance to be effective, the notice must:
- Use appropriate wording: It must show an immediate desire to end the joint tenancy. A future intent or wish is insufficient (Harris v Goddard [1983] 1 WLR 1203).
- Be received by all other equitable joint tenants or be deemed to have been received. The equitable joint tenants are the only people who will be affected by the severance.
- The notice can be handed directly or sent by post.

Question 17

What are the postal rules for deemed service under s 196 LPA 1925 when severance is attempted by post?

Answer 17

When a notice of severance is sent by post, certain deeming provisions under s 196 LPA 1925 apply to prove service, depending on the method used:

Registered post – s 196(4): If a notice is sent by registered or recorded delivery, it is deemed sufficiently served if the letter is not returned undelivered. For instance, in Re 88 Berkeley Road [1971] 1 All ER 254, severance was effective even though the recipient stated they had never seen the letter, as it was signed for and not returned undelivered.

Ordinary post – s 196(3): If notice is sent by ordinary post, it is deemed served if left at the last known place of abode or business in the UK of the person to be served. For example, in Kinch v Bullard [1998] 4 All ER 650, the severance was deemed effective when the notice was left at the property, despite the sender destroying it. The court accepted evidence of delivery by the postman.

Question 18

What is severance by informal means under Williams v Hensman (1861) and what methods can effect it?

Answer 18

Severance by informal means is based on actions that indicate an intention to treat the joint tenancy in equity as severed. The methods identified in Williams v Hensman (1861) I John & H 546 are:

Acts operating on the joint tenant’s share (alienation): A unilateral act where a joint tenant disposes of their equitable interest through sale, gift, lease, or mortgage. The disposition, relating to an equitable interest, must follow the rules in s 53(1) LPA 1925 (in writing and signed). If compliant, the joint tenancy is severed by removing the four unities among the joint tenants.

Mutual agreement: Joint tenants can sever by mutual agreement to deal with the land in a way that necessitates severance. An oral agreement suffices, even if not carried through to performance. This indicates a mutual intent to sever.

Course of dealing: A mutual course of conduct can sever the joint tenancy where the tenants’ behaviour shows they regard themselves as having distinct shares over time. As per Lord Denning in Burgess v Rawnsley [1975] 1 Ch 429, negotiations that indicate a shared intent to sever, though not resulting in a formal agreement, may suffice.

Question 19

How does bankruptcy affect severance of a joint tenancy?

Answer 19

Bankruptcy causes an involuntary alienation of a joint tenant’s share, classifying it as an act operating on the joint tenant’s share.

If a joint tenant becomes bankrupt, the joint tenancy is severed due to the involuntary assignment of the bankrupt tenant’s equitable interest to their trustee in bankruptcy.

Once the bankruptcy is discharged, the equitable interest reverts to the co-owner who will then hold it as a tenant in common.

Question 20

What is severance by homicide in relation to joint tenancy, and why does it occur?

Answer 20

Severance by homicide applies when one joint tenant unlawfully kills another joint tenant.

Under a joint tenancy, survivorship would typically allow the surviving tenant to inherit the deceased tenant’s share.

To prevent the wrongdoer from benefiting from their crime, a rule of public policy is applied, severing the joint tenancy to stop the survivor from inheriting.

Question 21

What is post-acquisition money management, and how can it affect the severance process and joint tenancy in equity?

Answer 21

When an unmarried couple acquires a family home in joint names without an express declaration of their beneficial interests, equity presumes they are joint tenants in law and in equity.

This presumption can be rebutted if:
- There was a different common intention at acquisition or if they later formed a new common intention regarding share adjustments.
- Simply contributing unequal amounts at the time of purchase is typically insufficient to rebut the presumption of joint tenancy.
- Over time, the parties’ common intentions may evolve, leading to an ambulatory constructive trust, reflecting their changing contributions or arrangements.

This common intention is objectively deduced from conduct. If conduct is unclear, the court will assign shares based on what is fair in light of the whole course of dealing between them.

In Stack v Dowden [2007] UKHL 17, Ms Dowden successfully argued for a 65% share due to substantial financial contributions, which outweighed Mr Stack’s, and the court used a holistic approach to assess their shares.

Question 22

What is the effect of severance on joint tenancy in equity?

