Chapter 7: Co-Ownership

Question 1

1. Introduction to trusts of land

Concurrent co-ownership

Answer 1

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.

Question 2

1. Introduction to trusts of land

Answer 2

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

Question 3

1. Introduction to trusts of land

Answer 3

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.

Question 4

1.1 Imposition of a trust

Answer 4

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.

Question 5

Example: Imposition of a trust of land

Answer 5

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.

Question 6

Remember

Answer 6

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.

Question 7

1.2 Types of trust - express trusts

Answer 7

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)).

Question 8

Example 1: An express trust of land

Answer 8

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.

Question 9

Example 2: An express trust of land

Answer 9

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.

Question 10

1.3 Types of trust - implied trusts

Answer 10

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

Question 11

1.3 Types of trust - implied trusts

Answer 11

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.

Question 12

Example: An implied trust of land

Answer 12

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.

Question 13

1.4 Summary

Answer 13

• 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

Question 14

1.4 Summary

Answer 14

• 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).

Question 15

2 Concepts and rules on legal and equitable titles

Answer 15

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

Question 16

2.1.1 Joint tenancy

Answer 16

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.

Question 17

2.1.2 Tenancy in common

Answer 17

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.

Question 18

2.2 The four unities of title

Answer 18

Determining the nature of the co-ownership – what unities are present?

Question 19

Unity of possession

Answer 19

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.

Question 20

Unity of title

Answer 20

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.

Question 21

Unity of interest

Answer 21

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.

Question 22

Unity of time

Answer 22

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.

Question 23

2.3 The right of survivorship

Answer 23

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.

Question 24

2.3 The right of survivorship

Answer 24

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.

Question 25

2.3 The right of survivorship

Answer 25

When there are two joint tenants, on the death of one, the interest accrues to the survivor who
becomes sole owner.
Survivorship does not apply to an interest held by a tenant in common, which will pass in
accordance with the deceased’s will, or under the intestacy rules if there is no will.

Question 26

2.4 The legal title: keeping it simple

Answer 26

The legal title is the ‘public’ face of co-ownership: the trustees are named as registered proprietors
on the proprietorship register at the Land Registry and are the people who deal with buyers and
lenders. The rules for holding the legal title are kept as simple as possible to make it easy to buy, sell and mortgage land. For example, there is a limit on the number of trustees who can hold the legal title. This means that a buyer or lender only has a limited number of people to deal with, making the
process quicker and easier.

Question 27

Rules for keeping the title simple

Answer 27

To keep the title as simple as possible, the following rules apply:
* There must be a maximum of four legal owners: Trustee Act 1925, s 34(2).
* The trustees must be ‘sui juris’: of full age and sound mind: LPA 1925, s 1(6) and s 22 (a minor
cannot therefore hold legal title).
* The legal title holders must hold the property as joint tenants.

Question 28

2.4 The legal title: keeping it simple

Answer 28

Note. If land is transferred to more than four people, the first four named who are sui juris will be
the legal title holders: LPA 1925, s 34(2). Because the legal title must be held as a joint tenancy, the legal title holders must have the four
unities. They are seen a single entity, and collectively hold the whole legal estate. Thus, on the
death of any legal joint tenant, the right of survivorship will always operate, and the interest
accrues to the surviving joint tenants.

Question 29

LPA 1925, s 36(2)

Answer 29

The legal joint tenancy cannot be severed to make a tenancy in common: LPA 1925, s 36(2). This
avoids the complications which would arise if the legal owners could leave their separate share to
their heirs, because on the death of a joint tenant the number of legal owners will reduce rather than increase.

Question 30

2.5 The equitable title: keeping it private

Answer 30

The equitable title is the ‘private’ face of co-ownership: the names of the equitable owners do not
appear on the registers of title, and the way the equitable interests are held is not disclosed. This
is known as the ‘curtain principle’ of Land Registration

Question 31

Reflecting Wishes of Owners

Answer 31

The equitable title is much more flexible and can be constructed to reflect the wishes of the
owners:
* There is no limit on the number of people who can hold an equitable interest in a piece of land.
* There is no requirement to be sui juris. For example, property is often held on trust for under18s.
* The equitable owners can choose whether they hold the equitable title as joint tenants or
tenantsin common.

