Co-Ownership: Types of Estates

Fee Simple or Freehold Ownership

• Largest estate recognized by common law, practically of unlimited duration.

• Terminates only if the current owner dies without a will and has no identifiable successors (extremely rare).

• Three categories of rights:

  • Possession: Right to exclude all others from the land.

  • Use & Enjoyment: "Every act of ownership which can enter the imagination" - whatever you want to do with the land with subjection (e.g., Resource management consents).

  • Alienation: Full power to dispose of the entire interest, or portions of the interest whether during their lifetime or by will.

Life Estate

• A fee simple estate, but the holder only enjoys the rights of use and occupation during their life.

• Limited power of alienation; interest cannot be passed by will.

• Example: Lease can be granted or could be sold but not worth very much due to uncertainty of duration.

• Mainly found in family situations (e.g., elderly parents).

Leasehold Interests

• Leasehold is a proprietary interest.

• No limit to duration; can be for 99 or even 999 years.

Future Interests

• Interests do not exist at the moment, but the holder will become entitled to legal estates in land if either occurs:

  • Reversions: Owner of a freehold or leasehold estate grants a lesser interest in the land to another person. After the lesser estate ends, it will revert to the original owner.

  • Remainders: Owner of a fee simple estate grants an estate to one person, and at the same moment, a second or more estates to another person, with these only coming into effect once the prior estates end.

What is Co-Ownership?

• Simultaneous entitlement where two or more people (natural or legal persons) are simultaneously entitled to the same parcel of land, although they may not have the same entitlements.

• Common situations:

  • Family or de facto relationships (partners and spouses).

  • Trusts.

  • Māori land.

  • Cross leases.

  • Commercial relationships.

• Applies to any interest in land whether freehold or leasehold.

• Co-ownership interests may exist at law or in equity; a person may have an equitable interest in land even if the legal title does not reflect this.

• Legal incapacity (minority age or mental disorder) does not prevent holding of co-ownership interests.

Types of Co-ownership

• Joint tenancy.

• Tenancy in common.

• Joint family homes.

Joint Tenancies

• Two or more co-owners in the same piece of land, in law, that are constituted as a single owner.

• Equal entitlement to the entire property; co-owners technically do not hold "shares," each is invested with the whole interest in the land.

• Each co-owner has the right to alienate via severance of their interests through conversion to tenancy in common.

• Statutory presumption of joint tenancy under the Land Transfer Act 2017, s47: "Two or more persons named in an instrument as transferees, mortgagees, or owners of an estate or interest in land must be treated as joint tenants."

  • Does not apply to Māori land.

  • Subject to anything contrary in the instrument.

  • Does not preclude the court from looking behind the tenants' interests (Re Foley).

• Two main features:

  • Presence of the 4 unities.

  • Right of survivorship (jus accrescendi).

Words Conveying Joint Tenancy

• Words must not imply that grantees would own separate shares; implies creation of a tenancy in common instead.

  • Conveyance - Grant "to A and B".

• Words demonstrating an intention that the co-owners are to hold seperate shares (words of severance):

  • Equally.

  • Equally divided amongst.

  • To be divided.

  • Share and share alike.

  • Between.

  • Among.

The 4 Unities

• Title: Each JT's title must be derived from the same instrument.

• Time: Rights of the JTs commence simultaneously.

  • Unity of title does not necessarily ensure unity of time.

  • Example: During my lifetime, I grant my interest "to A for life, then to the heirs of B and C."

  • If B and C die at different times in A's lifetime, B's heirs and C's heirs cannot take as JTs because there is no unity of time (as B and C have died at different times, and as a result, their heirs would not gain interests simultaneously).

• Exceptions:

  • Does not apply to wills.

  • Does not apply to trusts.

• Interest: JTs have to hold the same nature of interest (e.g., Freehold or leasehold) and the same duration (e.g., Life tenant and fee simple reversioner).

  • Impact: Any legal act must be effected by all JTs if it is to bind the entire estate (e.g., Mortgage, leases, easements, etc.).

• Possession: Each JT is just as much entitled to possession of all or any part of the land as the other.

  • Where fewer than the total number of JTs are in possession of the land, possible for those in possession to be in adverse possession against the others - allowing them to take sole ownership of the property.

