Co-ownership Flashcards
Co-ownership: imposition of a trust
- 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.
Types of trust of land
(1) Express trusts
(2) Implied trusts
Express trusts of land
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
Implied trusts of land
- 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.
Types of co-ownership
(1) Joint tenancy
(2) Tenancy in common
Joint tenancy
- 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)
Tenancy in common
- 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%’.
AG Securities v Vaughan - The four unities
(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.
Survivorship
- 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.
Legal title
- 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))
Equitable title
- 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.
Equitable title: joint tenancy or tenancy in common?
- 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)
Severance
- 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
Two basic ways equitable joint tenancy can be severed (s 36(2) LPA 1925)
(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)
The effect of severance
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.
Severance by notice in writing
- 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
Notice in writing: form and intention cases
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.
Notice in writing: service
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.
Notice in writing: service cases
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.
Severance by ‘other acts or things’ - three possible ways
(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
Severance by ‘other acts or things’ - (1) Unilateral act by one joint tenant
- 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
Severance by ‘other acts or things’ - (1) Unilateral act by one joint tenant case
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.
Severance by ‘other acts or things’ - (2) Mutual agreement
- 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.
Severance by ‘other acts or things’ - (3) Mutual conduct
‘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’