Co-ownership and Trusts

Question 1

what is co-ownership and what are the types?

Answer 1

when more than one person owns the land at one time, they are joint owners. There are two forms of co-ownership:
o Joint tenants
o Tenants in common

Question 2

what does concurrent sharing mean?

Answer 2

Concurrent sharing, also known as concurrent ownership or co-tenancy, is a legal term that refers to when more than one person owns a property at the same time. The people who own the property are known as co-owners, co-tenants, or joint tenants

when there is concurrent sharing, there is a trust of land.

Question 3

where there is concurrent sharing, when will a trust of land arise?

Answer 3

o Express trust (i.e. set up by the landowner)
o Implied trust (i.e. someone acquires an interest due to their conduct)
o Co-ownership (i.e. the land is acquired by more than one owner jointly)

Question 4

explain the position of trustees and beneficiaries in relation to trusts of land

Answer 4

o Trustees and beneficiaries can be the same or different people

o Ts are the legal owners. They have no entitlement to the benefit of the property. Upon sale of the land, Ts execute the deed to transfer the legal title

o Bs are the equitable owners. They are entitled to occupy the property or receive rent from it. They will receive proceeds of sale.

Question 5

how is the legal estate held and what is the effect of this?

Answer 5

The legal estate is always held as JT and this cannot be severed (effect of s1(6) LPA 1925)

Question 6

who can be a trustee?

Answer 6

Only those over the age of 18 can be a trustee

Question 7

what happens if a settlor attempts to transfer the legal estate to a minor?

Answer 7

o If a legal estate is conveyed to a minor, this will operate as a declaration of trust that the land is held on trust by the settlor (as a trustee) for the minor

o If the land is conveyed to a minor and adult, the land is vested in the adult in trust for the minor

Question 8

what is the minimum and maximum number of trustees?

Answer 8

No min no. of trustees, max 4 trustees, but:
o If more than 4 are named the first 4 will be the trustees
o Usually there would be at least 2 trustees so that overreaching can work

Question 9

what powers do trustees have?

Answer 9

they are the absolute owners. This means they can sell or mortgage the trust land or purchase land for the occupation of B.

Question 10

how are trustees’ powers limited?

Answer 10

Ts must consult Bs who are of age and have an interest in possession and they must comply with their / the majority wishes (according to the value of the interest(s)) as far as is consistent with the general interests of the trust

The duty to consult is only as far as it is practicable to do so

Question 11

what does interest in possession mean?

Answer 11

Interest in possession = entitled to immediate possession

Question 12

how can the beneficial estate be held? How is this different to the legal estate?

Answer 12

The beneficial estate can be held as JT or TIC. If it is held as JT, this can be severed, unlike the legal estate.

Question 13

what is survivorship and what does it apply to?

Answer 13

interest automatically passes to surviving joint tenant(s).

It applies to joint tenancy only, not tenants in common.

Question 14

what are joint tenants entitled to?

Answer 14

JTs are entitled the whole of the property (i.e. there are no shares)

Question 15

can a joint tenancy be severed? what is the effect of this?

Answer 15

A JT can be severed in equity and convert the beneficial interests into a TIC. This is not possible for the legal estate.

Therefore, if multiple people are the legal owners of a property, they are all joint tenants. This cannot be severed. This means if one of them sells their share, they are only selling their equitable interest (which severs their share of the tenancy. The remaining owners still hold the equitable interest as JTs), their legal interest is unaffected and they are still a trustee.

Question 16

explain tenants in common

Answer 16

Each owner has a distinct share in the land and these can be unequal. The rule of survivorship does not apply.

Question 17

what is the test to determine whether an equitable interest is held as JT or TIC?

Answer 17

4 tests:
1. four unities
2. express declaration
3. words of severance
4. presumption of JT

Question 18

what are the ‘four unities’

Answer 18

• Unity of possession - each co-owner has the right to possession (actual possession is not required) of all of the land
• Unity of interest - each co-owner has identical rights (indicative of JT)
• Unity of title - each co-owner must have acquired their interest from the same document
• Unity of time - co-owners receive their interest at the same time

Question 18

explain the unities test

Answer 18

 Interest, title or time are absent > indicative of TIC
 If all four are present, the equitable interest could be held as either JT or TIC so proceed to test 2

Question 19

explain the ‘express declaration’ test

Answer 19

An express DOT (that complies with s53(1) LPA 1925) is conclusive of equitable title

Question 20

re: express declaration test

how might an express declaration of co-owners as JTs be expressed in a fact pattern?

Answer 20

o ‘Transferred into their joint names as express beneficial joint tenants in equity’
o ‘Conveyed to them as express beneficial joint tenants in equity’
o ‘The transfer contained a declaration that all four owners were beneficial joint tenants’

Question 21

explain the ‘words of severance’ test

Give examples

Answer 21

If there is no express DOT, look whether there are words in the document that indicate distinct shares

Examples:
o ‘I grant Greenacre to my children to be divided equally between them.’
o ‘To A and B in equal shares.’
o ‘Between A and B.’
o ‘Half to A and half to B.’

