Co-ownership

Question 1

Co-ownership: imposition of a trust

Answer 1

• Whenever land is owned jointly, a trust of land is imposed.
• Legal title: held by the trustees, who are the registered owner(s) at the Land Registry, and have powers and duties of management.
• Equitable title: held by the beneficiaries, names kept private and do not appear on the registers.

Question 2

Types of trust of land

Answer 2

(1) Express trusts

(2) Implied trusts

Question 3

Express trusts of land

Answer 3

Formalities which must be followed:

• LPA 1925, s 53(1)(b): must be in writing signed by some person who is able to declare such a trust or by his will
• Applies:
  (a) where the trust is deliberately set up
  (b) where land is gifted to a minor, as minors cannot own property in their own right
  (c) where land is bought by more than one person in joint names

Question 4

Implied trusts of land

Answer 4

• may arise informally, no formalities
• may arise:
  (a) If a property is bought in A’s name, but B makes a financial contribution
  (b) If a court decides that the owner should, as a matter of conscience, hold the land by way of constructive trust.

Question 5

Types of co-ownership

Answer 5

(1) Joint tenancy

(2) Tenancy in common

Question 6

Joint tenancy

Answer 6

• All co-owners are deemed to constitute one single entity, and own the whole property as one collective entity
• They must hold the four unities (AG Securities v Vaughan)

Question 7

Tenancy in common

Answer 7

• Requires only unity of possession
• 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, e.g. 25%, but cannot point to any particular part of the land and say ‘that is my 25%’.

Question 8

AG Securities v Vaughan - The four unities

Answer 8

(1) 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
(2) Unity of interest: The interest in land held by each co-owner must be of the same nature and duration
(3) Unity of title: all co-owners must acquire their title from the same document
(4) Unity of time: the interest of each co-owner must vest/take effect at the same time.

Question 9

Survivorship

Answer 9

• Joint tenants are regarded as a single entity, and therefore when one joint tenant dies, survivorship applies. The notional interest of the deceased joint tenant accrues to the surviving joint tenants
• Survivorship operates automatically as soon as the joint tenant dies. It is unaffected by any provision in a will, or by the intestacy rules if there is no will. Any provision in a will to leave a joint tenant’s interest to someone will have no effect (Re Caines deceased)
• Survivorship does not apply to an interest held by a tenant in common.

Question 10

Legal title

Answer 10

• the public face of co-ownership
• (1) maximum of four legal owners (Trustee Act 1925, s 34(2))
• (2) trustees must be ‘sui juris’ (of full age and sound mind) (LPA 1925, s 1(6))
• 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))
• Legal title holders must hold the property as joint tenants; they must have the four unities
• The legal joint tenancy cannot be severed to make a tenancy in common (LPA 1925, s 36(2))

Question 11

Equitable title

Answer 11

• The private face of co-ownership; does not appear on the registers of title.
• much more flexible; can be constructed to reflect the wishes of the owners
• no limit on the number of people who can hold an equitable interest, nor must they be sui juris
• equitable owners can choose whether they hold equitable title as joint tenants (for which they must have the four unities) or tenants in common
• if they hold it as tenants in common, each owner will have a ‘distinct but undivided’ share in the property
• an equitable joint tenancy can be severed by an joint tenant so that that person in future holds a separate share as a tenant in common.

Question 12

Equitable title: joint tenancy or tenancy in common?

Answer 12

• Equitable title can be held as a joint tenancy if the four unities are present. If they are not, there will be a tenancy in common
• It is possible for the parties to make an express declaration that they hold the beneficial interest as joint tenants. The four unities must still be present.
• Even if the four unities are present, an express declaration that the owners hold as tenants in common will prevail (Pink v Lawrence)
• Falling short of express declaration, words such as ‘in equal shares’ or ‘equally’ may be present, which indicate the parties intend to have shares.
• A rebuttable presumption of a tenancy in common will arise where:
  (a) the land is a business asset (Lake v Craddock)
  (b) the purchase price of a non-domestic property has been paid in unequal shares (Bull v Bull)

Question 13

Severance

Answer 13

• The process of converting an equitable interest held as a joint tenancy into an interest held as a tenancy in common.
• Legal title cannot be severed, but equitable title can be.
• It is open to any joint tenant to sever the joint tenancy
• They may want to do this in order to exclude the operation of survivorship
• Severance does not bring co-ownership to an end; it just changes the basis on which the equitable co-owners continue to hold the equitable title

Question 14

Two basic ways equitable joint tenancy can be severed (s 36(2) LPA 1925)

Answer 14

(1) Severing joint tenant can give a notice in writing to all of the other equitable joint tenants
(2) The joint tenant can do ‘other acts or things’, or behave in such a way that the joint tenancy is severed.
- The severing must take place during the joint tenant’s lifetime. Making a will does not sever a joint tenancy because survivorship takes place immediately on death (re Caines deceased)

Question 15

The effect of severance

Answer 15

That person will in future hold a tenancy in common which is an equal share, based on the number of former joint tenants rather than on the proportion of contributions made to the initial price.