Question 32

2.6 Equitable title: joint tenancy or tenancy in common?

Answer 32

The equitable title can be held as a joint tenancy if the four unities are present. If unity of time,
title or interest is missing, then there will be a tenancy in common providing unity of possession
exists. It is possible, and good practice, for the parties to make an express declaration that they hold the beneficial interest as joint tenants. These words will be found in the will or transfer deed. It is
important to remember that an express declaration by itself will not be enough: the four unities
must also be present

Question 33

Pink v Lawrence [1978] 36 P&CR

Answer 33

Even if the four unities are present, an express declaration that the owners hold as tenants in common will prevail: Pink v Lawrence [1978] 36 P&CR. Falling short of an express declaration, words such as ‘in equal shares’ or ‘equally’ may be present, which indicate that the parties intend to have ‘shares’ and hold as tenants in common.

Question 34

Rebuttable Presumption

Answer 34

Where there is no express declaration or specific wording, the equitable title will be held as a joint
tenancy (providing the four unities are present) unless a rebuttable presumption of a tenancy in
common applies. A rebuttable presumption of a tenancy in common will apply where:
(a) Land is a business asset (Lake v Craddock (1732) 3 P Wms 158); and
(b) The purchase price of a non-domestic property has been paid in unequal shares (Bull v Bull
[1955] 1 QB 234).

Question 35

3. Severance

Answer 35

Severance: Severance is the process of converting an equitable interest held as a joint tenancy into an interest held as a tenancy in common. It is important to understand that severance
does not bring co-ownership to an end: it simply changes the basis on which the equitable co-owners continue to hold the equitable title.

Question 36

Equitable joint tenant

Answer 36

Remember, the legal title must be held as a joint tenancy. The equitable (also known as the
beneficial) title can be held by the co-owners as a joint tenancy or tenancy in common. An equitable joint tenant may wish to sever that joint tenancy to create a tenancy in common. The usual reason an equitable joint tenant will want to so this in order to exclude the operation of survivorship, so that a distinct share in the property can be left to someone other than the
surviving joint tenant(s) on death. This may be required because there has been a breakdown in the relationship between the joint tenants, meaning that one person does not wish the other to take the property by survivorship

Question 37

3.1 Law of Property Act 1925, s 36(2)

Answer 37

Severance is governed by LPA 1925, s 36(2). It states that it is not possible to sever a legal joint
tenancy; only an equitable one, which can be severed by two basic ways. The reason the legal title cannot be severed is to preserve the simplicity of the legal title. If legal trustees could sever the joint tenancy and leave an interest held as a tenancy in common to other(s), that would complicate the legal title for two reasons: first, the number of legal owners could grow, not shrink! Second, documents would be required to prove that the new holders had actually acquired title properly. With a joint tenancy, the only document required on the death of a joint tenant is a copy of that person’s death certificate.

Question 38

Assessment focus point

Answer 38

The severance must take place during the joint tenant’s lifetime. Making a will does not sever a
joint tenancy as it takes effect after death, whereas severance takes place immediately on death: Re Caines deceased [1978] 1 WLR 540.

Question 39

s 36(2)

Answer 39

As per s 36(2), severance of an equitable joint tenancy can take place by either:
(a) notice in writing; or
(b) ‘other acts or things’
‘Other acts of things’ is deliberately vague. It was intended that the modes of severance recognised by Williams v Hensman (1861) would continue to apply. In Williams v Hensmen three possible ways in which a joint tenancy in personal property and land could be severed were identified. These three ways falls under the ‘other acts of things’ mode of severance in s 36(2).
A summary of these recognised modes of severance appears below and will be explored further in
this chapter.

Question 40

3.2 The effect of severance

Answer 40

It seems to us that it is of the very nature of a joint tenancy that, upon a severance, each takes an equal aliquot share according to the number of joint tenants. Slade LJ in Goodman v Gallant [1986] Fam 106
Therefore, if a joint tenant successfully severs the equitable joint tenancy, they will hold a tenancy in common which is an equal share, based on the number of former joint tenants not on the
proportion of contributions made to the initial price.