This means they will be TIC

Question 22

explain ‘presumption of JT’

Answer 22

If the other tests are inconclusive, then there is a rebuttable presumption that co-owners will be JTs in equity.

Question 23

how can the presumption that a JT exists in equity be rebutted?

Answer 23

o If the property is acquired for business
o If there are unequal contributions to the purchase price
o Post-acquisition money management

In relation to a trust of the home, there is a strong presumption in favour of a JT. This can be rebutted in exceptional circumstances i.e. if one co-owner made far greater financial contributions to the home

Question 24

what is a summary of the key features of a JT?

Answer 24

o each owner has an interest in the whole and owns nothing individually
o four unities must be present
o survivorship applies
o dealing with ‘a share’ (i.e. sale or mortgage) operates as severance
o general presumption in favour of JT

Question 25

why is there a presumption in favour of a JT?

Answer 25

there is a presumption that equity follows the law

Question 26

what is a summary of the key features of TIC?

Answer 26

o each owner owns a share
o no right of survivorship
o each owner can deal with their share
o TIC will arise where: expressly declared; it is presumed; or there has been an act of severance

Question 27

re: severance of a JT in equity

what effect does a will have on severance?

Answer 27

although a will is written during the co-owner’s lifetime, it does not effect severance until death

Question 28

re: severance of a JT in equity

when must a severance of a JT happen?

Answer 28

inter vivos i.e during the lifetime of the co-owner

Question 29

re: severance of a JT in equity

how can severance be effected?

Answer 29

o Formal severance by written notice
o Informal severance

Question 30

re: severance of a JT in equity

what form can the written notice take?

Answer 30

There is no specified form and it need not be signed.

This can be express or impliedly, but appropriate words must be used. It must state they want the JT to end immediately, not in the future or a desire to end.

expressly = ‘I want to sever the JT’
impliedly = ‘I want to sell the property now and split the proceeds’

Question 31

re: severance of a JT in equity

is consent of other JTs required to serve a written notice?

Answer 31

No. This is a unilateral act by one owner, permission of the other JTs is not required.

Question 32

re: severance of a JT in equity

for severance to be effective, the written notice must…

Answer 32

o Use appropriate wording. It must state express the JT is to end immediately (future intent / desire is not sufficient)
o Be received or deemed to been received by all other JTs

Question 33

re: severance of a JT in equity

if the notice is posted, what is the position of deemed service?

Answer 33

• Registered post > if the notice is sent as registered / recorded post and not returned undelivered by the post office, it will be presumed received
• Ordinary post > a notice will be sufficiently served if it is left at the last known place of abode or business in the UK of the person

Question 34

re: severance of a JT in equity

give an example where the wording of a notice lacks immediacy

Answer 34

the notice states the JT wants to sell the property in a year’s time. This lacks immediacy. Therefore, severance will not have been effected by the written notice.

Question 35

re: severance of a JT in equity

what are the ways a JT can be informally severed?

Answer 35

o Acts operating on JT’s share
o Mutual agreement
o Course of dealing
o Bankruptcy
o Homicide
o Post-acquisition money management

Question 35

re: severance of a JT in equity

explain ‘acts operating on JT’s share’

Answer 35

when a JT in equity disposes of their equitable interest by:
o sale, gift, lease or mortgage which is signed and in writing; or
o contract which is signed and in writing and is capable of specified performance

Question 35

re: severance of a JT in equity

explain ‘mutual agreements’

give an example

Answer 35

JTs (impliedly or expressly) agree (orally or in writing) to sever the JT and this is supported by valuable consideration

The agreement need not be performed for severance to take place, as long as there was an intention to give valuable consideration

Sam and Tom purchase a house as JT in law and equity. Sam agreed to sell his interest for £1000. This was agreed. Tom decides he wants more money. No further action is taken. Severance still took effect, because there was a common intention to sever the JT and give valuable consideration

Question 36

re: severance of a JT in equity

explain ‘course of dealing’

Answer 36

JTs do not need to agree to sever but show through their conduct that they clearly regard themselves as having separate shares

Question 37

re: severance of a JT in equity

explain ‘bankruptcy’

Answer 37

Any bankruptcy has the effect of severing the JT by causing the involuntary assignment of the equitable interest to the JT’s trustee in bankruptcy

Once bankruptcy is discharged, the interest reverts to the co-owner who will hold it is a TIC

Question 38

re: severance of a JT in equity

explain ‘homicide’

Answer 38

• If one JT kills another, then the JT will be severed
• This is for policy reasons as otherwise survivorship would operate and that would not be just

Question 38

re: severance of a JT in equity

explain ‘post-acquisition money management’

Answer 38

relevant where a family home is bought in the joint names of an unmarried couple who are both responsible for the mortgage but there is no express declaration of their beneficial interest

the starting point is that they are JTs, but this can be rebutted if parties can show:
 They had a different common intention at the time of the acquisition (the fact they paid unequal shares at the start is not normally sufficient); or
 They later formed the common intention that their respective shares would change (this would create an ambulatory constructive trust)

‘common intention’ will be looked at objectively by conduct

If there is no direct evidence then shares will be assessed by the court as to what they consider to be fair. They will look at the whole course of dealing (i.e. not just financial contributions) in relation to the property.

the onus of proof is on the claimant

Question 38

re: severance of a JT in equity

what is the effect of severance?