Question 16

Severance by notice in writing

Answer 16

• a notice in writing to all of the other equitable joint tenants
• could be deliberately intended to sever the joint tenancy, but writing which is primarily intended for another purpose could have the unintended consequence of severing the joint tenancy
• there are no particular formalities to be observed, but it must demonstrate an unequivocal and irrevocable intention to sever the equitable joint tenancy immediately

Question 17

Notice in writing: form and intention cases

Answer 17

Re Draper’s Conveyance - the writing was a divorce petition issued by the wife, including a request for an order that the matrimonial home be sold immediately and the proceeds of sale split equally. The divorce papers showed she had a clear intention for the joint tenancy to be severed immediately.

Harris v Goddard - also involved a divorce petition that included a request for such order ‘as may be just’ relating to the matrimonial home. 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.

Quigley v Masterson - Pilkington & Masterson lived in a house which they held as beneficial joint tenants. Mr Pilkington instructed his solicitor to sever the joint tenancy by notice in writing. They did not serve it properly and it was ineffective. The court said the papers that had been filed showed Masterson’s belief that she and Pilkington owned a 50% share in the property as tenants in common. This indicated her intention to sever the joint tenancy immediately.

Question 18

Notice in writing: service

Answer 18

LPA 1925, s 196(4)

• must be served correctly on all of the other equitable joint tenants
• a notice can be served by handing it over personally
• 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. If it is made by registered post and not returned undelivered, it will be deemed served at the time a registered item would in ordinary course of events be delivered.
• notice is deemed to have been served when it has been delivered; it does not have to be received or read.

Question 19

Notice in writing: service cases

Answer 19

Kinch v Bullard: The notice had been given or served when it had been delivered to the home. The destruction of the letter had no effect.

Re 88 Berkeley Road: the person who sent the notice themselves was the one who signed for it, and the other never knew about it. Held that although she was never physically given 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 20

Severance by ‘other acts or things’ - three possible ways

Answer 20

(1) Unilateral act by a joint tenant
(2) Mutual agreement of the joint tenants
(3) Any course of dealing which indicates that the interests were mutually treated as constituting a tenancy in common

Question 21

Severance by ‘other acts or things’ - (1) Unilateral act by one joint tenant

Answer 21

• No requirement for the other joint tenant(s) to know or consent to the act
• Can be subdivided into acts of:
  (1) Total alienation: when the severing owner disposes of the interest permanently, by way of sale or gift of the interest
  (2) Partial alienation: where the severing owner temporarily disposes of the interest, by way or mortgage or lease. When the loan is repaid or the lease expires, the holder will take back the interest unencumbered.
  (3) Involuntary alienation: when the joint tenant is declared bankrupt by the court

Question 22

Severance by ‘other acts or things’ - (1) Unilateral act by one joint tenant case

Answer 22

First National Security v Hegarty
FACTS: Couple owned a house as beneficial joint tenants. They separated and the husband left. He mortgaged the house by forging his wife’s signature
HELD: A sole act by one joint tenant will have no effect at law, therefore the mortgage was ineffective. However, the legal charge was held to be a charge on the husband’s equitable interest, which severed the joint tenancy. The wife’s share was unaffected.

Question 23

Severance by ‘other acts or things’ - (2) Mutual agreement

Answer 23

• Will occur only when all equitable joint tenants agree that one person’s interest is severed.

Burgess v Rawnsley

• Mrs Rawnsley orally agreed to sell her share to Mr Honick, but subsequently changed her mind on the price and then Honick died before anything was resolved.
• The equitable joint tenancy was severed by mutual oral agreement; it was enough to show that the parties agreed to sever. It did not matter that the agreement was never acted upon

Hunter v Babbage

• In the course of divorce proceedings, Mrs Allen applied for a property adjustment order, and stated that the fairest way of dealing with the house would be for the house to be sold and the proceeds to be split. An agreement was reached and the terms incorporated into a draft consent order, but it was not finished when Mr Babbage died.
• Reaching an agreement to deal with property in such a way which involves severance was sufficient to sever. The fact that the draft consent order had been made was enough to sever into equal shares.

Question 24

Severance by ‘other acts or things’ - (3) Mutual conduct

Answer 24

‘any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common’
- most likely to arise where the parties have not reached a point where there could be said to be a ‘mutual agreement’. 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.