Question 41

Assessment focus point

Answer 41

Remember, severance only affects the owner who instigates the severance. The remaining equitable joint tenants will continue to hold the equitable title as joint tenants. However, if there are only two joint tenants, severance will affect both of them.

Question 42

Example 1: Severance

Answer 42

A and B are the legal owners of property, they hold on trust for themselves and C and D as joint
tenants in equity. B wishes to sever the joint tenancy so that they can leave their share of the property to E in their will. It is not possible to sever the legal joint tenancy, so B will continue to be a joint tenant of the legal title. The equitable joint tenancy can be severed, and if B does this by one of the methods recognised in LPA s 36(2), B will have a 25% separate equitable share as tenant in common. Note. As joint tenant are seen as a single entity, we represent them in diagrams by putting brackets around them.

Question 43

Example 2: Severance

Answer 43

A and B are the legal owners of property, which they hold on trust for themselves as joint tenants
in equity. B wishes to sever the joint tenancy so that they can leave their share of the property to C in their
will. It is not possible to sever the legal joint tenancy, B will continue as a legal joint tenant. The equitable joint tenancy can be severed, and if B does this by one of the methods recognised
in LPA s 36(2), A and B will each have a 50% equitable share as tenants in common. It is not
possible for A to continue as a joint tenant by themselves.

Question 44

3.3 Summary

Answer 44

• Severance is the process by which a joint tenant can convert an interest into a separate share
  held as tenant in common.
• Law of Property Act 1925, s 36(2) governs the process of severance.
• A legal joint tenancy cannot be severed: the legal owners will remain as joint tenants.
• An equitable joint tenancy can be severed by either notice in writing, or certain kinds of behaviour.
• Severance can only take place during the severing joint tenant’s lifetime; it cannot be severed
  by will.
• If an equitable joint tenant successfully severs and holds a tenancy in common, the size of the
  share will be an equal share depending on how many equitable joint tenants there were before
  severance.
• If there were only two equitable joint tenants before severance, both will hold as tenants in
  common.

Question 45

4. Severance by notice in writing

Answer 45

Section 36(2) states that the equitable joint tenancy can be severed. One way this can be done is for the severing joint tenant to give a notice in writing to all of the other equitable joint tenants.
Rules concerning the content and service of such notices must be observed if the notice is to have
the effect of severing the joint tenancy. The writing could be deliberately intended to sever the joint tenancy, such as where it is the starting point to a tax planning scheme. However, writing which is primarily intended for another
purpose could have the unintended consequence of severing the joint tenancy.

Question 46

4.1 Form and intention of the notice

Answer 46

There are no particular formalities to be observed for the notice: it does not even need to be signed. However it must demonstrate an unequivocal and irrevocable intention to sever the equitable joint tenancy immediately.

Question 47

Demonstrating the intention

Answer 47

Two cases with similar facts but different results demonstrate the ‘intention’ aspect perfectly. In
each, one co-owner had died and the dispute had arisen between the surviving co-owner and the
deceased’s next of kin. The surviving co-owner argued that the deceased had died as a joint
tenant and that they took the property by survivorship. The next of kin argued that the deceased
died as a tenant in common and that the share passed to them.

Question 48

Key case: Re Draper’s Conveyance [1969] 1 Ch 486

Answer 48

In this case, severance by notice in writing was successful, the requisite intention could be inferred
in the circumstances. The writing was a divorce petition issued by the wife, which included a request for an order that the matrimonial home be sold immediately and the proceeds of sale split equally. The husband died before the house was sold.

The wife argued that he died as a joint tenant and that she took the house by survivorship. The court disagreed. The divorce papers showed that she had a clear intention for the joint tenancy to
be severed immediately. Therefore, the husband had a 50% share as tenant in common at the date of his death.

Question 49

Key case: Harris v Goddard [1983] 1 WLR 1203

Answer 49

In this case there was no severance, the requisite intention could not be inferred in the circumstances.