Answer 22

Upon severance, a joint tenancy in equity becomes a tenancy in common. The precise effect depends on the number of joint tenants involved:
- Two joint tenants: Both become tenants in common with equal shares.
- Three or more joint tenants: Only the co-owner who severs becomes a tenant in common, while the others retain a joint tenancy in equity of the remaining interest.

In cases with more than two tenants, the share of the severing co-owner is proportionate to the total number of joint tenants. Contributions to the purchase price are irrelevant to their resulting shares.

Question 23

When is a resulting trust implied in relation to land, relating to co-ownership?

Answer 23

A resulting trust may be implied when:
- No express declaration of trust exists for the property.
- One party contributes to the purchase price but does not hold legal title.
- There is no evidence that the contribution was a gift or loan.
- The contribution is made at the date of acquisition and not after.

In such cases, the person contributing holds a beneficial interest proportionate to their contribution.

Example: Ken buys a property solely in his name but Barbara pays the deposit. Here, Ken holds the legal estate in trust for himself and Barbara, with Barbara’s beneficial interest proportionate to her 10% contribution.

Question 24

What is the two-stage test for creating a constructive trust under Lord Bridge’s approach in Lloyds Bank v Rosset [1991]?

Answer 24

Lord Bridge’s two-stage test establishes a constructive trust if:
1. Agreement + Detrimental Reliance:
There is an agreement, arrangement, or understanding on sharing property beneficially.

The non-legal owner relies on this agreement to their detriment, such as by:
- Paying for house improvements.
- Covering household bills to support mortgage payments.
- Working unpaid in the legal owner’s business.

2. Conduct + Direct Financial Contribution:
   - In the absence of an agreement, direct financial contributions (e.g., to the purchase price or mortgage) by the non-owning party show a common intention to share beneficial ownership.
   - Lesser actions, such as general family contributions, are insufficient to create this trust.

Example: In Lloyds Bank v Rosset, Mrs Rosset’s indirect contributions and lack of detrimental reliance meant she held no beneficial interest. Lord Bridge’s test has been critiqued as narrow, but remains valid unless updated by subsequent case law.

Question 25

How did the holistic approach in Stack v Dowden [2007] and Jones v Kernott [2011] expand the two-stage constructive trust test in Lloyds Bank for establishing a constructive trust?

Answer 25

The holistic approach introduced in Stack v Dowden and developed in Jones v Kernott provides flexible guidance on implied trusts in family homes, focusing on the parties’ shared intentions as inferred from their conduct. Key points include:
- Determine if the non-owning party was intended to have a beneficial interest.
- If so, deduce intentions from the parties’ conduct.
- Unlike traditional resulting trusts, constructive trusts in family homes have no presumption of joint ownership.
- When intentions are unclear, the court considers fair shares based on the entire course of dealings regarding the property.
- Financial contributions are relevant, but the whole context of conduct is considered in deciding ownership proportions.

This approach allows courts to apply Lord Bridge’s test to establish a trust and then use the holistic approach to determine fair shares, such as in Stack v Dowden, where Ms Dowden’s greater contributions led to a 65% interest in the property.

Question 26

How are disputes resolved when co-owners of property fall out, with one wanting to sell the property and the other(s) wanting to retain it?

Answer 26

Married Couples: Disputes are resolved through legislation specific to divorce.

Non-married Couples: No legislation specifically governs non-married couples; instead, case law (e.g., Stack v Dowden and Jones v Kernott) serves as an attempt to create a legal framework for resolving their property disputes.

For co-owned land to be sold, all trustees must execute the deed transferring the legal estate.

Sections 14 and 15 of the TLATA 1996 apply where co-owners fall out, allowing the court to intervene when one or more co-owners wish to sell the property, and others do not.

Question 27

What powers does Section 14 of the TLATA 1996 provide for resolving property disputes among co-owners?

Answer 27

Section 14 enables a trustee or any person with an interest in the property to apply to the court for an order.

Court’s Broad Discretion: The court can issue orders:
(a) Concerning the exercise of trustees’ functions, or
(b) To declare the nature or extent of any person’s interest in the property.

Typical Applications under s 14 include:
- Resolving disputes over co-ownership interests where there is no express trust declaration,
- Settling conflicts about occupation rights of trust land,
- Authorising transactions without the consent of all trustees,
- Deciding if co-owned land should be sold.

Question 28

What factors must the court consider under Section 15 of the TLATA 1996 when making decisions in property disputes?

