Property law - co-ownership

Question 1

Property - Co-ownership - Steps

Answer 1

• STEP 1: State the following introductory points:
• STEP 2: Initial Acq_uisition_ - how is the property held at common law?
• STEP 3: In_itial_ Acquisition - how is the property held in equity? Consider in this order:
• STEP 4: Have there been any acts of severance? You should be certain about whether the JT _has b_een severed or not.
• STEP 7: Will potential buyers be bound by any equitable interests?
• STEP 8: Conclude:

Question 2

Property - Co-ownership - Introductory points

Answer 2

• Whenever land is co-owned a trust is imposed by statute (s. 34(2) LPA 1925). Such a trust is known as a trust of land (s. 1(*1)(a) Trusts of Land and Appointment of Trustees Act 1996 *(“**TLATA”)), which separates legal and equitable title to the land between the trustees and the beneficiaries.
• In order to cre_ate_ an express trust the declaration must be evidenced in signed writing (s. 53(1)(b) LPA).

Question 3

Property - Co-ownership - Initial Acq_uisition_ - how is the property held at common law?

Answer 3

• Legal title can only be held by way of a joint tenancy (“UT”) (s. 1(6) LPA 1925). It cannot be severed to create a tenancy-in-common (s. 36(2) LPA 1925).
• The maximum number of legal owners is four (s. 34(2) Trustee Act 1925 (“TA”)). If more than four names a_re_ mentioned on the conveyance, the first four named (of age and sound mind) will hold the legal title as trustees (s. 34(2) LPA 1925).
• The trus_tees_ must be of full age (ss. 1(6)&20 LPA 1925), which s. 1 Family Law Reform Act 1969 defines as 18. They must also be of sound mind (s. 22 LPA 1925). State who they are.

Question 4

Property - Co-ownership - Initial Acquisition - how is the property held in equity?

Answer 4

• 1) In order to be JTs the four unities must be present (AG Securities v V_augh_an) - if unity of possession (no tenant can be excluded from any part of the land_), interest (each tenant_ has the same estate), time (each tenant’s interest vests at the same time), and title (all tenants acquire title under the same document) are all present, a JT can exist. If not, but unity of possession is still present, it will instead be a tenancy-in-common (“TiC”).
• 2) Consider any express declarations in the grant/conveyance/transfer. Express words prevail over any presumptions of JT or Tic (**Pink v Lawrence).
• 3) Where there are no express declarations, consider words of severance in the grant. Words such as ‘in equal shares’ (Payne v Webb) and ‘to be divided between’ (Fisher v Wigg) indicate a Tic.
• 4) If any equitable presumption against a JT exists, because the purchase money is provided in unequal shares, the tenants are presumed to own as TiCs in proportion to their payments (Bull v Bull) - but this does not apply to domestic situations unless there is evidence to the contrary (Stack v Dowden; Jones v Kernott). Commercial situations are presumed to be Tics (Lake v Craddock), unless rebutted by e_xpress_ words (see (2) & (3) above).
• In a JT the tenants/co-owners constitute one legal owner. On the death of a joint tenant his ownership immediately passes to the other joint tenants by right of survivor_ship_ and not by will, because wills operate afterdeath(Re Caines). NOTE: do not use the word ‘share’ when discussing ITs,* *only* *use* *it* *when* *discussing* *Tics.
• In a TiC each co-owner has a distinct but undivided share in the land, and shares can be unequal. No right of survivorship applies. It is possible to be both a JT and a Tic.

Question 5

Property - Co-ownership - Have there been any acts of severance?

Answer 5

You should be certain about whether the JT has been severed or not.

• A JT can never be severed at law (s. 36(2) LPA 1925), only a beneficial JT can be.Severanceseparates off the equitable interest of the JT, and only affects the severing tenant - the others are still joint tenants of the rest (unless there are just 2 JTS, in which case both become Tics). The severing party becomes a Tic.
• In the absence of an express agreement, the shares arising from a JT are always equal (irrespectiveofinitialcontributions) (GoodmanvGallant). E.g. if there are 5 JTs and 1 severs, that 1 has a 20% TiC and the others hold the 80% as JTs, even if the one had contributed 75% of the purchase price.
• Possible modes of severance:
  
  • WRITTEN NOTICE
    
    • Written notice given to all tenants stating an irrevocable intention to sever immediately (s. 36(2) LPA 1925). A divorce petition alone is not immediate enough (Harrisv Goddard). It must be served upon all the other JTs by being left at the tenants’ last known home or business address (s. 196 LPA 1925). If it is posted, the rules in ss. 196(3)&(4) apply, even if it is not read by the tenant (Re88BerkeleyRoad). Once served, a notice cannot be revoked (Kinch v Bullard). See also Quigley v Masterson**.
  • “AN ACT OPERATING ON OWN SHARE”
    
    • “An act* *opera**ting on own share” (per Page-Wood VC in Wil_liams_ v Hensman), e.g:
      
      • Total alienation, i.e. disposition of tenant’s share to a 3rd party under s. 53(1)(c) LPA 1925.
      • Partial alienation, such as taking out an equitable mortgage (First National Securities v Hegerty).
      • Involuntary alienation, i.e. bankruptcy (Re Gorman).
      • Divorce proceedings that have become irrevocable (Re Draper**‘s Conveyance).
  • “BY MUTUAL AGREEMENT OR A COURSE OF CONDUCT”
    
    • “By mutual* *agreement* *or a course of c_onduct_”* *(Williams v Hensman), i.e.a mutual intention to sever is inferred from actions.
      
