WS 4 Trusts of Land and Co-ownership

Question 1

How to answer a question on trusts of land and co-ownership?

Answer 1

STEP 1: State: ‘This question involves the co-ownership of [insert name of property] by [insert names of purchasing parties]. When land is co-owned, it gives rise to a statutory trust of land (s.36 LPA 1925)

STEP 2: Explain how the LEGAL TITLE to land is held on the purchase of the property

STEP 3: Explain how the EQUITABLE INTEREST in the land is held on the purchase of the property

STEP 4: Discuss the effect of incidents/changing arrangements (death, sales, mortgages etc) on the LEGAL TITLE

STEP 5: Discuss the effect of incidents/changing arrangements (death, sales, mortgages etc.) on the EQUITABLE INTEREST

STEP 6: Conclude as to how both the legal title and equitable interest are held (JT or TinC), and in what proportions by whom

STEP 7: If question specifies: explain how a DISPUTE BETWEEN TRUSTEES & BENEFICIARIES over whether to sell the property might be resolved

STEP 8: If question specifies: explain whether any potential BUYER WILL BE BOUND by the equitable interests that exist in the property

Question 2

STEP 2: Explain how the LEGAL TITLE to land is held on the purchase of the property

Answer 2

• s.1(6) LPA 1925: Legal is ALWAYS held as JOINT TENANCY
• NB – a co-owner must be 18 in order to hold a legal estate in land
• s.36(2) LPA 1925: cannot sever JT in legal estate

Question 3

Joint equitable tenancy portions?

Answer 3

• co-owners have identical interests in the property, their interests being of non-defined portions

Question 4

What about attempting to transfer legal estate to more than 4 people?

Answer 4

• s.34(2) LPA 1925 – where there is an attempt to transfer the legal estate to more than 4 people, the effect is that the first 4 named will own the legal estate. They will hold the legal estate as joint tenants (s.36(1) LPA)

Question 5

What about disposing of equitable joint tenancy in will?

Answer 5

• cannot dispose of legal joint tenancy in will (Moyes v Gilles), joint tenancies will run on survivorship (Gould v Kemp);

Question 6

Define tenancy in common

Answer 6

as a TENANCY IN COMMON, i.e. co-owners have separate, but as yet undivided shares in the property, each for a specific percentage ownership of the property (Fisher v Wiggs: Re Kings Theatre). They will receive a share of the proceeds of sale equivalent to the size of their distinct shares of land.

Question 7

4 part test to determine whether JT or TIC?

Answer 7

1) 4 UNITIES: possession, interest, time, title
2) Any EXPRESS DECLARATIONS?
3) WORDS OF SEVERANCE in the transfer document?
4) Does EQUITY PRESUME A TENANCY IN COMMON?

If still unclear after applying the tests, then equity follows the law: JOINT TENANCY

Question 8

What are the 4 unities?

Answer 8

The 4 unities (-PITT – Possession, Interest, Title Time)

a. Unity of TIME: Did the co-owners acquire their interests in the property at the same time?
b. Unity of TITLE: Did the co-owners acquire their interests in the property under the SAME document?
c. Unity of INTEREST: Are the co-owners’ interests in the property of the SAME NATURE & DURATION?
d. Unity of POSSESSION: Are the co-owners each equally entitled to use and occupy the WHOLE PREMISES? (If the co-ownership is to take the form of an equitable tenancy in common, the only essential unity is that of possession)

Question 9

2) Does the transfer document contain an EXPRESS DECLARATION as to how the equitable interest is held?

Answer 9

a. If it does, it is CONCLUSIVE (Goodman v Gallant [1986]).
b. If title to the land is unregistered, we would need to look at the conveyance to the owners.
c. If title is registered, the express declaration would be in transfer to the co-owners, in Form TR1

Question 10

3) Are there WORDS OF SEVERANCE in the transfer document? E.g. to be held ‘equally’/ ‘in equal shares’

Answer 10

a. If so, equitable interest will be held as TENANCY IN COMMON (Robertson v Fraser)

Question 11

4) Does EQUITY PRESUME A TENANCY IN COMMON? Equity will do so where:

Answer 11

a. Partnership property: Where the co-owners are business partner and they buy the land as a partnership asset, equity presumes that they buy the land as tenants in common in equity
b. Lenders: Where more than one person lends money to a borrower, the relationship between the lenders is that of tenants in common (rare in practice)
c. Unequal Contributions: The buyers each contributed different amounts to the purchase price (Lake v Gibson)

Question 12

How should equitable JT and TIC be put on register?

Answer 12

If they hold the land as tenants in common in equity then a restriction should be placed on the proprietorship register. If on the other hand they hold the land as joint tenants in equity, there will be no restriction on the register.

Question 13

Can you sever the legal title?

Answer 13

1) s.36 LPA 1925: Severance of the legal title is PROHIBITED. Therefore, legal title will continue to be held as a JOINT TENANCY

Question 14

What is the right of survivorship with regards to joint tenancy legal title?

