CO-Ownership and Trusts

Question 1

What is co-ownership in the context of land law, and when does it arise?

Answer 1

Co-ownership occurs when more than one person owns land concurrently. It is common in situations where couples (whether married or not) are joint owners of land (either freehold or leasehold). When co-ownership arises, a trust of land is automatically created under s 1 TOLATA 1996. This trust arises in three scenarios:

• When a landowner intentionally sets up a trust by transferring title to trustees for the benefit of others (an express trust under s 53 LPA 1925).
• When an interest in land is acquired by a person’s conduct (implied trust).
• When land is acquired by more than one person jointly (co-ownership).

Question 2

Who are the trustees and beneficiaries in a trust of land, and what are their respective roles?

Answer 2

Trustees: Legal owners of the land, responsible for administrative functions. They do not have any entitlement to benefit from the property (i.e., they cannot live in it or collect rent from it).

Beneficiaries: Equitable owners of the property, entitled to occupy it or receive any income (rent) derived from it. When the property is sold, the trustees must execute the deed to transfer the legal title, while the beneficiaries are entitled to the proceeds of the sale. The trustees’ role is therefore primarily administrative, while the true value of the property resides with the beneficiaries.

Question 3

What does s 1(6) LPA 1925 say about the legal estate, and how does it affect co-ownership?

Answer 3

According to s 1(6) LPA 1925, a legal estate cannot be held in undivided shares. This means that the legal estate must be held as a joint tenancy, and it cannot be severed. Therefore, the legal estate is always held by the trustees as joint tenants. While the legal estate is always held as a joint tenancy, the equitable interest can be held either as joint tenants or tenants in common.

Question 4

Who can be a trustee of land, and what happens if a minor is involved in the conveyance of land?

Answer 4

• Only individuals over the age of 18 can act as trustees (s 1(6) LPA 1925).
• If land is conveyed to a minor, the conveyance operates as a declaration of trust, meaning that the legal estate is held in trust for the minor until they reach adulthood (TOLATA 1996, Sch 1, para 1(1)).
• If land is conveyed to both a minor and an adult, the land will be vested in the adult in trust for the minor (TOLATA 1996, Sch 1, para 1(2)).

Question 5

What is the maximum and minimum number of trustees allowed under the law, and why is it common to have two trustees?

Answer 5

*Maximum number of trustees: Four (s 34(2) Trustee Act 1925). If more than four people are named, only the first four adults will act as trustees.

• Minimum number of trustees: There is no statutory minimum. However, it is common to have at least two trustees to enable the mechanism of overreaching to work, allowing equitable interests to be transferred to the proceeds of sale

Question 6

What are the powers of trustees under s 6(1) TOLATA 1996, and what duty do they have to beneficiaries under s 11 TOLATA 1996?

Answer 6

• Powers under s 6(1) TOLATA 1996: Trustees have the same powers as an absolute owner, meaning they can sell, mortgage, or purchase land for the occupation of a beneficiary.
• Duty under s 11 TOLATA 1996: Trustees have a duty to consult with beneficiaries of full age who have an interest in possession (i.e., a present right to the land). Trustees must follow the beneficiaries’ wishes as far as is consistent with the trust’s overall interests, or in the case of disagreement, follow the majority based on the value of their combined interests. This duty to consult applies only when it is practicable.

Question 7

What are the two forms of co-ownership, and what is the key difference in how they handle survivorship and shares in the property?

Answer 7

The two forms of co-ownership are:

• Joint tenancy: The co-owners hold the property jointly, without distinct shares. When one joint tenant dies, their interest automatically passes to the surviving joint tenants through the right of survivorship. No shares are defined.
• Tenancy in common: The co-owners hold distinct shares in the property, which may be unequal. Upon death, a tenant in common’s share passes to their estate (i.e., it does not automatically pass to the other co-owners). There is no right of survivorship

Question 8

How can you tell if a co-ownership arrangement is a joint tenancy or a tenancy in common in equity? What are the four unities?