Answer 28

Section 15(1) lists specific factors the court must consider:
(a) Intentions of the trust creator(s), if any, when the trust was established;
(b) Purposes for which the property is held under the trust;
(c) Welfare of any minor who occupies or may occupy the property as their home;
(d) Interests of secured creditors of any beneficiaries.

Section 15(3) adds that the court should consider:
- Circumstances and wishes of beneficiaries of full age with an interest in possession, or, if there is a dispute, of the majority based on the value of their combined interests.

Case Law highlights that the factors listed are not exhaustive, and the court can consider any other relevant circumstances. However, a secured creditor’s interest is usually prioritised over the needs of a child or an ill co-owner (Bank of Ireland Home Mortgages Ltd v Bell [2001]).

Question 29

How does the court consider the intentions of the trust creator(s) under Section 15(1)(a) of TLATA 1996 in property disputes?

Answer 29

Section 15(1)(a) focuses on the intentions of the person(s) who created the trust, which is relevant when the trust has been explicitly created, such as by a will.

The court assesses the historic intentions of the settlor or creator of the trust prior to its formation, taking these original intentions into account when making its decision.

Question 30

How does the purpose for which trust property is held influence the court’s decision in property disputes under TLATA 1996?

Answer 30

Under Section 15(1)(b), the court evaluates the current purpose of the trust.

Purposes of a trust can be set informally and can also be changed through agreement between the parties.
- Family Home Example: If the trust’s purpose—such as providing a family home—remains achievable, the court is likely to refuse a sale.
- However, where a relationship has irretrievably broken down, and no minor children are involved, the court may order a sale (Jones v Challenger [1961]).

Question 31

How does the welfare of minors impact court decisions regarding property sale disputes under Section 15(1)(c) of TLATA 1996?

Answer 31

Section 15(1)(c) requires the court to consider the welfare of any minor who occupies or might reasonably be expected to occupy the property as their home.

Example: In Re Evers [1980], the court refused an order for sale because the mother accepted responsibility for the outstanding mortgage, and the father had secure housing. The court indicated it would reconsider the application if circumstances changed, such as when the children grew up and left home.

Question 32

How does the court regard the interests of secured creditors under Section 15(1)(d) in property sale disputes?

Answer 32

Section 15(1)(d) considers the interests of secured creditors of any beneficiary, especially in cases where a trustee in bankruptcy applies for a sale under s 14.

Court Priorities:
- The interests of a mortgagee or secured creditor generally take precedence unless there are exceptional circumstances.
- Example: A child’s welfare, such as a 17-year-old’s needs, is typically given little weight against a secured creditor’s requirements.
- The court also considers whether retaining the property would result in an increased mortgage debt that might devalue the property or render debt repayment impossible.

Question 33

What options does the court have in resolving property disputes under the TLATA 1996?

Answer 33

1. Refuse a Sale: Likely if the original purpose of the trust (such as housing needs) can still be met.
2. Order a Sale: Commonly chosen when the purposes for which the property was acquired have clearly failed, such as a property purchased for a failed business.
3. Regulate Occupancy Rights: Rarely, the court may refuse a sale but regulate occupancy. For example, if a relationship breakdown involved violence, the person in occupation may be ordered to pay rent to the excluded party.
4. Partition the Property: In very rare, exceptional cases, the court may divide the property among co-owners.

Question 34

Provide a summary of co-ownership.

Answer 34

• Section 1 of TLATA 1996 automatically creates a trust of land when more than one person
  owns land.
• The legal estate is always held as a joint tenancy (s 1(6) LPA 1925) and the trustees have
  all the powers of an estate owner (s 6 TLATA 1996).
• Beneficial owners can hold their equitable interests as either joint tenants or tenants in
  common.
• In the absence of an express declaration (which is conclusive), if the four unities are
  present, there is a presumption in favour of a joint tenancy.
• That presumption can be rebutted (ie words of severance or business use).
• The right of survivorship applies to joint tenancies (but not tenancies in common).
• A joint tenancy in equity can be severed formally or informally.
• A co- owner severing a joint tenancy in equity (where there are more than two co-
  owners) holds as a tenant in common (in proportion to the number of co- owners) and the
  remaining co- owners continue to hold the remainder as joint tenants.
• A dispute between co- owners may be resolved using ss 14 and 15 of TLATA 1996.