Answer 14

2) Under the RIGHT OF SURVIVORSHIP, on the death of a trustee (one of the co-owners of the property), legal title passes to the other co-trustees.

Question 15

What is severance?

Answer 15

The equitable interest may be SEVERED (i.e. ownership of the equitable interest as a joint tenancy ends, and co-owners become tenants in common, owning separate shares in the property. These new tenants in common will have equal shares, regardless of size of contribution to purchase price),

Question 16

What happens if there are only two equitable joint tenants and one wants to sever?

Answer 16

Both come TICs

Question 17

4 methods of severance?

Answer 17

Notice; Alienation; Mutual Agreement or Course of Dealings; Homicide

Question 18

Requirements of severance by notice under s.36(2) LPA?

Answer 18

1) In writing
2) Showing correct intention
3) Correctly served

Question 19

s.36(2) Severance by notice: Correct intention

Answer 19

must show intention to sever immediately, and not at some later

i. Harris v Goddard [1983] – a prayer in divorce petition was not effective to sever the JT as it did ‘no more than invite the court to consider at some future time whether to exercise its jurisdiction’
ii. Re Draper’s Conveyance [1969] – on similar facts, the wife’s affidavit stated, ‘I am entitled to a half share in the matrimonial home.’ – this was requisite intention
c. Correctly SERVED: notice will be correctly served if:

Question 20

S.196(3) LPA 1925

Answer 20

Notice is left at the last known abode/place of business of person to be served (If delivered here, notice will be effective even if addressee does not actually ‘receive’ the notice – Kinch v Bullard – does not matter who left the notice of severance)

Question 21

S.196(4) LPA 1925:

Answer 21

Notice is sent by registered post to person to be served (Effective even if not actually ‘received’, provided letter is not sent back undelivered

Question 22

Re 88 Berkeley Road NW9

Answer 22

Court confirmed that the notice was correctly even though the serving co-owner had signed on behalf of the recipient to prove receipt of the notice. The equitable joint-tenancy was served.)

Question 23

What is alienation?

Answer 23

a. When the joint tenant sells, gives or mortgages his equitable interest to a third party

Question 24

Alienation cases

Answer 24

b. i.e. sale, gift, mortgage (Petty v Styward), or bankruptcy (Morgan v Marquis). Bankruptcy automatically severs equitable JT as it results in involuntary alienation of the equitable interest to vest in his trustee in bankruptcy.

Question 25

Severance by alienation must comply with?

Answer 25

c. Any severance by alienation must be in compliance with s.53(1)(c) LPA 1925 – in signed writing

Question 26

Mutual agreement?

Answer 26

a. Where joint tenants expressly agree to sever the equitable interest, or where the parties agree to deal with the land in a certain way and that method of dealing would have the effect of severing. E.g. Burgess v Rawnsley: oral agreement is sufficient to show the common intention necessary to sever a joint tenancy (the agreement need not be binding)

Question 27

Course of Dealings?

Answer 27

a. Where parties act in a way that suggests they intend the shares to be held as a tenancy in common. E.g. Where bough for business (Burgess v Rawnsley). This cannot be a mere unilateral statement by one party alone.

Question 28

Homicide?

Answer 28

Where one of two joint tenants murders the other. V’s equitable interest in the land passes to the B’s under his or her will or intestacy. Murderer takes the legal estate in the land as a result of survivorship, and it is held on trust for the murder and V’s estate as equitable tenants in common (Re K)

Question 29

How can severance be shown?

Answer 29

Once co-owners have severed the joint tenancy in equity, they should record this on the title to the property. How to do this depends on registered or unregistered:

a) Unregistered titles. A memorandum of severance should be placed on the conveyance to the co-owners (although not compulsory)
b) Registered titles – Restriction should be placed on the register to indicate that the land is no longer held by the co-owners as joint-tenants.

Question 30

Typical problem scenario: dispute between trustees and Bs

Answer 30

As the sole surviving owner of the legal estate, the trustee of land wishes to sell the property, against the wishes of one or more beneficiaries, who hold an equitable interest only in the property.

Question 31

How to start off a problem question regarding dispute between trustees and beneficiaries?

Answer 31

• State: “Under s.36 LPA 1925, co-ownership of a property gives rise to a trust of land, and this is governed by Trusts of Land and Appointment of Trustees Act 1996.” Relevant sections for resolving such disputes are:

Question 32

S.6(1) TLATA

Answer 32

trustees of land have all the powers of an absolute owner of the land (i.e. they may sell or lease the property)

Question 33

S.6(2)

Answer 33

Trustees can dispose of legal estate in a particular way – by transferring it to a beneficiary who is full age and capacity and absolutely entitled to the land & thus to end the trust.