Answer 8

To determine if an equitable interest is held as a joint tenancy or tenancy in common, the four unities test is applied: The first test is to check if the four unities are present. These unities indicate a joint tenancy in equity. They are:

1. Unity of possession: All co-owners have equal rights to possess the entire property.
2. Unity of interest: All co-owners must have identical interests in the land.
3. Unity of title: All co-owners must acquire their interests through the same document.
4. Unity of time: All co-owners must receive their interests at the same time.

If any of these unities are absent, the interest is likely held as a tenancy in common

Question 9

What is the effect of an express declaration in a deed when determining whether co-owners are joint tenants or tenants in common, and what case supports this?

Answer 9

An express declaration in the deed is conclusive in determining whether co-owners are joint tenants or tenants in common, regardless of any contributions made. This is supported by the case Goodman v Gallant [1986], which held that an express declaration of trust, if present in the transfer document, determines the nature of the co-ownership.

Question 10

What are words of severance, and how do they affect co-ownership arrangements?

Answer 10

Words of severance in a transfer document indicate that the co-owners are to hold distinct shares, which would make the co-ownership a tenancy in common rather than a joint tenancy. Examples of words of severance include:
* “To A and B in equal shares.”
* “Half to A and half to B.”
* “Divided equally between them.”

Question 11

How does equity approach co-ownership, and how can the presumption of joint tenancy be rebutted?

Answer 11

Equity follows the law, meaning that if the legal estate is held as a joint tenancy, equity presumes the equitable interest is also held as a joint tenancy. This presumption can be rebutted in the following circumstances:

• If the property was purchased for business purposes, equity would assume the owners would want their interest to pass to their estate rather than co-owners upon death.
• Unequal contributions to the purchase price may result in equity presuming a tenancy in common, where each owner’s share is proportional to their contribution.
  • In trusts of the home, even where contributions are unequal, there is a strong presumption of joint tenancy in equity, unless there is clear evidence to the contrary, as suggested by Stack v Dowden [2007].

Question 12

If the four unities are absent, What is the second test used to determine whether the equitable interest is held as joint tenants or tenants in common?

Answer 12

The second test asks whether the deed transferring the land to the co-owners contains an express declaration. An express declaration is conclusive in determining the nature of the co-ownership, and it must comply with the formalities of s 53(1) LPA 1925. For example:

• “Transferred into their joint names as express beneficial joint tenants in equity.”
• “Conveyed to them as express beneficial joint tenants in equity.”
• “The transfer contained a declaration that all four owners were beneficial joint tenants.”

In these cases, the express declaration determines that the property is held as joint tenants in equity, even if there were unequal contributions to the purchase price. The Goodman v Gallant [1986] case confirms the binding nature of such express declarations.

Question 13

What does the third test examine in the absence of an express declaration?

Answer 13

The third test checks whether the deed transferring the land contains any words of severance. Words of severance indicate that the co-owners are to hold distinct shares, which would establish a tenancy in common. Examples of words of severance include:

• “I grant Greenacre to my children to be divided equally between them.”
• “To A and B in equal shares.”
• “Between A and B.”
• “Half to A and half to B.”

If such words are present, the co-owners are tenants in common. If no such words are present, we move to the fourth and final test.

Question 14

What is the fourth test, and how does equity presume the nature of co-ownership when no express declaration or words of severance are present?

Answer 14

The fourth test asks whether equity presumes a tenancy in common. Generally, equity follows the law, meaning that if the legal estate is held as a joint tenancy, it is presumed that the equitable interest is also held as a joint tenancy. However, this presumption can be rebutted in certain cases, such as:

• Business use: If the property is acquired for business purposes, equity may presume a tenancy in common, as business owners typically prefer that their interest pass to their estate rather than their business partners.
• Unequal contributions: If the co-owners made unequal contributions to the purchase price, equity may presume a tenancy in common, with each co-owner’s share reflecting their contribution.
• Post-acquisition money management: If one co-owner provided a far greater share of the financial support for the property (e.g., paying the majority of the mortgage), equity might rebut the presumption of a joint tenancy and instead recognize a tenancy in common.

The case Stack v Dowden [2007] confirms that unequal contributions or other factors could rebut the presumption of a joint tenancy in equity, though in the context of a home, joint tenancy is usually favored unless exceptional circumstances are proven.