  • Example: If 3 people co-owned a property, and one leaves the country and doesn't come back, the 2 other co-owners act in a way that looks like they are the sole co-owners of the property. As a result, they may show adverse possession against the other owner, and as a result, his interests are extinguished.

  • A JT who has failed voluntarily to exercise their right of possession ordinarily cannot claim an occupation fee from the JT in possession.

Wright v Gibbons (1949) CLR 313

• Sisters A, B, and C owned property as JTs.

• A and B wanted to end the joint tenancy.

• In one instrument, A transferred her undivided interest to B, and B transferred her undivided interest to A.

• C survived A and B and sought a declaration that the memorandum of transfer did not effect a severance of the joint tenancy.

• Issue: When a JT alienates their interest to another party (including another JT), does this sever the original joint tenancy?

  • Held: Yes, upon registration of the memorandum of transfer, the joint tenancy was severed, and A, B, and C become tenants in common.

Right of Survivorship

• When 1 JT dies, their interest is extinguished, and it accrues to the remaining JTs whose interests are correspondingly enlarged.

• The entire estate "survives to" the living JTs.

• A JT can avoid the right of survivorship by severing their interest during their lifetime - converting the tenancy into a tenancy in common.

Simultaneous Deaths

• If both/all JTs die simultaneously, the property will devolve as if it were held as a tenancy in common with equal shares.

• Division of the property will occur according the deceased's will or intestacies.

Homicide of one JT by another

• Former approaches:

  • Re Pechar (Deceased) [1969]: One half of the whole property is held on constructive trust for the victim's estate. Upon the killer's death, one half of the property goes to the killer's estate, the other half to the victim.

  • Re K (Deceased) [1985]: The killing severed the joint tenancy, and it became a tenancy in common.

• Current approach: Succession (Homicide) Act 2007 (s 8)

  • Killer is not entitled to any interest in any property that the killer jointly owned with the victim and that otherwise would have passed to the killer.

  • In respect of jointly owned property, it is to be distributed or passed as if the killer predeceased the victim and any other property.

  • Except where the property was owned in joint tenancy between the victim and the killer.

  • Property devolves at the death of the victim as if the property was owned by each as tenants in common with equal shares.

Determination of Joint Tenancies

• Union in a sole tenant, destruction of one of the "4 unities."

Union in a Sole Tenant

• When there is a single owner, co-ownership is clearly at an end. May occur:

  • Through the operation of survivorship.

  • Where all existing JTs transfer the land to a 3rd, single party.

  • Where JTs agree to transfer and release their interests to a single co-owner.

  • Where a court order is made under the Property (Relationships) Act 1976.

Destruction of one of the 4 unities

• Unity of time cannot be destroyed, but unities of possession, title, and interest can.

• Destruction may be desirable to convert a joint tenancy into a tenancy in common, thereby avoiding the right of survivorship.

Means of destruction

Acquiring a greater interest

• Where one JT acquires a greater interest than other JTs, unity of interest is destroyed, and joint tenancy severed.

  • Example: One of several JTs for life - purchases or inherits the reversion from the grantor of the life estate.

Partition

• Division of jointly-held land into separate holdings reflecting each owner's respective share; each of the respective tenants then takes a distinctive property.

  • Destroys unity of possession.

  • Known as Division under the Property Act 2007.

Severance

• Destroys the unity of interest or title.

• Size of severed share depends on the number of JTs; each is entitled to an equal fraction of the whole estate.

• Only the severed share is affected (the remaining parties stay as joint tenants).

Severance by Unilateral Action (Voluntary Alienation)

• Transfer to 1 (or more) of the JTs.

• Transfer to oneself as TIC (Land Transfer Act 2017, s 48).

• Sale by 1 JT of their interest.

• Gift by 1 JT of their interest.

• Transfer of legal interest alone.

• Assignment - similar to gifting, e.g., In the case of bankruptcy to satisfy creditors.

Granting of a lease

• No local authority, best approach is likely the temporary suspension of the survivorship principle.

Spouses

• Cannot alienate their interest in a joint family home. Tenants in common can severe their interest.

Bankruptcy

Mutual Agreement

• Where all JTs together agree to sever the joint tenancy.

Effective at law

• When memorandum of transfer (transfer of interests to themselves as TIC, s48 LTA) giving effect to the agreement is registered.

  • Legal title will then be held as tenancy in common.