Question 34

S.6(3)

Answer 34

gives Ts power to buy land in E&W for the wide purposes set out in s.8 Trustees Act 2000

Question 35

s.6(3) TLATA and s.8(2) TA 2000

Answer 35

state that trustees can only buy a legal estate in land & not equitable interest in land

Question 36

S.6(5)

Answer 36

But – In the exercise of these powers, trustees must:

• S.6(5) – have regard to the rights of beneficiaries

Question 37

S.10

Answer 37

consent

Question 38

S.11(1)

Answer 38

consult beneficiaries who are of full age and fully entitled and, so far as consistent with the general interest of the trust, give effect to the majority wishes

o Ultimately decision lies with trustees
o Settlors can exclude this requirement for the trustees to consult in the trust deed
o Do not have to consult someone who only has a remainder interest

Question 39

• S.8 TLATA

Answer 39

potentially have a right to give consent

Question 40

• S.14

Answer 40

in the case of dispute, either the trustee of the land (legal owner) or the beneficiary/ies (with equitable interest) may apply to the court for a decision

Question 41

s.14(2)(a) TLATA

Answer 41

o (2)(a) relating to the exercise by the trustee of any of their functions (including an order relieving them of any obligation to obtain the consent of, or to consult any person in connection with the exercise of any of their functions

Question 42

s.14(2)(b) TLATA

Answer 42

o (2)(b) declaring the nature or extent of a person’s interest in property subject to the trust

Question 43

s.14(3) TLATA

Answer 43

o (3) the court cannot make order under this section to appoint or remove trustees

Question 44

s.15 TLATA

Answer 44

• S.15 – in coming to this decision, the court will consider factors such as:
o (1)(a) intentions of the person or persons who created the trust
o (1)(b) the purposes for which the property subject to the trust is held
o (1)(c) the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home, and
o (1)(d) the interests of any secured creditors of any beneficiary

Question 45

• s.12 TLATA

Answer 45

beneficiaries are entitled to occupy the land at any time provided (1)(a) purposes of the trust are to make land available for his occupation and (1)(b) land is held by the trustees so as to be so available

Question 46

s.13 TLATA

Answer 46

trustees may impose reasonable conditions on a beneficiary in relation to this entitlement to occupy the land

Question 47

If there are two or more co-owners who hold legal title (trustees) then will the buyer be bound?

Answer 47

1) If 2 or more co-owners hold legal title (i.e. are trustees): straightforward answer – as a buyer will be buying from at least 2 trustees, he will be OVERREACHING the beneficiaries’ equitable interests under a trust of land, so he will take the land free of these interests.

Question 48

If there is one holder of legal title, will a buyer be bound by trust interests in land?

Answer 48

Depends upon whether the land is registered or unregistered.

Question 49

Enforcement of trust interest under registered land system

Answer 49

• Trust interests (express or implied) may be recorded as a restriction at Land Registry by date of registration of buyer (s.40)
• If so this will alert buyer to need to overreach. If buyer fails to overreach, buyer will be prevented from registering the purchase. If there is no restriction recorded, the trust interest might be overriding under Sch 3 para 2, and need overreaching if buyer is to purchase free of the trust interest.
o Sch 3 para 2 – consider: is there someone in actual occupation? See WS 3, this will elevate the trust interest to OVERRIDING STATUS (Williams & Glyn’s Bank v Boland). If this is the case, in order not to be bound by the interests, buyer must OVERREACH (City of London Building Society v Flegg)

Question 49

Enforcement of trust interest under registered land system

Answer 49

• Trust interests (express or implied) may be recorded as a restriction at Land Registry by date of registration of buyer (s.40)
• If so this will alert buyer to need to overreach. If buyer fails to overreach, buyer will be prevented from registering the purchase. If there is no restriction recorded, the trust interest might be overriding under Sch 3 para 2, and need overreaching if buyer is to purchase free of the trust interest.
o Sch 3 para 2 – consider: is there someone in actual occupation? See WS 3, this will elevate the trust interest to OVERRIDING STATUS (Williams & Glyn’s Bank v Boland). If this is the case, in order not to be bound by the interests, buyer must OVERREACH (City of London Building Society v Flegg)

Question 50

Enforcement of trust interest under unregistered land system

Answer 50

•	Trust interests are not registrable land charges, and thus cannot be registered on the Land Charges Register. To take the land free of the equitable interests, buyer must:
o	OVERREACH (ss.2 and 27 LPA)
o	Be EQUITY’S DARLING (see WS 2) 
•	NB, Buyer should look at title deeds. Where one of the joint tenants died, the buyer should look for evidence as to whether the JT was severed before death. If the purchaser can rely on s.1 LP(Joint Tenants) Act 1964, the purchaser can assume the JT was not severed in equity before Mia died

Question 50

Enforcement of trust interest under unregistered land system

Answer 50

•	Trust interests are not registrable land charges, and thus cannot be registered on the Land Charges Register. To take the land free of the equitable interests, buyer must:
o	OVERREACH (ss.2 and 27 LPA)
o	Be EQUITY’S DARLING (see WS 2) 
•	NB, Buyer should look at title deeds. Where one of the joint tenants died, the buyer should look for evidence as to whether the JT was severed before death. If the purchaser can rely on s.1 LP(Joint Tenants) Act 1964, the purchaser can assume the JT was not severed in equity before Mia died