Chapter 7: Co-Ownership Flashcards
- Introduction to trusts of land
Concurrent co-ownership
Concurrent co-ownership arises where two or more people
together own the same estate (freehold or leasehold) in the same piece of land at the same
time. For example, when a couple buy a house together, both people share the ownership of
the freehold and are said to own the freehold concurrently.
- Introduction to trusts of land
Prior to 1925, concurrent co-ownership was relatively uncommon. Most families lived in residential accommodation held on short-term tenancies; and if the family home was owned outright, it
would generally be owned by the husband or father. With increased prosperity throughout the 20th century and changes in attitude to family life and ownership of land, many couples (married or not), friends and family members now jointly purchase their own homes
- Introduction to trusts of land
Co-ownership is all about the legal relationship between co-owners of land. The Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996) governs the law of coownership. It came into effect on 1 January 1997 and reformed the law in this area.
1.1 Imposition of a trust
Today, whenever land is owned jointly, a trust of land is imposed (TOLATA 1996, s 1). The imposition of a trust has the effect of separating the legal title to the land, which is held by trustees, from the equitable title, which is held by the beneficiaries. Ownership of the legal title does not confer any rights of enjoyment over the land. Instead, it carries with it powers and duties of management. The people who benefit from the trust are the beneficiaries.
Example: Imposition of a trust of land
A couple buy a house together and are both registered as the legal owners of the land at the land
registry. Although they may not realise it, a trust is imposed. The couple hold the house on trust
for themselves, they are both the trustees and beneficiaries.
Remember
Where someone is the beneficiary of a trust of land, they are regarded in equity as an ‘equitable owner’ and have a proprietary right (an equitable interest) in the land subject to the trust.
1.2 Types of trust - express trusts
A trust of land can be created expressly. For example, a piece of land is transferred to A to hold on trust for B. A is the trustee, the legal
owner of the land. B is the beneficiary and has an equitable interest in the land. Where a trust is expressly created, there are formalities which must be followed by the person(s) who sets up the trust. The declaration of trust must be evidenced in writing and signed by the declarant(s) (LPA 1925, s 53(1)(b)).
Example 1: An express trust of land
A grandparent made a will in which they left their house on trust for their six grandchildren in
equal shares. They appointed A and B as trustees. After the grandparent’s death, the executors of the estate transferred the legal title of the house to A and B. As the will set out the declaration of trust in writing which was signed (LPA 1925, s 53(1)(b)), the trust is properly declared in favour of the grandchildren. The grandchildren hold the equitable interest. The trustees have the power to sell the house, but they cannot keep the proceeds: they are bound as trustees to account to the beneficiaries or reinvest for them.
Example 2: An express trust of land
A brother and sister, X and Y, bought a home together. X paid 75% of the price and Y paid 25%.
The transfer deed transferred the legal title to them both. In the transfer deed X and Y made an
express declaration that they hold the property for themselves beneficially in proportion to their
contributions (75% for X and 25% for Y). Here, X and Y hold both the legal and equitable title. The flexible rules relating to the equitable
title enable them to reflect their individual contributions.
1.3 Types of trust - implied trusts
A trust of land can also be created impliedly if certain circumstances exist. There are no formalities for the creation of such trusts (LPA 1925, s 53(2)). An implied trust of land will be a resulting or a constructive trust. A resulting trust may be implied if, for example, a property is bought in A’s name, but B makes a financial contribution. So if B paid 25% of the price, A will hold the property on trust for A and B in a 75%:25% ratio
1.3 Types of trust - implied trusts
Note. In the context of the family home, a resulting trust no longer has any place, and a common
intention constructive trust will be used instead. You can learn about implied trusts of the family
home in Trusts Law. Constructive trusts arise in a wider range of circumstances, but all respond to unconscionability. They will therefore be imposed in cases where it is unconscionable for the legal owner of the land to deny the interest of another person.