Question 15

In the example of Mohammed and Fatima, if Mohammed contributes £40,000 and Fatima contributes £240,000 toward the purchase price, but the transfer document contains an express declaration of joint tenancy, how is the property held?

Answer 15

Despite the unequal contributions (Mohammed contributing £40,000 and Fatima contributing £240,000), the express declaration in the transfer document is conclusive. Since the declaration states that Mohammed and Fatima are beneficial joint tenants, the property is held as joint tenants in equity, meaning they each own the property jointly without distinct shares, regardless of their unequal contributions.

Question 16

In the example of Nikki, Tasha, James, Claire, Randall, and Sorcha purchasing 31 St James Road, how is the property held considering Nikki is 17 years old?

Answer 16

Since Nikki is 17, she cannot act as a trustee. The legal estate is therefore held by the first four named adults (Tasha, James, Claire, and Randall) as joint tenants. The equitable interest is held by all six individuals (Nikki, Tasha, James, Claire, Randall, and Sorcha) as joint tenants, because there is no express declaration or words of severance, and all four unities (possession, interest, title, and time) are present. The contributions were equal, and there is no business use, so the equitable interest is held as a joint tenancy.

Question 17

How does equity handle unequal contributions to the purchase price when determining if co-owners are tenants in common or joint tenants?

Answer 17

Equity typically presumes that if co-owners contribute unequally to the purchase price, they hold the property as tenants in common, with each co-owner’s share proportionate to their contribution. However, in cases of trusts of the home, as indicated in Stack v Dowden [2007], equity still presumes a joint tenancy, even in cases of unequal contributions, unless there are exceptional circumstances.

Question 18

How might post-acquisition financial contributions influence equity’s decision on whether co-owners hold as joint tenants or tenants in common?

Answer 18

In cases where one co-owner makes significantly larger post-acquisition financial contributions (e.g., paying the majority of the mortgage or other major outgoings), equity may rebut the presumption of a joint tenancy and recognize the co-ownership as a tenancy in common. This would reflect the disproportionate financial contributions made after the purchase.

Question 19

What is severance in the context of a joint tenancy in equity, and why is it significant?

Answer 19

Severance is the process by which a joint tenancy in equity is converted into a tenancy in common. It allows co-owners to own distinct shares in the property rather than jointly owning the entire property.

Importantly, severance only affects equitable interests; the joint tenancy of the legal estate cannot be severed. Severance must happen inter vivos (during the lifetime of the co-owner), meaning a will cannot effect severance because a will only takes effect after death (Carr v Isard [2006]).

Question 20

What are the two main ways in which severance of a joint tenancy in equity can be effected?

Answer 20

1. Formal severance by written notice: A joint tenant can sever their share by giving written notice to the other co-owners, indicating their immediate intention to sever the joint tenancy. This does not require the consent of other joint tenants and is a unilateral act.
2. Informal severance: Severance can occur through acts such as mutual agreement, a course of conduct, or the unilateral act of disposing of a joint tenant’s equitable share (e.g., through sale or mortgage).

Question 21

What are the requirements for written notice to sever a joint tenancy under s 36(2) LPA 1925?

Answer 21

• The written notice must express a clear and immediate intention to sever the joint tenancy. A mere future intention or a desire to sever at a later date is insufficient (Harris v Goddard [1983]).
• The notice must be received by all other joint tenants, or it must be deemed to have been received. This can be done by physically handing over the notice or by posting it.

Question 22

What are the postal rules for serving written notice under s 196 LPA 1925, and how does the delivery method affect the effectiveness of the notice?

Answer 22

• Registered post (s 196(4)): If the notice is sent by registered or recorded delivery and is not returned undelivered, it is deemed to have been served.
• Example: In Re 88 Berkeley Road [1971], one joint tenant sent a severance notice via recorded delivery. Even though the recipient claimed they never saw the letter, the severance was effective because the letter was not returned undelivered.
• Ordinary post (s 196(3)): If the notice is sent via ordinary post, it is deemed served if it is left at the last known residence or place of business of the person to be served.
• Example: In Kinch v Bullard [1998], the wife sent a severance notice via ordinary post but later destroyed the letter. Despite her change of mind, the severance was effective because the letter was left at the husband’s last known abode.