This case also involved a divorce petition issued by the wife. The petition included a request for
such order ‘as may be just’ relating to the matrimonial home. The husband died as a result of a
car accident before the divorce hearing. The children from the husband’s first marriage argued that he died as a tenant in common as his wife had severed the joint tenancy.

The court disagreed. Unlike the papers in Re Draper’s
Conveyance, the divorce petition request did not show a sufficient desire to sever immediately as
it may have been ‘just’ to order a sale in the future and not immediately.

Question 50

4.2 Service of the notice

Answer 50

A notice in writing must be served on all of the other equitable joint tenants in order to sever the
joint tenancy. A notice can be served by handing it over personally or posting it.
If it is posted it will be deemed to be served if it has been left at the ‘last known place of abode or
business’ of the joint tenants. This means that it could be served by the severing joint tenant
leaving it there, or by postal delivery there. If it is made by registered post and not returned
undelivered, it will be deemed served at the time a registered item would in the ordinary course of
events be delivered (s 196(3) and s 196(4) LPA 1925).

Question 51

Assessment focus point

Answer 51

Remember, it is only the equitable joint tenants that need to be served, any equitable tenants
in common do not need to be served with the notice. If only a few of the equitable joint tenants
(ie not all of them) are served, the notice is completely ineffective.

Question 52

Key case: Kinch v Bullard [1999] 1 WLR 423

Answer 52

Facts: Mr and Mrs Johnson were beneficial joint tenants of their home, but their relationship had
deteriorated. Mrs Johnson was terminally ill and, to prevent her interest in the property passing by
survivorship to her husband on her death, she wanted to sever the joint tenancy in equity. The notice in writing was sent by her solicitors by ordinary post on 3 August 1995. The husband suffered a serious heart attack on 5 August and was in hospital when the letter arrived. Mrs Johnson had subsequently changed her mind about severance, perhaps because it was now likely
that her husband would die before her, and therefore destroyed the letter when it was delivered.
The question came before the court as to whether the notice had been validly served given it had
not been read by the recipient.

Question 53

Key case: Kinch v Bullard [1999] 1 WLR 423 Judgement

Answer 53

Held: the notice in writing had been ‘given’ or served on Mr Johnson when it had been delivered to
his home. Severance took place at that moment so that destruction of the letter had no effect

Question 54

Key case: Re 88 Berkeley Road [1971] Ch 648

Answer 54

Facts: Miss Elridge and Miss Goodwin owned 88 Berkeley Road as beneficial joint tenants. When
Miss Elridge announced she was shortly to be married, Miss Goodwin, who was a generation older and likely to die first, decided to sever the beneficial joint tenancy. Miss Goodwin’s solicitors sent a notice of severance by recorded delivery to the property. When it was delivered, Miss Elridge had gone to work and Miss Goodwin herself signed for the letter

Question 55

Key case: Re 88 Berkeley Road [1971] Ch 648 Facts

Answer 55

Miss Elridge, or Mrs Rickwood as she became, knew nothing about the notice until she found a draft of it amongst Miss Goodwin’s
papers after her death. Mrs Rickwood applied for a declaration that the notice was of no effect
and that she was entitled to the property by survivorship as she had not been ‘given’ notice in
accordance with s 36(2).

Question 56

Key case: Re 88 Berkeley Road [1971] Ch 648 Judgement

Answer 56

Held: The court said that there was no distinction between ‘giving’ and ‘serving’ notice. Although
Mrs Rickman was not physically given the notice of severance, it was effectively served under LPA
1925, s 196(4) by registered post as it had been signed for and had not been returned undelivered.

Question 57

4.3 Summary

Answer 57

• Law of Property Act 1925, s 36(2) states that an equitable joint tenancy can be severed by
  notice in writing.
• The writing can be in any form and need not be signed.
• It must, however, demonstrate an unequivocal and irrevocable intention to sever the equitable
  joint tenancy immediately.

Question 58

4.3 Summary

Answer 58

• The notice must also be served correctly if it is to have effect:
• It must be given to all of the other equitable joint tenants.
• It can be handed over or left at the last known place of abode or business of the equitable
  joint tenants.
• It does not have to be read.
• Severance takes place the moment the notice is served.