Example: An implied trust of land
V and W decided to buy a home together. Although they both contributed to the purchase price,
the property was transferred to V as sole legal owner. As the property was bought as a family home, and W paid part of the price, they may be able to establish an interest under a common intention constructive trust. No formalities are required for this to happen: LPA 1925, s 53(2). V will hold the property as trustee for V and W in shares quantified by the court.
If the property is mortgaged or sold, V as trustee will be the person who has the power to execute
the mortgage or transfer deed.
1.4 Summary
- Co-ownership exists where two or more people own the same estate in land at the same time.
- A trust of land is automatically imposed on the co-owners which has the effect of separating
the legal and equitable titles. - The legal title is held by the trustees who carry out the administrative functions of coownership: they sign documents such as mortgage and transfer deeds
1.4 Summary
- The equitable title is held by the beneficiaries who are the ‘true’ owners of the property.
- Trusts of land can be declared expressly. The relevant formalities are set out in LPA 1925, s
53(1)(b), the trust must be evidenced in writing and signed by the declarant(s). - Trusts may also arise impliedly if certain circumstances exist. No formalities apply to this type
of trust: LPA 1925, s 53(2).
2 Concepts and rules on legal and equitable titles
2.1 The two types of co-ownership
It is essential you understand the distinction between the two types of co-ownership:
* Joint tenancy; and
* Tenancy in common.
A common feature of co-owned land is that all co-owners are simultaneously entitled to
possession of it. No co-owner is entitled to exclusive possession of any part. This is known as unity
of possession and this is what distinguishes co-ownership from sole ownership. Both the joint tenancy and the tenancy in common share the common characteristic of unity of
possession: without it there simply is no co-ownership
2.1.1 Joint tenancy
Where there is a joint tenancy all co-owners are deemed to constitute one single entity, and own the whole property as one collective entity. Where a joint tenancy exists, the right of survivorship applies. For a joint tenancy to exist, the co-owners must hold the four unities of title.
2.1.2 Tenancy in common
A tenancy in common requires only unity of possession, although the other unities may be present. This is because tenants in common are not viewed as a single entity, but as each having a ‘distinct but undivided share’ in the land. Each has a clearly quantified share of the whole, say 25%, but cannot point to any particular part of the land and say ‘that is my 25%’. The right of survivorship does not apply where a tenancy in common exists.
2.2 The four unities of title
Determining the nature of the co-ownership – what unities are present?
Unity of possession
Each co-owner is as much entitled to possession of any part of the
land as the others. No co-owner can be excluded from any part of the land.
Unity of title
All co-owners must acquire their title from the same document. This will be satisfied if they all obtain title from the same transfer deed or lease.
Unity of interest
The interest in land held by each co-owner must be of the same nature and duration. For example, in a leasehold context, all owners must hold the lease for the same length of time, with joint obligations.
Unity of time
The interest of each co-owner must vest at the same time. This does
not mean that they must all sign the document at the same time or
move into the property at the same time. To have unity of time, the interest of each co-owner must take effect at the same time.
2.3 The right of survivorship
The practical significance of holding land as a joint tenant or as a tenant in common arises when one co-owner dies. Joint tenants are regarded as a single entity, and therefore when one joint tenant dies, survivorship or ius acccrescendi applies.
This means that the notional interest of the deceased joint tenant accrues to the surviving joint
tenants. It is incorrect to say that the deceased joint tenant’s ‘share’ goes to the surviving joint tenants as of course a joint tenant does not have a ‘share’ in the first place.
2.3 The right of survivorship
Survivorship operates automatically as soon as the joint tenant dies. This means that the interest
accrues immediately on death and is unaffected by any provision in a will, or by the intestacy
rules if there is no will. This is because a will is of no effect until after death, by which time
survivorship has already operated. Therefore any provision in a will which purports to leave a joint
tenant’s interest to someone will have no effect: Re Caines deceased [1978] 1 WLR 540.