Question 23

What are the three methods of informal severance as identified in Williams v Hensman (1861)?

Answer 23

1. Acts operating on a joint tenant’s share:
   * This is a unilateral act by one joint tenant that disposes of their equitable interest.
   Examples include:
   * Sale: A joint tenant sells their equitable interest to a third party.

• Gift: A joint tenant gifts their equitable interest to another person.
• Lease: A joint tenant leases their share to someone else.
• Mortgage: A joint tenant uses their share as collateral for a loan.
• Such actions sever the joint tenancy because they destroy the unity of interest (one of the four unities). Once the joint tenant disposes of their equitable share, the joint tenancy is converted into a tenancy in common.
• Any disposition of a joint tenant’s equitable interest must comply with s 53(1) LPA 1925, which requires the transaction to be in writing and signed. If the action involves a contract (e.g., a contract to sell the share), it must also comply with s 2 LPMPA 1989 and be capable of being specifically enforced (i.e., the courts can compel the contract’s completion under equity). This means that equity regards as done that which ought to be done, so the contract itself can effect severance even before the transaction is completed.

2. Mutual agreement:
   * Mutual agreement occurs when all joint tenants agree to sever the joint tenancy. This can be express (e.g., a verbal or written agreement) or implied (e.g., actions that suggest a shared intention to sever). Importantly, the agreement does not need to be performed; it is the expression of the intention to sever that matters.

• The agreement does not need to be formalized in writing, nor does it require that the severance actually be completed. For example, if the co-owners orally agree to treat their shares as distinct and even if that agreement is not carried out, the mere intention to treat the property as severed can be sufficient to effect severance.
• The mutual agreement must also be supported by some form of valuable consideration, meaning there must be some exchange or benefit provided as part of the agreement.

3. Mutual course of conduct:
   * Mutual conduct refers to the way in which the joint tenants behave over time concerning the property. Through their actions, the joint tenants demonstrate that they no longer view themselves as holding the property jointly, but rather as holding distinct shares. This does not require a formal or explicit agreement to sever.

• The joint tenants must show, through their ongoing actions, that they regard themselves as tenants in common, owning separate interests rather than a single, unified interest.
• The behavior must occur over a significant period of time and in relation to how the co-owners treat the property and each other. This could include, for example, discussions about dividing the property, negotiating separate interests, or acting as if they hold distinct shares.
• In Burgess v Rawnsley, Sir John Penncuick explained that mutual conduct “covers only acts of the parties, including, it seems to me, negotiations which, although not otherwise resulting in any agreement, indicate a common intention that the joint tenancy should be regarded as severed.”
• Additionally, Lord Denning in Burgess v Rawnsley noted that “a course of dealing need not amount to an agreement, expressed or implied, to sever. It is sufficient if there is a course of dealing in which one party makes clear to the other that he desires that their shares should no longer be held jointly but be held in common.”
• While these observations were obiter dicta (meaning they were not the binding parts of the judgment), they provide insight into how mutual conduct could effect severance. There is, however, no conclusive case law on mutual conduct as a method of severance, meaning its precise boundaries remain somewhat unclear.

Question 24

How can a joint tenant’s bankruptcy effect severance?

Answer 24

Bankruptcy is a form of involuntary alienation of a joint tenant’s equitable interest. When a joint tenant is declared bankrupt, their equitable interest is automatically assigned to the trustee in bankruptcy, which results in severance. Once the bankruptcy is discharged, the co-owner will continue to hold their interest as a tenant in common.

Question 25

How does homicide lead to severance of a joint tenancy, and why is this rule necessary?

Answer 25

Homicide severs a joint tenancy if one joint tenant unlawfully kills another joint tenant. Normally, the right of survivorship would allow the surviving tenant to acquire the deceased’s share, but public policy prevents the wrongdoer from benefiting from their crime. Therefore, the tenancy is severed upon the unlawful killing.

Question 26

What is the significance of post-acquisition money management in relation to severance of a joint tenancy?

Answer 26

In the absence of an express declaration of beneficial interests, post-acquisition money management can lead to severance if the co-owners develop a common intention that their shares would be distinct.

