Co-Ownership Flashcards
Definition of co-ownership:
Two or more people enjoy rights of ownership in relation to a freehold or leasehold estate
What is the legal/equitable distinction in this context?
Legal co ownership includes joint tenancy
What is the legal/equitable distinction in this context?
- Equitable co ownership includes joint tenancy or tenancy in common
- Key distinction is that a tenant in common (unlike a joint tenant) has a “share” in the co-owned property which can be left by will or pass on intestacy.
What is Alienation?
Joint tenant transfers his share to a third party.
What is a Joint tenancy?
A joint tenancy carries the right of survivorship (jus accrescendi):
When one joint tenant dies, the entire co-owned estate “survives to” the remaining joint tenant(s).
Joint tenancy: Survivorship
Commorientes rule:
Where two or more joint tenants die at approximately the same time (e.g. in an accident) and it is impossible to determine the order in which the deaths occurred, the law presumes that the youngest survived longest.
Joint tenancy: no shares
- Each joint tenant is “wholly entitled to the whole” of the co-owned estate or interest.
- Burton v Camden London Borough Council [2000] 2 AC 399, per Lord Millett
- A joint tenant does not have any identifiable “share” in the estate separate from that of any other joint tenant.
Joint tenancy four unites:
Joint tenancy cannot exist unless ALL the following are met:
Unity of Time – the interest of each joint tenant must vest at the same time.
Joint tenancy four unites:
Joint tenancy cannot exist unless ALL the following are met:
Unity of Title – each joint tenant must derive title to the land from the same document (i.e. transfer or grant) or act (i.e. adverse possession).
Joint tenancy four unites:
Joint tenancy cannot exist unless ALL the following are met:
Unity of Interest – the interest held by each joint tenant must be the same in extent, nature and duration.
Joint tenancy four unites:
Joint tenancy cannot exist unless ALL the following are met:
Unity of Possession – each joint tenant must be as much entitled to possession of every part of the co-owned land as any other joint tenant.
What is a tenancy in common:
There is no right of survivorship between tenants in common. On the death of a tenant in common, his or her “share” passes to those entitled by will or on intestacy
Tenancy in common: “undivided shares”
- Each tenant in common holds an “undivided share” of the co-owned property.
- Law of Property Act 1925, ss.1(6) and 36(2)
“Share” is “undivided” in the sense that each tenant in common has a right to possession of the entirety of the co-owned property throughout the duration of the tenancy in common.
Tenancy in common: Unity of Possession
The only requirement for the existence of a tenancy in common is unity of possession.
No need to show unities of time, title and interest.
How do trusts work in co-ownership? (TOLATA)
Before TOLATA 1996, most co-owned land was held on a specific type of trust known as a “trust for sale”:
- Express: “… Treetops is hereby conveyed to Tom and Tanya on trust for sale for the benefit of Jack and Jill as tenants in common …”.
- Statutory: most trusts arising under the Law of Property Act 1925 were also automatically designated as “trusts for sale”.
- A “trust for sale” imposed an immediate duty on trustees to sell the land, but gave them power to postpone sale.
Before TOLATA:
“Doctrine of conversion” – beneficiary’s interest under a “trust for sale” was therefore viewed by the courts as an interest in the sale proceeds of land (i.e. as if the trust for sale had already been “executed”), rather than an interest in the land itself.
In 1925 this made little difference to most beneficiaries because their interests in land were held for them as investments (rather than providing them with places to live).
Not until Bull v Bull [1955] 1 QB 234 that the Court of Appeal eventually acknowledged that a beneficiary under a “trust for sale” had a right to occupy land.
TOLATA:
TOLATA 1996 was introduced to provide a simplified structure for “trusts of land” covering almost all forms of beneficial interest in land.
TOLATA:
Section 1 of TOLATA defines a trust of land as follows:
(1) In this Act –
(a) “trust of land” means … any trust of property which consists of or includes land […]
(2) The reference in subsection (1)(a) to a trust –
(a) is to any description of trust (whether express, implied, resulting or constructive), including a trust for sale and a bare trust, and
(b) includes a trust created, or arising, before the commencement of this Act.”
Trusts of Land and Trusts for Sale
Statutory trusts for sale after 1st January 1997
Section 5 and Sch.2 of TOLATA 1996 provide that where a trust for sale was imposed by statute before the 1996 Act came into force, there is now a trust of land with no duty on the trustees to sell the land.
Sch.2 made amendments to ss.31, 34 and 36 LPA 1925 and s.33 Administration of Estates Act 1925 to give effect to this change.
Trusts of Land and Trusts for Sale
Express trusts for sale after 1st January 1997
Existing express trusts for sale continue and new trusts for sale may be expressly created, BUT they are treated as “trusts of land” under the 1996 Act and are substantively amended.
Section 4 of TOLATA gives trustees of land held on express trust for sale the power to postpone sale indefinitely (regardless of any contrary provision in the document creating the trust) and with no liability on trustees for postponing sale.
Trusts of Land and Trusts for Sale
Abolition of the doctrine of conversion
Section 3 of TOLATA 1996 abolishes the “doctrine of conversion” for both pre- and post-TOLATA trusts for sale (although this does not apply to trusts created by will before the Act came into force).
