Co-ownership and Trusts

Land Law - Chapter 2

What is co-ownership?

Where more than one person owns land at the same time (ie concurrently)

Where there is concurrent sharing, s 1 of TLATA 1996 creates a trust of land - this arises where:

i) landowner intentionally sets up trust in land by transferring title to trustees

ii) implied trust by conduct.

iii) land is acquired by more than one owner jointly (co-ownership)

What are the requirements of ‘the legal estate’?

A legal estate is incapable of ‘subsisting or of being created in an undivided share’ – s 1(6) LPA 1925:

i) must be held as a joint tenancy.

ii) joint tenancy cannot be severed.

Therefore, trustees hold legal estate as JTs.

Who can be a trustee in land?

Must be over 18.

If land is conveyed to a minor and an adult, the land is vested in the adult in trust for the minor – TLATA 1996, Sch 1, para 1(2).

What is the max/min number of trustees?

The Trustee Act 1925, s 34(2) permits a maximum of four trustees - where property is conveyed to more than four people, the first four named adults will be the trustees.

No minimum number of trustees - usual to have two trustees to ensure that overreaching can occur. 

What are the powers of trustees?

a) Trustees have all the powers of an absolute owner - includes the power to sell or mortgage the trust land, or purchase land for the occupation of a beneficiary.

b) The trustees’ powers are limited by their duty to consult the beneficiaries - duty applies only to beneficiaries of full age and who have an interest in possession (entitled to an immediate interest in the land).

c) The trustees must comply (as far as is consistent with the general interests of the trust) with the wishes of the beneficiaries or (in the case of a dispute) with the majority of them (according to the value of their combined interests) - duty to consult is only in so far as it is practicable to do so.

What happens to a joint tenancy when a tenant dies?

The interest passes automatically to the surviving joint tenant(s) - does not pass under a will/intestacy

What are joint tenants entitled to?

The whole of the property - it is possible for joint tenants to sever a joint tenancy in equity and convert the beneficial interests into a tenancy in common.

It is not possible to sever the joint tenancy of the legal estate. This cannot be severed to create a tenancy in common – s 36(2) LPA 1925.

Severance only relates to joint tenancy in equity 

What happens to a tenancy in common when the tenant dies?

Share will pass in accordance with the terms of their will/ intestacy - THEREFORE number of tenants could increase and shares likely to be unequal in size.

What are the four unities? (used to decide between a joint tenancy and tenancy in common in equity)

1. Unity of possession - immediate possession (both JT and TIC) 

2. Unity of interest - for LT - in a TIC can have unequal shares (no unity)

3. Unity of title - each co-owner must have acquired their interest from the same document - e.g. the same transfer or conveyance.

4. Unity of time - – the co-owners receive their interests at the same time.

Only unity of possession is required for a TIC - all four for a JT.

What is the second test for a JT or TIC?

Express declaration of trust - a document of transfer sets out how the property is to be held (regardless of the size of contribution made by any of the co-owners)

Joint tenants if the declaration of trust is conclusive (notwithstanding unequal contributions)

What is the test for words of severance?

If the deed contains WoS = JT/TIC

If a JT deals with their share - will operate as severance of a joint tenancy - in a TIC each owner can deal with their share separately (e,g, mortgage or sell) 

What does equity presume about TICs?

There is a presumption that the co-owners will be joint tenants in equity on the basis that equity follows the law – Stack v Dowden [2007]

The legal estate is always held as a joint tenancy and it is, therefore, presumed that the equitable interest will also be a joint tenancy.

How can the presumption that co-owners are JTs in equity be rebutted?

i) Property is acquired for business use - as would want interest to go to estate rather than to co-owners

ii) Unequal contributions to the purchase price – equity presumes a tenancy in common (share in proportion with contribution) 

iii) Post-acquisition money management – in relation to a trust of the home, there is a strong presumption in favour of a joint tenancy in equity - can be rebutted in exceptional circumstances where it can be shown that one co-owner has provided the far greater share of the finance for the home, for example in paying all of the mortgage payments and the majority of the outgoings.

In the absence of any of these presumptions, the equitable interest will be held as JOINT TENANTS - as ‘equity follows the law’ - i.e. mirrors the legal estate. 

What is severance of a joint tenancy in equity?

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

Only applies to equitable interests - cannot sever the joint tenancy of the legal estate.

Must occur during the lifetime of the co-owner and cannot be effected by a will

What are the two ways severance can be effected?

1. Formal severance by written notice 

2. Informal severance 

How is a joint tenancy (in equity) severed by written notice?

Written notice must be given to other co-owners stating an intention to sever - no specific form and does not need to be signed - does not require the consent of other joint tenants

To be effective:

i) must use appropriate wording

ii) be received by all the other joint tenants or be deemed to have been received.

iii) must be immediate - cannot be in a years time (if so, would continue to hold property as JTs in equity)

What are the postal rules for notice of severance?

Registered post - if letter is not returned undelivered 

Ordinary post - sufficiently served if it is left at the last known place of abode or business in the UK of the person to be served

What is the effect of severance?

If severance occurred - property held as tenants in common - interest goes to estate

If severance has not occurred - property held as joint tenancy - if co-owner dies, survivorship applies and other co-owners become sole owners of the property.

What are the methods of informal severance?

i) Acts operating on the joint tenant’s share (alienation) - a joint tenant in equity disposes of their equitable interest by sale, gift, lease or mortgage (must be in writing and signed) 

ii) Severance by mutual agreement - the joint tenants to act together (either expressly or by implication) to sever the joint tenancy in equity (oral agreement will suffice) 

iii) Severance by mutual conduct/course of dealings - behaviour clearly regard themselves as owning distinct shares.

iv) Severance by bankruptcy - once the bankruptcy is discharged, the equitable interest reverts to the co-owner who will continue to hold it as a tenant in common.

v) Severance by homicide - one joint tenant unlawfully kills another joint tenant.

What are the effects of severance?

On severance, the joint tenancy in equity becomes a tenancy in common.

i) two or more tenants in equity = both become tenants in common in equal shares.

ii) three or more = only the co-owner who severs their joint tenancy becomes a tenant in common - the other joint co-owners continue to hold a joint tenancy in equity of the remaining interest.

• Their ‘share’ of the property is proportionate to the number of joint tenants. So, if there are three joint tenants, the co-owner who severs their joint tenancy will hold one-third as a tenant in common and the remaining co-owners will continue to hold two-thirds as joint tenants.

• When severance occurs, the individual co-owners’ contributions to the purchase price is irrelevant.

What is a resulting trust and when will it arise?

A resulting trust will arise when:

i) a person, who does not hold legal title to property, makes a contribution to the purchase price of the property

ii) which is not a gift or a loan

iii) at date of acquisition (not subsequent to it)

The person then holds a beneficial interest in the property proportionate to the contribution made.

RESULTING TRUST IN EQUITY - legal estate held on trust by purchaser for the contributor.

What is a constructive trust and how does it arise?

i) agreement and detrimental reliance - doesn’t matter if a trick/deceitful - reliance = paying for improvement/ bills/ working unpaid 

ii) conduct and direct financial contributions - payment towards the purchase price initially or payment of the mortgage payments by the non-owning party - anything less than a direct financial contribution would be insufficient 

COMMON INTENTION = property shared beneficially. 

read through 2.4 then start cards from 2.5