Factors that could show a change in common intention include unequal financial contributions to mortgage payments or household expenses. If such intentions are demonstrated over time, equity may recognize a constructive trust and sever the joint tenancy.

Question 27

What is the effect of severance on the equitable interest of the co-owners, and how does it depend on the number of joint tenants?

Answer 27

The effect of severance depends on the number of co-owners:

• If there are two joint tenants, severance converts the joint tenancy into a tenancy in common, with each tenant owning an equal share.
• If there are three or more joint tenants, only the severing co-owner becomes a tenant in common. The remaining joint tenants continue to hold their shares as joint tenants in equity. The severing co-owner’s share is proportionate to the number of original joint tenants.

For example, if there were three joint tenants, the severing tenant would hold one-third as a tenant in common, and the remaining two tenants would continue to hold two-thirds as joint tenants.

Question 28

How do mutual agreement and mutual conduct lead to severance, and what key case discusses these methods?

Answer 28

• Mutual agreement: Severance occurs when all joint tenants agree (expressly or impliedly) to sever the joint tenancy. The agreement does not need to be formal or carried into effect; it simply needs to reflect a clear intention to sever.
• Mutual conduct: Severance can also occur when the behavior of the joint tenants over time shows that they regard themselves as holding separate shares in the property, rather than jointly owning it. This can be shown through negotiations or actions that imply distinct ownership.
• Example: In Burgess v Rawnsley, Lord Denning noted that mutual conduct could indicate an intention to sever, even if no formal agreement was reached. However, the comments on mutual conduct were obiter, meaning there is no conclusive case law on this method.

Question 29

What role does a contract to dispose of the equitable interest play in severance, and what formalities must it satisfy?

Answer 29

A contract to dispose of a joint tenant’s equitable interest (e.g., through sale or mortgage) can effect severance, provided that the contract complies with the formalities of s 2 LPMPA 1989 and is capable of being specifically enforced. This means that equity will treat the contract as severing the joint tenancy, even if the transaction has not yet been completed, because equity regards as done that which ought to be done.

Question 30

What is the significance of post-acquisition money management in relation to severing a joint tenancy, and what factors influence whether severance occurs?

Answer 30

• A: Post-acquisition money management can lead to severance of a joint tenancy in situations where co-owners of a property—typically an unmarried couple—jointly purchase a family home, and over time their actions or financial contributions suggest that they no longer intend to hold the property as joint tenants. Several important factors and considerations influence this:

1. Starting point: Equity follows the law:

• When a family home is bought in joint names and both parties are responsible for the mortgage (but without any express declaration of their beneficial interests), the default assumption is that they are joint tenants in both law and equity.
• The principle that “equity follows the law” means that, unless proven otherwise, the equitable interest will mirror the legal interest—i.e., joint tenants in law are also presumed to be joint tenants in equity.

2. Rebutting the presumption:

• The presumption of joint tenancy can be rebutted by evidence showing that the co-owners had a different common intention at the time of acquiring the property or that they later formed the common intention to hold distinct shares (i.e., severance).
• The mere fact that the co-owners contributed unequally to the purchase price does not normally rebut the presumption of joint tenancy for a home!. However, if their intentions or behaviors change over time, equity may recognize the existence of a constructive trust, which would sever the joint tenancy and create a tenancy in common.

3. Changing intentions over time:

• Over time, the co-owners may develop the intention that their respective shares in the property should change. This can be demonstrated through various factors such as financial contributions, mortgage payments, or other property-related expenses. If the parties clearly express or show that they view their interests in the property as distinct (e.g., through discussions, written agreements, or their behavior), this may lead to severance.
• The concept of an ambulatory constructive trust arises here. This trust adjusts over time as the parties’ common intentions shift based on their financial and personal contributions to the property.

4. Deducing the parties’ common intention:

• The courts will attempt to deduce the parties’ common intention from their conduct over time. This deduction can be made from:
• Direct evidence (e.g., discussions or agreements).
• Inferences drawn from conduct, such as contributions to the mortgage, household expenses, renovations, or decisions regarding the property.
• If it is impossible to ascertain the parties’ common intention from direct evidence or inferred behavior, the court will allocate the shares based on what it considers to be fair. This decision will consider the whole course of dealing between the parties in relation to the property.