Question 59

5. Severance by ‘other acts or things’

Answer 59

Section 36(2) states that the equitable joint tenancy can be severed by notice in writing or by
‘other acts or things’. In Williams v Hensman (1861) 1 J & H 546 Page-Wood VC identified three possible ways in which a joint tenancy could be severed. These three ways are what the drafters of s 36(2) intended to be adopted as severance by ‘other acts or things’.

Question 60

5. Severance by ‘other acts or things’

Three Ways of Severance

Answer 60

These three ways are:
(a) A unilateral act by a joint tenant operating on its own share
(b) Mutual agreement of the joint tenants
(c) Any course of dealing which indicates that the interests were mutually treated as constituting
a tenancy in common (known also as ‘mutual conduct’)

Question 61

5.1 Unilateral act by one joint tenant

Answer 61

There is a logical inconsistency in saying that a joint tenancy can be severed by one joint tenant
‘acting on its own share’ as we already know that the joint tenant does not have a ‘share’ in the
first place. However we can interpret this as meaning that the act itself creates the share: it does
not exist unless and until the act takes place.

Question 62

5.1 Unilateral act by one joint tenant

Answer 62

The most important point to note here is that the act can be unilateral: there is no requirement for the other joint tenant(s) to know or consent to the act for severance to take place. The unilateral acts can be subdivided into acts of total alienation; partial alienation; and
involuntary alienation.

Question 63

Example of total alienation

Answer 63

A, B, C and D own property as beneficial joint tenants. B has been offered a job in another city
and sells their equitable interest to C. Position before the sale: the usual rules on co-ownership operate and A, B, C & D are legal joint tenants holding the property on trust for themselves as equitable joint tenants.

Question 64

Example of total alienation

Answer 64

Position after the sale: A, B, C & D continue as legal joint tenants as the legal title cannot be
severed. B’s equitable interest is severed on sale to C, who holds it as a tenant in common (25%
share). C remains a joint tenant with A & D as to the remaining 75% of the equitable title.

Question 65

5.2 Mortgage as an act of partial alienation

Answer 65

Most property purchases are funded by mortgage finance. Where all legal joint tenants act
together to create a legal mortgage or charge over the property as security for a loan, this does
not result in severance, because the joint tenants are charging the legal estate. The equitable estate remains unaffected. If an equitable joint tenant mortgages their equitable interest, that will be an act of severance, resulting in a tenancy in common. Alternatively, where one joint tenant fraudulently tries to mortgage/sell the entire property, the disposition is deemed to be a mortgage/sale of their equitable interest.

Question 66

Key case: First National Security v Hegarty [1985] QB 850

Answer 66

In First National Security v Hegarty [1985] QB 850 a couple owned a house as beneficial joint tenants. They separated and the husband left. He mortgaged the house by forging his wife’s signature on the mortgage deed, and took the loan money. It was held that a sole act by one joint tenant will have no effect at law. Therefore the legal mortgage was ineffective. However, the purported legal mortgage was held to be a mortgage on the husband’s equitable interest, which
severed the joint tenancy

Question 67

5.3 Mutual agreement

Answer 67

Severance by mutual agreement will occur only when all equitable joint tenants agree that one
person’s interest is severed, thereby creating a tenancy in common. This mode of severance is closely linked to severance by mutual conduct, and it is unclear where the dividing line lies. The leading case here is Burgess v Rawnsley [1975] Ch 429.

Question 68

Assessment focus point

Answer 68

The agreement need not go as far as being a specifically enforceable contract to sell the interest; but it must amount to an agreement that one person’s interest is separate or severed

Question 69

Key case: Burgess v Rawnsley [1975] Ch 429

Answer 69

Facts: Mr Honick and Mrs Rawnsley bought a house as beneficial joint tenants, each paying half
of the purchase price. In 1968, after their relationship broke down, Mrs Rawnsley orally agreed to
sell her share to Mr Honick for £750, but subsequently changed her mind and wanted £1,000. Mr
Honick died before anything was resolved. Mr Honick’s daughter argued that the beneficial joint
tenancy had been severed, and as he had died as a tenant in common, she took his share on his
death. The court looked at whether and when there had been severance by mutual agreement.