Answer 38

• 2 JTs - they both become TICs
• 3 or more JTs - severing party becomes a TIC, the others remain JTs
• The TICs share is proportionate i.e. if 3 parties, the TIC would have 1/3 equitable interest

Co-owners contribution to the purchase price is irrelevant when severance occurs. Shares will always be divided equally.

Question 38

when will an implied trust in land arise?

Answer 38

if there is no express declaration of trust

Question 39

when will a resulting trust arise? what is the outcome?

Answer 39

This will arise when:
o A person who does not hold legal title makes a contribution to the purchase price of the property;
o There is no evidence this was a gift or loan; and
o The contribution must be all or part of the purchase price at the date of the acquisition (i.e. not afterwards)

The person then holds a BI proportionate to the contribution made

Question 40

when will a constructive trust arise?

Answer 40

A constructive trust can be made by either:
1. An agreement + detrimental reliance; OR
2. Conduct + direct financial contribution

Question 41

re: constructive trust

explain ‘detrimental reliance’

Answer 41

the non-legal owner must show they have relied upon the agreement to their detriment or significantly altered their position. The detriment must be linked to the agreement.

Examples:
o Paying for improvements to the house out of their own money
o Paying all of the household bills to allow the legal owner to pay the mortgage
o Working unpaid in the legal owner’s business.

Question 41

re: constructive trust

explain ‘agreement’

Answer 41

Agreement = agreement, arrangement or understanding
o This is a question of fact and will depend on evidence of express discussions between parties
o It doesn’t matter if the agreement was based on trick or deceit
o The agreement can be at the time of purchase or subsequent

Question 42

re: constructive trust

explain ‘conduct + direct financial contribution’

Answer 42

• If there is no evidence of agreement, the court looks at whether the non-owning party has contributed towards the purchase price or mortgage payments (anything short of this and the test will fail)
• This would give rise to the common intention that the property should be shared beneficially

Question 43

what is needed for a piece of co-owned land to be sold?

Answer 43

all trustees need to execute a deed transferring the legal estate

a co-owner can sell their interest in the property unilaterally, but to sell the whole property requires a deed executed by all trustees

Question 44

how is a dispute between co-owners resolved?

Answer 44

the dispute will be resolved using s14 and 15 of TOLATA

Question 45

who can make a s14 TOLATA application when there is a dispute?

Answer 45

A trustee or any person with an interest in the property can make an application for a court order under s14

Person with an interest would include a beneficiary i.e. a share was sold to them and they only have a beneficial interest as a TIC. They do not hold any of the legal estate as a JT.

Question 46

what orders can the court make under s14 TOLATA in relation to the trustees/persons with an interest?

Answer 46

The court has a wide discretion to make an order:
o Relating to the exercise by trustees of any of their functions; or
o Declaring the nature and extent of the person’s interest in the property

Question 47

what is usually the substance of a s14 TOLATA application?

Answer 47

o disputes regarding the size of co-ownership interests, for example where there has been no express declaration of trust
o disputes regarding the occupation of trust land
o authorising transactions without the consent of all the trustees
o disputes as to whether co-owned land should be sold.

Question 48

what must the court consider determining a s14 TOLATA application?

Answer 48

s15 factors (non-exhaustive list)i.e:
o Intentions of any settlor > i.e. if the trust was created expressly or by will

o Purpose of the property subject to the trust > if the purpose of the trust is still capable of being substantially fulfilled, an order for sale is unlikely i.e. purpose of the trust property was to be used as the family home, if the relationship had broken down and children left, order for sale more likely.

o Welfare of any minor who occupies the trust or might reasonably be expected to occupy the any land subject to the trust as his home

o Interests of any secured creditor of any beneficiary (if the s14 application is made by a trustee in bankruptcy, different considerations apply (s335A IA 1986). This interest will take priority, unless there are exceptional circumstances.

o The circumstances and wishes of any Bs (or the majority) of full age and entitled to an interest in possession

Question 49

what options are available to the court in relation to s 14 TOLATA application? When might these be granted?

Answer 49

• Refuse a sale > likely if the purpose of the acquisition can be fulfilled
• Order a sale > likely if the purpose of the property acquisition has failed (i.e. a business has failed)
• Refuse a sale but make an order regulating the right to occupy the property (very rare) > i.e. a relationship has broken down due to violence, the person occupying the property made be ordered to pay rent to the person excluded from the property
• Partition the co-owned property (very rare)