Co-ownership and Trusts

Question 1

When is a trust of land ceated?

Answer 1

s1 TLATA 1996
1. A landowner intentionally sets up a trust and transfers the title to the trustees
2. A person acquires an interest in land owned by another due to their conduct (implied trust)
3. Land is acquired by more than one owner jointly (co-ownership)

Question 2

How can a legal estate be held?

Answer 2

s1(6) LPA 1925
The legal estate must be held as a joint tenancy and this cannot be severed.

Question 3

What is the maximum amount of people who can hold the legal title of land?

Answer 3

Four s34(2) TA 1925

Question 4

What are the powers of trustees of land?

Answer 4

Trustees have all the powers of an absolute owner. This includes the
power to sell or mortgage the trust land, or purchase land for the occupation of a beneficiary.

Question 5

What are limitations for trustees of land?

Answer 5

They have a duty to consult all beneficiaries of full age and who have an interest in the land.
They must comply with the wishes of the beneficiaries/ the majority of them according to the value of their interests.
The duty to consult is only in so far as it is practicable
to do so.

Question 6

What are the two forms of co-ownership?

Answer 6

Joint-tenancy and tenants in common.

Question 7

What is joint tenancy?

Answer 7

Joint tenants are jointly entitled to the whole of the property.
There is the right of survivorship, on the death of one joint tenant, their interest automatically passes to the surviving joint tenants.

Question 8

What are tenants in common?

Answer 8

Each owner is regarded as having a distinct share in the land, can be equal or unequal.
No right of survivorship. Their share in the property will pass to their estate.

Question 9

How do you determine whether it is a joint tenancy or tenant in common?
1/4 test

Answer 9

Are all the four unities present? (indicates a joint tenancy)

Unity of Possession: Each co-owner has the right to possession of all of the land. (actual possession is not required)

Unity of interest: each co-owner must have identical rights over the land.

Unity of title: each co-owner must have acquired their interest from the same document.

Unity of time: – the co-owners receive their interests at the same time

Next consider the 2nd test

Question 10

How do you determine whether it is a joint tenancy or tenant in common?
2/4

Answer 10

Express declaration?

An express declaration of trust (complying with the formalities in s 53(1) LPA 1925)) - signed in writing, is conclusive Goodman v Gallant (1986)

In absence of one, go to the 3rd test.

Question 11

How do you determine whether it is a joint tenancy or tenant in common?
3/4

Answer 11

Does the deed contain any words of severance?

Any words in the document of transfer that indicate that
the co-owners are to have distinct shares.

In absence, go to the 4th test

Question 12

How do you determine whether it is a joint tenancy or tenant in common?
4/4

Answer 12

Does equity presume a tenant in common?

There is a presumption that the co-owners will be joint tenants in equity on the basis that equity follows the law Stack v Dowden (2007)

The presumption will be rebutted if:

• When the property is acquired for business use.
• Unequal contributions to the purchase price.
• Post-acquisition money management, if one co-owner has provided a far greater share of the finance for the home.

Question 13

What is severance?

Answer 13

Severance is the method by which a joint tenancy in equity can be converted into a tenancy in
common.
It must be during the life time of the joint tenant, it cannot take effect in the will.

Question 14

What are the methods of severance?/ What can it be affected by?

Answer 14

Written notice
Alienation
Mutual agreement
Course of dealing

Can be affected by: bankruptcy, homicide and post-acquisition money management.

Question 15

How to severe by written notice?

Answer 15

• Giving written notice to the other
  co-owners stating their intention to sever, either expressly or impliedly.
• Need not be signed s36(2) LPA
• must express a desire to severe immediately
• must be received/ deemed to be received by all other joint tenants, can be handed or posted
• A unilateral act

Question 16

What are the postal rules for severance by written notice?

Answer 16

Registered post s196(4) -
- If the notice is sent by registered or recorded letter, it is deemed to be sufficiently served if the
letter is not returned undelivered.

Ordinary post s196(3) -
- Any notice is sufficiently served if it is left at the last known place of abode or business in the UK of the person to be served. Even if they do not see it.

Question 17

How to severe by alienation?

Answer 17

This is an unilateral act. When a joint tenant in equity disposes of their equitable interest by sale, gift, lease or mortgage. Complying with s53(1), signed and in writing.

Question 18

How to severe by mutual agreement?

Answer 18

This requires the joint tenants to act together (either expressly or by implication) to sever the joint tenancy in equity/ the parties agree to deal with the land in a certain way that has the effect of severing.

An oral agreement will suffice and the agreement does not need to be carried through to
performance.

Question 19

How to severe by mutual conduct/ course of dealing?

Answer 19

The joint tenants must show through their conduct that they regarded themselves as owning distinct shares over a significant period of time.

Question 20

what is severance by bankruptcy?

Answer 20

Any bankruptcy affecting a joint tenant has the effect of severing the joint tenancy.
Once the bankruptcy is discharged, the equitable interest reverts to the co-owner who will
continue to hold it as a tenant in common.

Question 21

What is severance by homicide?

Answer 21

Where one joint tenant unlawfully kills another joint tenant, public policy rule.

Question 22

What is severance by post-acquisition money management?

Answer 22

The presumption of joint tenancy in equity can be rebutted if either by the parties showing that they had a
different common intention at the time of the acquisition or that they later formed the common intention that their respective shares would change.

There are different financial contributions e.g only one person paying the mortgage.

Question 23

When does a resulting trust arise?

Answer 23

• A person, who does not hold legal title to property, makes a contribution to the purchase
  price of the property.
• There is no evidence that the contribution was intended as a gift or a loan; and
• The contribution must be of all or part of the purchase price at the date of acquisition

The person then holds a beneficial interest in the property proportionate to the contribution made.

Question 24

What are the two ways a constructive trust can be created?

Answer 24

An agreement + detrimental reliance
or
Conduct + direct financial contribution
Lloyds Bank plc v Rosset [1991]
(common intention trust)

Question 25

How is a constructive trust by an agreement + detrimental reliance
formed?

Answer 25

Any ‘agreement, arrangement or understanding’ reached between
the parties on how the property is to be shared beneficially.
This is a question of fact.
The agreement can be at the time of purchase or afterwards.
The non-legal owner must show that they have relied upon the agreement to their detriment or significantly altered their position.
The detriment must be related to the agreement and not any other motive e,g love and affection

Question 26

How is a constructive trust by conduct + direct financial contribution formed?

Answer 26

The court looks at the conduct between both parties as the basis to infer a common intention to share the property beneficially.
There must be payment towards the purchase price initially or payment of the mortgage payments by the non-owning party.

Question 27

What happens when there is a dispute between those with an interest in the property?

Answer 27

s14 TLATA 1996 -
- A trustee or any person who has an interest in the property may make an application to the court for an order.
- The court has the discretion to make an order:
(a) relating to the exercise by the trustees of any of their functions; or
(b) declaring the nature or extent of the person’s interest in property.

s15 TLATA 1996 -
- sets out the factors that the court should consider in exercising its powers under s 14. (not exhaustive) s15(1):
(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 any secured creditor of any beneficiary.
- and s15(3) the wishes of any beneficiaries of full age