Therefore, a beneficiary’s interest under a trust of land can no longer be viewed merely as an interest in the sale proceeds of the land.
Resolution of disputes: before TOLATA
Under this provision, courts focused on the purpose for which the land had been acquired.
Primary obligation on trustees under a trust for sale was to sell the land, therefore the courts tended to favour a solution which gave effect to this primary obligation – i.e. ordering sale
UNLESS the land had been acquired for a particular purpose and that purpose was continuing (“doctrine of subsisting collateral purpose”).
Pre-TOLATA case law: “subsisting collateral purpose”
- Jones v Challenger [1961] 1 QB 176
H & W acquired house as matrimonial home, but then divorced. No subsisting collateral purpose.
Bedson v Bedson [1965] 2 QB 666 - H & W acquired business premises with living accommodation above to provide income and home for couple and their children. W left with children. Subsisting collateral purpose – family income.
Re Evers’ Trust [1980] 1 WLR 1327 - M & W acquired house as home for themselves and children. M left and W remained in house with children. Subsisting collateral purpose – family home.
Pre-TOLATA case law: “agreement not to sell”
Re Buchanan-Wollaston’s Conveyance [1939] Ch 738
Owners of four houses overlooking sea jointly purchased a strip of land in front of their houses with the aim of preserving their sea view.
Trust deed provided that co-owners would not sell or otherwise deal with the strip of land, except by majority vote.
B-W sold his house and moved away. He then applied to court for an order that the strip of land be sold and the proceeds divided.
Court of Appeal rejected B-W’s application.
Resolution of disputes: TOLATA 1996
Section 14 of TOLATA 1996 allows trustees or persons having an interest under a trust of land (e.g. beneficiaries, mortgagees) to apply to the court.
The court may make such order as it thinks fit relating to:
Nature or extent of a person’s interest in property subject to a trust of land.
Example: declaration that a beneficiary owns an x% share of the beneficial interest.
Exercise by the trustees of any of their functions.
Example: order that the property be sold and the proceeds distributed.
Resolution of disputes: TOLATA 1996
Section 15(1) outlines the factors to be taken into account by a court in exercising its jurisdiction under section 14:
- Intentions of those who created the trust;
- Purposes for which the property subject to the trust is held;
- Welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his/her home;
- Interests of any secured creditor of any beneficiary.
Disputes between co-owners and creditors
Balancing interests under s.15 – beneficiaries, children and creditors:
Cases where one co-owner has forged another co-owner’s signature to obtain a mortgage loan.
Effect is to create an equitable mortgage over the forger’s share of the beneficial interest.
Lender then has locus standi under TOLATA, s.14 to apply to court for order of sale.
Trusts of land: bankruptcy
Considerations relating to secured creditors are similar to those arising in cases where a beneficiary becomes bankrupt.
Bankruptcy is a formal procedure whereby an official – “trustee in bankruptcy” – is appointed to realise the bankrupt’s assets and distribute them between the bankrupt’s creditors.
Pre-TOLATA 1996 case law established that the interests of the bankrupt’s creditors should, other than in exceptional circumstances, prevail over the interests of the bankrupt and his/her family members (In re Citro [1991] Ch 142; In re Holliday [1981] Ch 405).
Trusts of land: bankruptcy
Insolvency Act 1986, s.335A (added by TOLATA 1996)
On an application by a trustee in bankruptcy under s.14 TOLATA, court shall have regard to:
Interests of bankrupt’s creditors.
If land includes the home of the bankrupt or the bankrupt’s current or former spouse or civil partner:
Conduct of current or former spouse or civil partner in contributing to the bankruptcy;
Needs and financial resources of current or former spouse or civil partner;
Needs of any children (not limited to minors).
All other circumstances except the needs of the bankrupt.
Trusts of land: bankruptcy
Insolvency Act 1986, s.335A
Where the application is made more than one year after the start of the bankruptcy, the court must assume, unless there are exceptional circumstances, that the interests of the bankrupt’s creditors outweigh all other considerations.
What will count as “exceptional circumstances”?
No exhaustive definition, but includes medical conditions affecting bankrupt’s partner or children (but not bankrupt him/herself).
What impact do practical, family elements have i.e. having a child, separate
finances etc.
The judgement will be down to the judge and will depend on the circumstances.
- Direct cash contribution or money raised by mortgage
- contribution to deposit or legal conveyancing expenses
- Discount or reduction in purchase price
What is severance?
- If a beneficial interest in land is conveyed to co-owners as joint tenants, the joint tenancy may later be severed.
- Severance is possible only in equity, not at law (i.e. it is not possible to sever a joint tenancy of a legal estate).
- Law of Property Act 1925, s.36(2)
- Severance converts an existing joint tenancy of a beneficial interest into a tenancy in common of the beneficial interest.
Severance of a beneficial joint tenancy:
Severance brings an end to the right of survivorship in relation to the beneficial interest.
Severance cannot be brought about by will (because the right of survivorship operates automatically and immediately on death).