Question 70

Key case: Burgess v Rawnsley [1975] Ch 429 Judgement

Answer 70

Held: The equitable joint tenancy was severed by mutual oral agreement when the parties had
informally agreed a price of £750. This did not amount to a specifically enforceable contract for sale of the interest, but it was enough to show that the parties agreed to sever the joint tenancy. It did not matter that the agreement was never acted upon, nor that Mr Honick never actually bought Mrs Burgess’ interest. The significance of an agreement is not that it binds the parties; but that it serves as an indication of a common intention to sever, something which it was indisputably within their power to do.

Sir John Pennycuick in Burgess v Rawnsley

Question 71

Key case: Hunter v Babbage (1995) 69 P&CR 548

Answer 71

In Hunter v Babbage (1995) 69 P&CR 548 a divorcing couple had agreed the terms of a financial
settlement which had been embodied in a draft consent order. The husband died before the court
approved the order, which therefore had no legal effect. The wife argued that as the draft consent order had not been rubber-stamped, it had no effect on the joint tenancy; therefore she took the property by survivorship.

Question 72

Key case: Hunter v Babbage (1995) 69 P&CR 548 Judgement

Answer 72

The court disagreed: it was not necessary to show that the order had been finalised. The terms of the agreed draft showed that the parties considered the shares to be
separate and therefore, in agreeing the draft, the parties had agreed to sever the joint tenancy by mutual agreement.

Question 73

5.4 Mutual conduct

Answer 73

Where the parties have not reached a point where there can be said to be ‘mutual agreement’ to
sever the joint tenancy, there may still be severance by ‘mutual conduct’. In Williams v Hensman Page-Wood VC defined mutual conduct as: […] any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common […].

Question 74

5.4 Mutual conduct

Answer 74

The question of severance by mutual conduct is most likely to arise where the parties have not
reached a point where there could be said to be a ‘mutual agreement’ to sever. However, the fact
that they are negotiating over a prolonged period of time suggests that they do recognise and are
treating one person’s interest as being separate.

In Burgess v Rawnsley, Sir John Pennycuick acknowledged that severance could be inferred from
negotiations, but this was obiter as the decision in that case was made on the basis of mutual agreement. The reality is that it will prove difficult to show that there has been severance by mutual conduct,
as the fact that the negotiations are ongoing means that it is unlikely that there is any mutuality at all!

Question 75

Key case: Gore and Snell [1990] 60 P&CR 456

Answer 75

In Gore and Snell [1990] 60 P&CR 456 the court considered if prolonged negotiations amounted
to severance by mutual conduct.
The court held there was never a point at which both parties considered that either of them had a separate share.

Question 76

Key case: Gore and Snell [1990] 60 P&CR 456

Answer 76

Blackett-Ord J:
[…] Then was there a course of dealing? There were negotiations, as I have said, but
negotiations are not the same thing as a course of dealing. A course of dealing is where over the years the parties have dealt with their interests in the property on the footing that they are interests in common and not joint. […]

But in the present case there were simply negotiations between the husband and the wife and
again there was no finality and there was no mutuality. For severance to be effected by a
course of dealing all joint tenants must be concerned in such a course and in the present case
there is no evidence that Mrs Carpenter was committing herself to accepting a tenancy in
common […]

Question 77

Key case: Gore and Snell [1990] 60 P&CR 456

Contrast with Davis v Smith [2011] EWCA Civ 1603

Answer 77

In contrast in Davis v Smith [2011] EWCA Civ 1603 the court held there was severance by mutual
conduct. The parties started off, and continued, on the understanding that the house and other assets would be split in some way. Mrs Smith died before a ‘mutual agreement’ had been reached, but the manner in which the negotiations had been conducted made it clear that both parties were behaving in such a way as to recognise that they had separate shares

Question 78

Dunbabin v Dunbabin [2022] EWHC 38

Answer 78

In the recent case of Dunbabin v Dunbabin [2022] EWHC 38 the court considered whether the
making of mirror wills, which included provisions for the property that were inconsistent with the law of survivorship, amounted to a mutual agreement or course of mutual conduct sufficient to sever the joint tenancy.