• If the agreement is not registered, the equitable joint tenancy may still be severed, resulting in a specifically enforceable contract between co-owners.

Gateshead Investments Ltd v Harvey [2014]

• Mr. and Mrs. H owned family home as JTs.

• Mr. H died, and Mrs. H was subsequently bankrupt.

• Dispute between Mrs. H and creditors.

• Creditors claimed they were entitled to whole property as Mr. H interest had passed due to survivorship. Mrs. H claimed that prior to Mr. H's death the JT was severed.

Property (Relationships) Act 1976, s 47

• "Any agreement…between spouses or partners with respect to their relationship property and intended to defeat creditors of either spouse or partner is void…"

Court Held

• Mr. H and Mrs. H intended to sever the joint tenancy in the relationship property agreement.

• In this case, PRA 1976 does not void severance.

• At the time of the agreement, creditors only had a claim to Mrs. H's interest in the property - Mrs. H was bankrupt through a company she operated independent of Mr H.

• They never had a claim to Mr. H's interest.

• Purpose of s 47 was not to improve the position of creditors, only to preserve it.

Partition

• Partition is the division of co-owned land into separate parcels held individually.

• In New Zealand law, it's referred to as 'Division.'

• It destroys the unity of possession, effectively ending both joint tenancies and tenancies in common.

Voluntary Partition

• Requires a written agreement between co-owners to partition the land (Property Law Act 2007, s 24).

• Partition is legally completed upon registration of a memorandum of transfer, marking the end of co-ownership.

• Parties likely cannot waive the right to apply to court for partition or sale in the future.

Compulsory Partition

• Historically, co-owners lacked an inherent right to compel partition, a right granted by statutes like the Partition Act 1539.

• Under the Property Law Act 1952, a party seeking partition was generally entitled to it, with the court having the power to order partition or sale.

• This lacked flexibility in determining partition boundaries and could lead to unfair outcomes if partition was unreasonable.

• The Property Law Act 2007 provides courts with expanded discretion in cases of partition or sale (ss 339 - 343).

• The court can order or refuse a sale or partition.

• It can compel co-owners to purchase the shares of other co-owners at a fair price.

• Applications can be made by a co-owner, mortgagee (if entitled to exercise power of sale), or a person with a charging order, including both legal and equitable co-owners.

Proceeds of Sale

• Proceeds should be divided according to the beneficial interests in the property, subject to equitable accounting.

• Legal title may not accurately reflect parties' beneficial entitlement.

• In such cases, the rights of co-owners should be adjusted in an equitable manner, regardless of whether they are joint tenants (JTs) or tenants in common (TICs).

• Issues include costs incurred by one co-owner, such as improvements, outgoings (rates), and mortgage payments.

Bayley v Hicks [2012] NZCA 589, [2013] NZLR 401

• Two sisters, each holding an undivided 1/2 share as tenants in common, had a strained relationship.

• Hicks farmed the property, while Bayley did not.

• They both wanted to end co-ownership but disagreed on how. Bayley wanted to divide the property, while Hicks preferred a sale.

• The High Court judge rejected both proposals and suggested an alternative division.

• Both parties appealed.

• The issue on appeal was whether the Court had the discretion to determine a division different from that proposed by the parties.

• The Court held that the prior narrow jurisdiction has been replaced by a broad discretion, including to make orders and give directions different from those sought by the parties. However, a court should not implement an alternative division if there is demonstrable outrage of both parties or if significant action is required (e.g., resource consents).

Robertson v Robertson [2021] NZCA 295

• Two brothers (Conrad & Martin) had a boatbuilding partnership at a boatyard they owned as tenants in common.

• They had a falling out 25 years ago and dissolved the partnership.

• C continued the boatbuilding business and leased land from himself and M.

• C wanted to buy out M's share; M wanted to redevelop the land.

• The issue was whether the Judge was wrong not to order partition, or not to make an order requiring C to purchase M's share at a fair and reasonable price.

• The High Court judge insisted sale was the best outcome, taking into account the length and nature of the relationship and the significant disagreement so sale was the best option.

• The Court of Appeal will not interfere with a ss 339 - 343 order unless the lower court judge had made an error in law or principle, failed to take into account some relevant matter, taken into account irrelevant matter, or otherwise been 'plainly wrong'.

Severance

• Severance destroys the unity of interest or title.