5. Financial contributions:

• While financial contributions are important, they are not the only factor the court will consider. Unequal contributions to the purchase price or mortgage payments may suggest a different intention regarding ownership shares, but other factors—such as the way the couple managed household finances, how they treated the property, and their general financial arrangements—will also be relevant.

Question 31

What happens to the individual co-owners’ contributions to the purchase price after severance?

Answer 31

nce severance occurs, the individual contributions to the purchase price become irrelevant in determining each co-owner’s share. For example, if three joint tenants existed and one severed the joint tenancy, that co-owner would hold one-third as a tenant in common, regardless of their original financial contribution. The remaining two co-owners would continue to hold two-thirds as joint tenants. Severance determines shares based on the number of original joint tenants, not on financial contributions.

Question 32

What is an implied trust of land, and when does it arise?

Answer 32

An implied trust of land arises when there is no express declaration of trust, but a trust is implied due to the conduct of the parties. This can result in either a resulting trust or a constructive trust, depending on the specific circumstances.

Question 33

What is a resulting trust, and what are the conditions for its creation?

Answer 33

1. A person who does not hold the legal title to a property makes a financial contribution to the purchase price of the property.
2. There is no evidence that the contribution was intended as a gift or a loan.
3. The contribution must be made at the date of acquisition (i.e., it must be part of the purchase price, not after the property is acquired).
   The contributing party will then hold a beneficial interest in the property proportional to their contribution.

Question 34

What is the two-stage test for creating a constructive trust, as outlined by Lord Bridge in Lloyds Bank plc v Rosset [1991]?

Answer 34

The two-stage test for creating a constructive trust can occur in two ways:

1. Agreement + detrimental reliance: The parties reach an agreement or understanding regarding the beneficial ownership of the property, and one party relies on this to their detriment.
2. Conduct + direct financial contribution: In the absence of an agreement, a constructive trust can arise through conduct, specifically where the non-legal owner makes a direct financial contribution toward the property (such as mortgage payments).

Question 35

What constitutes agreement + detrimental reliance in the creation of a constructive trust?

Answer 35

To establish a constructive trust based on agreement + detrimental reliance:

1. There must be an agreement, arrangement, or understanding between the parties about how the property is to be shared beneficially. The agreement can be express or implied and may be imperfectly remembered.
2. The non-legal owner must show that they relied on this agreement to their detriment. Examples of detrimental reliance include:

• Paying for improvements to the property.
• Paying household bills to allow the legal owner to pay the mortgage.
• Working unpaid in the legal owner’s business.

3. The detriment must be linked to the agreement and not due to other motives, such as love or affection.

Question 36

How can conduct + direct financial contribution give rise to a constructive trust?

Answer 36

In the absence of an express agreement, a constructive trust can be established through conduct if the non-legal owner makes a direct financial contribution to the property, such as:

• Paying part of the purchase price at the time of acquisition.
• Making mortgage payments.
  These contributions demonstrate a common intention to share the property beneficially, which gives rise to a constructive trust. According to Lord Bridge in Lloyds Bank v Rosset, anything less than such a direct financial contribution is insufficient to establish a constructive trust.

Question 37

What approach did Jones v Kernott [2011] introduce regarding the common intention of parties in a constructive trust?

Answer 37

Jones v Kernott [2011] provided a more holistic approach to determining the parties’ common intention regarding a family home. Key points include:

1. Was it intended that the non-owning party should have a beneficial interest in the property?
2. The parties’ common intention must be deduced objectively from their conduct.
3. There is no presumption of equal shares (joint beneficial ownership).
4. If there is no evidence of intended shares, the court considers what is fair based on the whole course of dealings between the parties.
5. Financial contributions are relevant, but other factors may influence the court’s decision on what shares are fair.
6. Constructive trusts are the preferred legal tool for determining beneficial interests in a family home, rather than resulting trusts.

The safest approach is, therefore, to apply the two- stage test in Lloyds Bank v Rosset to identify whether a constructive trust has been created. If so, the more flexible approach in Stack v Dowden and Jones v Kernott can be applied to calculate the respective interests of the
beneficial owners in the family home.