Question 79

HHJ Matthews

Answer 79

concluded that:
[…] the evidence satisfies me that there was a course of conduct (in particular, the making of the mirror wills) which showed that one party (indeed, each party) made clear to the other that that one desired that their property should no longer be held jointly but be held in common.

Question 80

5.5 Summary

Answer 80

• Law of Property Act 1925, s 36(2) states that an equitable joint tenancy can be severed by
  ‘other acts or things’.
• According to the case of Williams v Hensman this behaviour can be unilateral acts, mutual agreement or mutual conduct.
• Examples of unilateral acts operating on a share include selling, mortgaging, or gifting a
  share; or being declared bankrupt.

Question 81

5.5 Summary

Answer 81

• Severance by mutual agreement occurs when the joint tenants all agree, expressly or impliedly, to change the basis on which they continue to hold the equitable title to the property.
• Severance by mutual conduct may occur when the parties embark on a ‘course of dealings’ which demonstrates that they are treating their shares in the property as separate. This may cover ongoing negotiations, but it is unclear exactly what will suffice here.

Question 82

6. Resolution of disputes relating to co-owned land

Answer 82

By its very nature, co-ownership involves two or more people owning the same land at the same
time. It is inevitable that there will be differences of opinion affecting ownership, particularly as to
whether the land should be sold or not.

Where the trustees and the beneficiaries are different people, and the land is owned as a
commercial venture or as an investment, any difference of opinion may be dealt with by the
trustees using their discretion.

Question 83

6 Resolution of disputes relating to co-owned land

Answer 83

However, where the property has been purchased as a home, and the trustees and the beneficiaries being the same people whose relationship has ended, the chances of any dispute being resolved amicably are much reduced. Further, if one or more co-owners is in debt, the creditors may wish to press for a sale of the property in order to recover the money due to them, although the co-owners may not want this. TOLATA 1996 does not simply govern the way the trust of land operates. It also contains provisions as to how disputes relating to land held in trust are to be resolved.

Question 84

6.1 Resolution of disputes

Answer 84

TOLATA 1996, s 14 gives courts jurisdiction to hear applications regarding disputes which involve
co-owned land. Anyone with an interest in the land can apply to the court for an order relating
to it. Section 14(1): Any person who is a trustee of land or has an interest in property subject to a trust of land may make an application to the court for an order under this section

Question 85

6.1 Resolution of disputes

Answer 85

Applicants could be trustees; beneficiaries; mortgagees of the legal or equitable title; trustees
in bankruptcy orders.
* The court may order trustees to do something eg: sell; or allow a beneficiary into occupation. It
cannot order one beneficiary to ‘buy out’ the another.
* Orders which may be made include orders for sale (which may be postponed); orders as to
who occupies; and orders as to the nature or extent of a beneficiary’s interest.

Question 86

6.2 How does a court make its decision?

Answer 86

The court must apply all factors in TOLATA 1996, s 15 in reaching its decision in relation to s 14 applications. It cannot pick and choose which factors to apply: all relevant factors must be considered equally. Each must be considered carefully, and a decision made as to whether it leans towards granting an application for, say, an order for sale, or against it.

Question 87

Section 15(1)

Answer 87

The matters to which the court is to have regard in determining an application for an order under section 14 include:
(a) The intentions of the person or persons (if any) who created the trust;
(b) The purposes for which the property subject to the trust is held;
(c) The welfare of any minor who occupies or might reasonably be expected to occupy any land
subject to the trust as his home; and
(d) The interests of the secured creditor of any beneficiary

Question 88

Section 15(3):

Answer 88

[…] the circumstances and wishes of any beneficiaries of full age […] or (in the case of dispute) of the majority (according to value of their combined interests).

Question 89

6.3 The s 15 factors

Answer 89

6.3.1 Section 15(1)(a): The intentions of the person or persons (if any) who created the trust
When we are considering co-owned land, we need not be concerned with the factor in TOLATA 1996, s 15(a) as this relates to expressly created lifetime trusts, or will trusts, and not to everyday co-ownership.

