Co-ownership and Trusts MCQ Flashcards
A solicitor acts for a husband and wife in the purchase of a freehold property (‘the Property’) for £350,000. The wife contributed £150,000 and the husband contributed the remaining £200,000. The Property is transferred to them as express beneficial joint tenants in equity.
Which of the following best describes how the Property is held?
A) The Property is held as a tenancy in common due to the unequal contributions made to the purchase price.
B) The Property is held legally and beneficially as joint tenants due to the express declaration of trust.
C) The Property is held as a joint tenancy as the four unities are present.
D) The equitable interests are held in a tenancy in common as the presumption for a joint tenancy has been rebutted by unequal contributions.
E) The equitable interests are held as a joint tenancy as the express declaration of trust is conclusive.
The correct option is B.
The husband and wife hold the legal estate as trustees as joint tenants (s 1(6) LPA 1925). The four unities are present which would indicate a joint tenancy (or a tenancy in common).
Option C is correct but is not the best answer as it does not reflect the express declaration.
There is an express declaration that the husband and wife hold the equitable interests as joint tenants.
Option E is, therefore, correct, but not the best answer as it does not take account of how the legal estate is held.
The express declaration is conclusive, notwithstanding the unequal contributions made to the purchase price. Options A and D are, therefore, wrong.
Four students (a chemistry student, an economics student, a geography student and a music student) purchased a property (‘the Property’) for them to live in whilst they studied at university. The chemist, economist and geographer each provided 20% of the purchase price. The musician contributed the remaining 40% of the purchase price. The Property was transferred to them as beneficial joint tenants in equity.
The economist struggled financially and mortgaged his interest in the Property to a bank. He subsequently received a large inheritance and managed to pay off the mortgage.
The chemist was killed in a car accident and, in her will, left her interest in the Property to her sister.
Which of the following best describes how the equitable interests in the Property are now held?
A) The economist holds 25% as a tenant in common, with the geographer and the musician holding the remaining 75% as joint tenants.
B) The economist, the geographer and the sister hold 20% each, with the musician holding 40% as tenants in common.
C) The economist and the sister each hold 25% as tenants in common with the geographer and the musician holding 50% as joint tenants.
D) The economist holds 20% as a tenant in common, with the geographer and the musician holding the remaining 80% as joint tenants.
E) The economist holds 20% as a tenant in common with the musician and the geographer holding a joint tenancy, with the musician holding 50% and the geographer
holding 30%.
The correct option is A.
Looking at the facts chronologically:
- The transfer of the Property to the co-owners contained an express declaration of trust. The equitable interests were, therefore, held as a joint tenancy at the outset, despite the unequal contributions made by the co-owners. Option A is, therefore, correct.
- When the economist mortgaged his interest, this severed the joint tenancy in relation to the economist. The effect was that the economist held a tenancy in common for 25% (being proportionate to the number of co-owners – four co-owners and, therefore, the economist is entitled to 25%). The other three students continued to hold the remaining 75% as a joint tenancy. Option D is, therefore, wrong.
- When the chemist died she was a joint tenant and the rule of survivorship applied. Her will, leaving her interest to her sister, was of no effect. The other joint tenants, the geographer and the musician, survived her. Options B and C are, therefore, wrong as the sister has no interest in the Property.
- Option E is incorrect as identifying shares is inconsistent with a joint tenancy. Plus, the maths is wrong in that the economist holds 25%.
A father gifts his house (‘the Property’) to his children (a son, a step-son, a daughter and a step-daughter) as beneficial joint tenants. The Property is transferred to them. At the time of the transfer, the step-daughter is 17 years old.
The son is offered a well-paid job in Paris and sells his interest in the Property to a friend. The friend immediately moves into the Property. The son retires as a trustee.
At the step-daughter’s 18th birthday party, the step-son (knowing he is terminally ill) gives the daughter and step-daughter a written notice stating that he wishes to immediately sever his joint tenancy.
Subsequently, the step-son dies and, in his will, leaves his interest in the Property to his wife.
Which one of the following best describes how the Property is held?
A) The trustees are the daughter and step-daughter who hold for the friend, the wife and themselves as joint tenants in equity.
B) The daughter is the remaining trustee and she holds for the friend as a tenant in common as to 25% and the step-son, the daughter and the step-daughter as joint tenants of the remaining 75%.
C) The daughter and step-son are the trustees holding for the friend and the wife as tenants in common (25% each) and the daughter and step-daughter as joint tenants of the remaining 50%.
D) The trustee is the daughter holding for herself and the step-daughter as joint tenants of 50% and the friend and the wife as tenants in common of 25% each.
E) The trustees are the daughter and step-daughter who hold for themselves and the friend and wife as tenants in common as to 25% each.
The correct option is D.
Looking at the facts chronologically:
Legal estate
The original trustees were the son, the step-son and the daughter who held the legal estate as a joint tenancy. The step-daughter could not be a trustee as she was a minor and she is not automatically appointed as a trustee when she reaches the age of 18. Therefore, options A and E are wrong. After all the events, the daughter remains the sole trustee (see below).
Equitable interests
There was an express declaration of trust and the four children held as beneficial joint tenants.
The son sells his interest
The son selling his interest to the friend severs the joint tenancy in relation to the son’s equitable interest. The friend therefore holds 25% as a tenant in common (there being four joint tenants). The other children continue to hold the remaining 75% as joint tenants.
The son resigns as a trustee. This means that the remaining trustees of the legal estate are the step-son and the daughter.
The step-son’s notice
This is formal severance (s 36(2) LPA 1925) and complies with the requirements as it is in writing, is given to the other joint tenants and expresses the necessary immediacy. This severs the step-son’s equitable interest so that he holds 25% as a tenant in common.
Option B is, therefore, wrong as it does not take account of the severance by written notice.
The step-son’s death
In relation to the legal estate, the daughter survives the step-son and becomes the sole trustee. Option C is, therefore, wrong as the step-son has died and cannot, therefore, be a trustee.
In relation to the equitable interest, the step-son had severed the joint tenancy and, at the time of his death, was a tenant in common. Survivorship does not occur and the step-son’s interest goes to the wife. The equitable interests are held as follows:
The wife = 25% as a tenant in common
The friend = 25% as a tenant in common
The daughter and step-daughter = 50% as joint tenants.