Question 38

How does Section 14 of TOLATA 1996 help resolve co-ownership disputes?

Answer 38

Under Section 14 of TOLATA 1996, a trustee or any person with an interest in the property can apply to the court to make an order. The court has wide discretion to:

• Make decisions regarding the exercise of trustees’ powers.
• Declare the nature or extent of the person’s interest in the property.
  Applications under s 14 may involve disputes about:
• The size of co-ownership interests.
• Whether co-owned land should be sold.
• Occupation of the trust land.

Question 39

What factors does the court consider when resolving disputes under Section 15 of TOLATA 1996?

Answer 39

Under Section 15 of TOLATA 1996, the court considers several factors, including:

1. The intentions of the person(s) who created the trust (Section 15(1)(a)):
   * The court looks at the initial intentions of the settlor(s) when creating the trust, such as whether the property was intended to be used as a family home or for another purpose, like investment or business use.
   * The court focuses on the historic position—i.e., what was intended at the time the trust was established—rather than any later developments. This is particularly relevant when the trust was created expressly or via a will.
   * Example: If the trust was created to provide a home for the beneficiaries, the court might be hesitant to order a sale while this purpose can still be fulfilled, especially if there are children involved.
2. The purposes for which the property subject to the trust is held (Section 15(1)(b)):

• The court considers the current purposes for which the trust property is held. This is a forward-looking factor, considering whether the property’s original purpose can still be fulfilled.
• The purposes of the trust can be informally formulated and can be varied by agreement over time, meaning the court will examine whether the parties’ needs or intentions have changed since the trust’s creation.
• If the original purpose of the trust can no longer be fulfilled (e.g., a relationship has irretrievably broken down), the court is more likely to order a sale.
• Example: In Jones v Challenger [1961], where the relationship between the co-owners had ended and there were no minor children, the court ordered a sale of the property, as the purpose of providing a family home was no longer relevant.

3. The welfare of any minor who occupies or might reasonably be expected to occupy the property (Section 15(1)(c)):

• The court takes into account the welfare of any minor living in the property or any child who might reasonably be expected to live in the property.
• The presence of children and the need to provide them with a stable home can be a strong reason for the court to refuse a sale. The court will consider whether the sale of the property could negatively impact the child’s living arrangements or welfare.
• Example: In Re Evers’ Trust [1980], the court refused to order a sale because the property was still being used as a family home for the children, even though the parents’ relationship had ended. The mother assumed responsibility for the mortgage, and the father had a secure home elsewhere, so the children’s welfare took priority over other interests.

4. The interests of any secured creditor of any beneficiary (Section 15(1)(d)):

• The court must also consider the interests of secured creditors who have a security interest in the property, such as a mortgagee or other lenders who hold a charge over the property.
• In cases involving a trustee in bankruptcy or where there are outstanding debts secured on the property, the court is likely to prioritize the rights of the secured creditor over the interests of other parties, including minors, unless there are exceptional circumstances.
• It is now settled that the interests of creditors often take precedence, as the property is usually the main security for the debt. If the property is not sold, the mortgage debt may increase, risking the entire value of the property or making it difficult for the debtor to repay the loan.
• Example: In Bank of Ireland Home Mortgages Ltd v Bell [2001], the welfare of a 17-year-old child was given little weight compared to the needs of the mortgagee, and the court ordered a sale to satisfy the outstanding mortgage debt.

5. The wishes and circumstances of the beneficiaries (Section 15(3)):

• The court must also consider the circumstances and wishes of the adult beneficiaries who are entitled to an interest in possession (i.e., beneficiaries who have the right to live in or use the property).
• If there is a dispute among beneficiaries, the court will give weight to the wishes of the majority of the beneficiaries, determined by the value of their combined interests in the property.
• Although the statute does not provide specific weightings for these factors, the wishes of adult beneficiaries will be taken into account, particularly where they have a substantial interest in the property.
• This section allows the court to consider other relevant circumstances, making the list of factors in Section 15 non-exhaustive. For example, the emotional connection a beneficiary might have with the property or a beneficiary’s ill health may also influence the court’s decision.