Question 90

6.3 The s 15 factors

Answer 90

6.3.2 Section 15(1)(b): The purposes for which the property subject to the trust is held. In considering this second factor, the court will look at the purpose for which the property was bought and whether that purpose is still continuing.
If the purpose is still continuing, it will weigh against an order for sale being made. Two contrasting cases illustrate this perfectly.

Note. These cases were decided under a different statutory regime, before TOLATA 1996 came into
force, but there is no reason to think that, were they to be decided today, the outcome would be
any different.

Question 91

Key case: Re Ever’s Trust [1980] 1 WLR 1327

Answer 91

In Re Ever’s Trust [1980] 1 WLR 1327 a couple bought a house as a family home where they, their
own child, and the woman’s two children from her marriage lived. On the breakdown of their
relationship, the father left and applied for an order for sale. This was refused as the property had
been bought as a family home. That purpose was still capable of continuing, despite the absence
of the father. The father was told he could make a further application when the children were
older

Question 92

Key case: Jones v Challenger [1961] 1 QB 176

Answer 92

In contrast, in Jones v Challenger [1961] 1 QB 176 a husband and wife bought a property together
as beneficial joint tenants, and it became their matrimonial home. They had no children. The wife
left the husband for another man, and the husband continued to live in the property for a further
three years. The wife applied for an order for sale.

At first instance the order was refused on the basis that it was unreasonable to turn the husband out of his home. On appeal, the order was granted. The correct test was not one of reasonableness, but whether the purpose for which the
property was bought still continued, which it no longer did for the wife: ‘a joint purpose cannot be carried out unilaterally

Question 93

6.3.3 Section 15 (1)(c): The welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home

Answer 93

This factor is heavily dependent on circumstances. Children aged six and seven may well have great weight attached to their welfare, with the continuity of their living arrangements being given priority over the interests of the applicant who wants a sale. On the other hand, less weight may be given to a young person who is seventeen relatively independent

Question 94

6.3.4 Section 15 (1)(d): The interests of the secured creditor of any beneficiary

Answer 94

The approach of the court to the interests of the creditor has changed over time. Pre-TOLATA 1996, the presumption was always in favour of a sale, and the interests of the creditors tended to take
precedence even where there were children in the property and the purpose for which the property was bought continued. Post-TOLATA 1996 the interests of the secured creditors are just one factor to be considered. There is no presumption for or against a sale at the start. The new approach was confirmed in Mortgage Corporation v Shaire [2001] Ch 743. Despite this, recent cases have once again given greater weight to the creditor.

Question 95

Bank of Ireland Home Mortgages v Bell [2001] 2 FLR 809

Answer 95

The Court of Appeal ordered a sale.
The purpose of a family home, and the interests of a minor were not material factors, as Mr and
Mrs Bell had divorced and their son was almost 18. The bank was owed £300,000 and no payment had been made for almost eight years. The level of debt was rising daily. Without a sale the bank had no real prospect of recovering anything.

Question 96

Putnam and Sons v Taylor [2009] EWCH 317 (Ch)

Answer 96

The secured creditor of a husband was granted an order for sale of a jointly owned property when his debts became unmanageable.
Although, the purpose of a family home was still continuing, the court ordered the sale as the wife
held enough equity in the property to enable her to buy a smaller property outright.

Question 97

Fred Perry v Genis [2015] 1 P&CR DG5

Answer 97

A sale was ordered even though the children’s education at a specialist school would be disrupted. The court specifically stated that commercial interests should take precedence over the residential security of the family. However, it postponed the order for a year to give the family time to relocate.

Question 98

6.3.5 Section 15(3): The circumstances and wishes of any beneficiaries of full age […] or (in
the case of dispute) of the majority (according to value of their combined interests)

Answer 98

Finally, do not forget the general sweeper in s 15(3). The court must have regard to the wishes of the beneficiaries who are over 18. If there is a dispute, the court shall have regard to the majority (in respect of value of interest held