      • Inc_onclusive_ negotiations are not sufficient to sever, as in Nielsen Jones* *v* *Fedden* *w*hen they agreed to sell, but did not agree the price. But i_t_ _was_ _stated_ _in_ *_Burg_ess v Rawnsley that Fedden was wrongly decided__, because no specifically-performable contract is actually necessary, just evidence of intention, so depending on the facts, inconclusive negotiations may be sufficient to sever (Burgess v Rawnsley**).
    • Re Buchanan Wollaston
      
      • Land bought to protect the sea-view of 4 houses could not be sold if just 1 owner moved away.
    • Jones v Challenger
      
      • The marital home could be sold after the husband and wife had divorced.
    • Re Evers
      
      • Famil_y_ home could not be sold after the divorce until the children reached age 16.
  • But these cases are only of limited assistance now that TLATA has changed the law by converting trusts for sale into trusts of land (per Neuberger J in The Mor**tg**age Corporation v Shaire). The s.15TLATAfactorsnow extendbeyond mere purpose (as in the above 3 cases) to include:
    
    • Bank of Ireland v Bell
      
      • Even though the property was still being used as a family home, the interest of the secured creditor was powerful enough to force a sale.
    • First National Bank v Achampong
      
      • Eve_n_ _though_ a handicapped child still lived there, the mortgagee could no longer be kept out of his money.
  • The court cou_ld_ _postpone_ _sal_e to allow the other co-owners to buy one out of his share (Ali v Hussein), or to sell the property themselves(Putnam v Taylor).
  • Bankruptcy follows different rules: bankruptcy severs a JT, giving the bankrupt a Tic, which then vests in the trustee-in-bankruptcy (s. 306 Insolvency Act 1986 (“IA”)), though the bankrupt remains on the legal title - only the equitable interest vests in the trustee-in-bankruptcy. The trustee-in-bankruptcy will want to sell the land to realize assets, so must seek a s. 14 TLATA court order, assuming the others oppose a sale.
  • But the s.15TLATAfactorsarenotrelevant, so the court will instead considerthes.** **335A** **IA** **factors: the interests of th_e_ creditors, spouse, and chil_dren_ (Note: not the debtor!) s. 335A(3) IA states that after a year the creditor__‘__s interests outweigh all othersunless‘exceptional circumstances’ apply. Examples of exceptional circumstances:
    
    • Re Citro
      
      • Sale was postponed for just 6 months, even th_ough_ the child had educational problems and they could not afford another property in the area.
    • Barca v Mears
      
      • Sale ordered even though son had special needs, as postponement would have made creditors wait 3 years.
    • Re Mott
      
      • Eld_erly_ lady allowed t_o rema_in in occupation because of her poor health.
    • Re Bremner
      
      • Sale p_ostponed_ because he had terminal cancer.
    • Re Raval
      
      • Sale postponed because paranoid schizophrenic would have been seriously affected by a move.
    • Donohue v Ingram
      
      • ‘Exceptional never includes educational needs.
    • Ford and another v Alexander
      
      • ss. 335A(2) & (3) IA adequately balance the rights of creditors with a debtor’s right to a home and private life, so are compatible with the ECHR.

Question 6

Property - Co-ownership - Will potential buyers be bound by any equitable interests?

Answer 6

• If they are buying from two or more trustees,the buyer willoverreachthebeneficiaries‘** **equitableint_erests_andsotakethelandfreeofthem(ss.2&27LPA 1925).
• If buying from one surviving co-owner:
  
  • Registered land: if a s.40LRA2002restriction is entered on the proprietorship register,thebuye_r_mustoverreach, or the interests of anyone in occupation are overriding if the elements of sch.3, para.2LRA2002 are present, unless one of the sch. 3 exceptions are present. See chapter on registered and unregistered land.
  • Unregistered land: beneficial interests are not registrable at the Land Charges Department because they can be overreached. If they are not overreached, the purchaser will not be bound if he is equity’s darling.
• Also note that spouses can enter a Class F restriction at the Land Charges Department for unregistered land,oras. 32 LRA 2002 notice for registered land.
• NOTE: a court ordered sale un_der_ _s. 14 TLATA w**ill always constitute **an** **overreachi_ng** **event (s. 2(1)(iv) LPA 1925), attaching the beneficial interests to the purchase monies.

Question 7

Property - Co-Ownership - Conclude

Answer 7

• What is the final position on who owns the land? Who holds how much as TiCs or JTs? Who has severed? Has the joint tenancy been terminated? Will a potential buyer be able to buy the land free of any beneficial interests?