Question 40

How does the court balance the welfare of minors and the interests of secured creditors under Section 15(1) of TOLATA 1996?

Answer 40

The court will weigh the welfare of any minor living in the property (or expected to live in the property) against the interests of secured creditors. However, the interests of secured creditors often take priority unless there are exceptional circumstances. For example, in Bank of Ireland Home Mortgages Ltd v Bell [2001], the welfare of a 17-year-old child was given little weight compared to the interests of the mortgagee.

Question 41

What are the court’s options when making an order under Section 14 of TOLATA 1996?

Answer 41

The court has several options when resolving co-ownership disputes under Section 14 of TOLATA:

1. Refuse a sale: If the purpose for which the property was acquired is still being fulfilled, especially if the property is a family home with children.
2. Order a sale: This is the common solution if the purpose for which the property was acquired has failed (e.g., a business property where the business has failed).
3. Refuse a sale but regulate occupation: In rare cases, the court may allow one co-owner to remain in the property while paying rent to the excluded co-owner (e.g., in cases of domestic violence).
4. Partition the property: In exceptional cases, the court may physically divide the property among the co-owners.

Question 42

When a purchaser acquires co-owned land, under what circumstances are they bound by the equitable interests held by beneficiaries?

Answer 42

A purchaser may be bound by the equitable interests of beneficiaries unless overreaching has occurred. Overreaching allows the buyer to take the property free of beneficial interests by paying the purchase money to a minimum of two trustees, thereby transferring the beneficiaries’ interests to the sale proceeds.

Question 43

What are the formal requirements for establishing a beneficial or equitable interest under a trust according to the LPA 1925?

Answer 43

Under the LPA 1925, an express trust requires a written and signed formality (s 53(1) LPA 1925), while implied trusts (resulting or constructive) have no formal requirements (s 53(2) LPA 1925).

Question 44

What is overreaching, and how does it affect the beneficial interests under a trust?

Answer 44

Overreaching allows the buyer to take the property free from beneficial interests by ensuring that the purchase money is paid to at least two trustees. Once overreaching occurs, beneficiaries lose their interest in the property, which transfers to the sale proceeds. Overreaching is only effective for beneficial interests under a trust and applies to both registered and unregistered land.

Question 45

In the context of unregistered land, what doctrine applies if overreaching has not taken place, and what does it entail?

Answer 45

If overreaching has not occurred in unregistered land, the doctrine of notice applies (s 199 LPA 1925). This means that a buyer will be bound by the equitable interest unless they are a bona fide purchaser of the legal estate for value without notice, known as “Equity’s Darling.”

Question 46

How should a beneficiary under a trust protect their interest in registered land, and why is this important?

Answer 46

A beneficiary should protect their interest by placing a restriction in the proprietorship register (s 40 LRA 2002). This restriction prevents the registration of a later registrable disposition for value that does not comply with the restriction terms, safeguarding the beneficiary’s interest.

Question 47

How are home rights for a non-owning spouse or civil partner defined under the FLA 1996, and do these rights constitute an interest in land?

Answer 47

Home rights, under s 30 of the FLA 1996, provide a statutory right of occupation for a non-owning spouse or civil partner in the matrimonial home. These rights apply as long as the parties are legally married or civil partners, and the home has been or is intended as their matrimonial home. Home rights do not create an interest in land

Question 48

What protections exist for home rights in unregistered and registered land?

Answer 48

In unregistered land, a home right must be protected by registering a Class F Land Charge (s 2 LCA 1972), making it binding on the buyer as actual notice (s 198 LPA 1925). In registered land, home rights must be protected by entering a notice in the charges register (ss 29 and 32 LRA 2002). An unprotected home right does not qualify as an overriding interest (s 31(1)(b) FLA 1996).

Question 49

What occurs in registered land if a property is held as beneficial joint tenants versus tenants in common concerning the proprietorship register?

Answer 49

For beneficial joint tenants, no restriction appears in the proprietorship register, as the right of survivorship automatically passes the interest to the surviving co-owner(s) upon death. For tenants in common, a restriction in the register warns a buyer to pay purchase money to a minimum of two trustees, as the interest of a deceased tenant in common passes to their estate.