Co-ownership & Trusts

Question 1

What is co-ownership?

Answer 1

Where more than one person owns land at the same time.

Question 2

When will a trust of land arise?

Answer 2

A landowner setting up a trust.

A person acquires an interest in land owned by another due to their conduct.

Land is acquired by more than one owner jointly.

Question 3

What is a Trustee?

Answer 3

Legal owners that have no entitlement to the benefit of the property, but must execute any deed to transfer legal title.

Question 4

What is a beneficiary?

Answer 4

Equitable owners that are entitled to occupy the property, receive rent from it and receive the proceeds of sale.

Question 5

How must the legal estate be held?

Answer 5

As a joint tenancy.

Question 6

Who can be a trustee of land?

Answer 6

Only a person over the age of 18 can act as a trustee. Any attempt to convey a legal estate to a minor operates as a declaration of trust that the land is held in trust for the minor

Question 7

What is the maximum/minimum number of trustees?

Answer 7

A maximum of four trustees with no minimum.

Question 8

What are the powers of a trustee?

Answer 8

Trustees have all the powers of an absolute owner but these are limited by their duty to consult the wishes of the beneficiaries

Question 9

Two forms of co-ownership?

Answer 9

Joint tenancy and tenancy in common.

Question 10

What are the implications of a joint tenancy?

Answer 10

Under the right of survivorship the interest of a join tenant who has died passes automatically and immediately to the surviving joint tenant(s).

Joint tenants are jointly entitled to the whole of the property.

Question 11

What are the implications of a tenancy in common?

Answer 11

There is no right of survivorship.

Each owner is regarded as having a distinct share in the land which can be unequal.

Question 12

What are the tests for distinguishing between a joint tenancy and a tenancy in common?

Answer 12

First Test: Are all the four unities present?

Second Test: Does the deed transferring the land to the co-owners contain an express declaration?

Third Test: Does the deed transferring the land to the co-owners contain words of severance?

Fourth Test: Does equity presume a tenancy in common?

Question 13

What are the 4 unities?

Answer 13

Unity of Possession: Each co-owner has the right to possession of all of the land.

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 interest at the same time.

Question 14

What are words of severance?

Answer 14

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

Question 15

What is the presumption of a joint tenancy and how can it be rebutted?

Answer 15

Since equity follows the law, it is presumed that the equitable interest will be held as a joint tenancy just like the legal interest.

The presumption can be rebutted where the property is acquired for business use, where there is unequal contributions to the purchase price (does not apply to trusts of the home) and where it can be shown that one co-owner has provided the far greater share of the finance for a home.

Question 16

What is severance?

Answer 16

Severance is the method by which a joint tenancy in equity can be converted into a tenancy in common.

Question 17

How does a formal severance by written notice occur?

Answer 17

The written notice must express a desire to end the joint tenancy immediately (expressing a future intent or desire is insufficient) and be received by all the other joint tenants or be deemed to have been received.

Question 18

What are the postal rules for formal severance by written notice?

Answer 18

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

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.

Question 19

What are the methods of informal severance?

Answer 19

When a joint tenant in equity disposes of their equitable interest by sale, gift, lease or mortgage which mean that the four unities are no longer present.

When joint tenants act together (either expressly or by implication) to sever the joint tenancy and must be supported by some valuable consideration.

For severance by a mutual course of conduct, the joint tenants do not have to agree to do something to sever, but must show through their conduct (in relation to the land and each other) that they clearly regard themselves as owning distinct shares over a significant period of time.

Any bankruptcy affecting a joint tenant has the effect of severing the joint tenancy by causing an involuntary assignment of the equitable interest to the joint tenant’s trustee in bankruptcy.

Where one joint tenant unlawfully kills another joint tenant.

Question 20

What are the two types of implied trusts of land?

Answer 20

A resulting trust and a constructive trust.

Question 21

When does a resulting trust arise?

Answer 21

When 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 (not subsequent to it.)

Question 22

When does a constructive trust arise?

Answer 22

Where there is an agreement + detrimental reliance or there is conduct + direct financial contribution.

Question 23

What constitutes agreement + detrimental reliance?

Answer 23

Where there is any agreement, arrangement or understanding reached between the parties on how the property is to be shared beneficially and the non-legal owner has detrimentally relied on the agreement by paying for improvements to the house out of their own money, paying all of the household bills to allow the legal owner to pay the mortgage, working unpaid in the legal owner’s business, etc.

Question 24

What constitutes conduct + direct financial contribution?

Answer 24

The required conduct is payment towards the purchase price initially or payment of the mortgage payments by the non-owning party. This direct financial contribution then gives rise to a common intention that the property should be shared beneficially.

Question 25

When can co-owned land be sold?

Answer 25

In order for co-owned land to be sold, all the trustees need to execute the deed transferring the legal estate.

Question 26

How are disputes in co-owned land resolved under s.14 TOLATA 1996?

Answer 26

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 wide discretion to make an order relating to the exercise by the trustees of any of their functions or declaring the nature or extent of the person’s interest in property.

Question 27

What is s.15 TOLATA 1996?

Answer 27

It sets out the factors that the court should consider in exercising its powers under s.15 including the intention of the persons who created the trust, the purposes for which the property subject to the trust is held, the welfare of minors and the interests of any secured creditor or beneficiary.