Gore and Snell v Carpenter
- In this case, there were simply negotiations and no finality or mutuality, no evidence that Carpenter was committing herself to accepting a tenancy in common

Davis v Smith

• agreeing to put the house on the market would not of itself be enough to sever the joint tenancy
• ‘the parties must have understood and assumed between themselves…that they had negotiated and actually acted on the basis that their assets…would be realised and the proceeds divided equally between them’

Question 25

TLATA 1996: Powers and duties of trustees

Answer 25

• trustees have the powers of an absolute owner (s 6(1))
• they can sell, mortgage, lease, and grant easements.
• must have regard to the rights of beneficiaries when exercising their powers
• obliged to consult beneficiaries, but need not give effect to their wishes unless it is deemed to be in the general interest of the trust

Question 26

TLATA 1996: Rights of beneficiaries

Answer 26

Two main rights:

(1) the right to be consulted
(2) the right to occupy trust land

Question 27

TLATA 1996, s 12: right of beneficiaries to occupy

Answer 27

The right will only arise where two criteria are met:

(1) must be shown that the land was intended for occupation by those beneficiaries (s 12(1))
(2) must be shown that the land is suitable for occupation by the particular beneficiaries (s 12(2))
- where a couple owns a home jointly, each will have the right to occupy it, as the property is both intended and suitable for occupation by them
- however, if the land was bought as an investment e.g. a buy-to-let property, there may be no right to occupy, as it was not intended for occupation by beneficiaries.
- the land does not have to be unsuitable for occupation altogether, it must simply be unsuitable for occupation by that particular beneficiary.

Question 28

TLATA 1996, s 13: restrictions on the right to occupy

Answer 28

• If two or more beneficiaries have a right to occupy the same land, the trustees can exclude/restrict the right for one or more, but not all of them (s 13(1)) although they may not unreasonably exclude or restrict any beneficiary
• The trustees must have regard to the purpose for which the land was bought, and the circumstances and wishes of each beneficiary who is entitled to occupy (s 13(4))
• The trustees may impose conditions such as paying outgoings and expenses (s 13(3) and (6)), and may require occupying beneficiaries to pay compensation to them (s 13(6))
• If a beneficiary is already in occupation of the land, the trustees cannot exercise their powers so as to exclude that person unless the beneficiary consents or the court approves.

Question 29

TLATA 1996: Resolution of disputes relating to co-owned land

Answer 29

• 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.
• the court may order trustees to do something e.g. sell, or allow a beneficiary into occupation. It cannot order one beneficiary to ‘buy out’ the other.
• Orders that can be made include orders for sale, orders as to who occupies, and orders as to the nature or extent of a beneficiary’s interest

Question 30

TLATA 1996 s 15 - How does a court make its decision?

Answer 30

• It must apply all factors in 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.
  (a) The intentions of the person or persons 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;
  (d) The interests of the secured creditor of any beneficiary
  s 15(3): ‘the circumstances and wishes of any beneficiaries of full age…or of the majority’
• s 15(1)(a) does not apply to everyday co-ownership, just expressly created lifetime trusts or will trusts

Question 31

TLATA s 15(1)(b) - ‘The purposes for which the property subject to the trust is held’

Answer 31

If the purpose is still continuing, it will weigh against an order for sale being made.

In re Ever’s Trust

• After the breakdown of a relationship, the father left and applied for an order of sale
• This was refused as the property had been bought as a family home and that purpose was still capable of continuing. He could make a further application when the children were older and the house could no longer be considered to be a ‘family home.’

Jones v Challenger

• A husband and wife bought a property together as beneficial joint tenants. They had no children. The wife left and the husband continued to live in the property for a further 3 years. The wife applied for an order of sale.
• The order was granted. The house was acquired as a matrimonial home, but with the end of that marriage, the purpose was dissolved.

Question 32

TLATA 1996, s 15(1)(c) - welfare of any minor

Answer 32

Heavily depends on circumstances and the age of the minor in question

Question 33

TLATA 1996, s 15(1)(d) - interests of the secured creditor of any beneficiary

Answer 33

• careful to balance the interests of various parties involved and the lender
• despite this, recent cases have given greater weight again to the creditor.

Bank of Ireland v Bell - Ordered a sale. The purpose of a family home and the interests of the minor were not material factors because the couple had divorced and their son was almost 18. Without a sale the bank had no real prospect of recovering anything, which the court felt was unfair to the bank.

Putnam and Sons v Taylor - the secured creditor of a husband was granted an order for sale of a jointly owned property. The purpose of a family home was still continuing, but the court ordered a sale as the wife had enough equity in the property to enable her to buy a smaller property outright.

Fred Perry v Genis - 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. However, it postponed for a year to give the family time to relocate.

Question 34

TLATA s 15(3) - circumstances and wishes of any beneficiaries of full age

Answer 34

• The court must have regard to beneficiaries over 18

- If there is a dispute, they will have regard to the majority (in respect of value of interest held)