• Unlike partition, severance does not necessarily end co-ownership but rather changes the size of interests.

• The size of the severed share depends on the number of joint tenants; each is entitled to an equal fraction of the whole estate.

• Only the severed share is affected; the remaining parties remain as JTs, and survivorship applies between them.

Course of Dealing

• Absence of express mutual agreement for joint tenants (JTs) to sever, but intention to sever can be inferred from conduct.

• The interests of all JTs are mutually treated as creating a tenancy in common.

• Related conduct may increase interest in the property (e.g., gaining more profits).

• The course of dealing must be known by all JTs and affect all their interests.

• Course of dealing must treat all JTs as tenants in common.

  • Burgess v Rawnsley [1975]

    • H and R, initially acquaintances, bought a house in their joint names "as joint tenants," each providing 1/2 of the purchase price.

    • H wanted a marital relationship with R, but R did not.

    • R never lived in the house.

    • An oral agreement was made for R to sell her share to H, but she later refused.

    • Issue: Was the joint tenancy severed in equity?

      • If no, survivorship would operate, and therefore R would become the sole owner.

    • Yes, the joint tenancy of H and R was severed by R's oral agreement to sell her shares to H.

    • Even though the agreement was not specifically enforceable, the negotiations between H and R amounted to a "course of dealing" that satisfied the requirements of Williams v Hensman and effected a severance in equity.

    • Therefore, from that point onwards, they were tenants in common, and survivorship would not apply.

Rights of Co-Owners

• Unity of Possession: Applies to both joint tenancies and tenancies in common.

• All co-owners are equally entitled to enjoy the whole of the property. This includes:

  • Physical occupation

  • Proportionate share of rents and profits resulting from management of the property

• A co-owner in possession cannot be evicted by other co-owners.

• If one co-owner takes sole occupation of the property, they are generally not liable to compensate the others simply by being in sole occupation.

Ouster

• Where occupation rent could be appropriate.

• A "rather antique expression" (Sitarz v Burke) and a narrow concept. Maybe found where:

  • There is a "destruction" of the common property (Wilkinson v Haygarth).

    • Turf farming - extracted all of value from the property.

  • There is complete (physical) exclusion of a co-owner from possession.

  • If an occupying owner has secured sole enjoyment by ouster of the co-owners, may be liable in trespass for damages or liable to pay an occupation rent.

Other Remedies

• Order for possession

• Award of damages (measure of damage reflects plaintiff’s proportion)

Liability for Occupation Rent

• May be imposed by courts as part of equitable accounting between co-owners.

• Common situation is where a martial or de facto relationship has been broken down, and the party who leaves the property may be regarded as excluded.

  • Dennis v McDonald [1982] Fam 63 (CA)

    • De facto relationship broke down, with Mrs. D leaving the property because of violence and threats of further violence.

    • Ex-partner, Mr. McD remained in occupation and was ordered to pay an occupation rent calculated as 50 percent of the "Fair rent" of the property.

      • Fair rent = fair market rent (Surridge v Quinn)

Leases

• If one co-owner occupies as tenants of the other tenants share or interest, rent will be payable during tenancy any hold-over period.

• Landlord-tenant relationship does not affect parties' co-ownership rights.

• Leases to 3rd parties:

  • JTs and TICs can lease their interests to 3rd parties and therefore collect a proportionate share of the rent.

  • Whether a lease executed by only one co-owner effects a severance is unclear.

  • A suspension of the right of survivorship during the period of tenancy.

  • It is clear that because of the unity of possession, the lessee cannot exclude the co-owner that has not granted the lease (Catanzariti v Whitehouse)

    • Marital breakdown, wife leaves house. Husband leases property out for period of 12 months, wife returns and renter tries to exclude her from the property. The tenant could also not be excluded by the wife as they had a right to occupy.

Other Issues

• In general, co-owners cannot obligate each other to contribute to their expenditure on repairs/improvements while the co-ownership is ongoing. E.g., sole occupation where the occupying co-owners renovates house etc - while the other co-owners would usually contribute voluntarily, the sole occupier cannot obligate the co-owners in contributing.

• Equitable accounting between co-owners - where co-ownership ends in sale or partition. Needs to account for and share expenses related to:

  • Expenditures on repairs and improvements.

  • Mortgage repayments (including principal and interest)

  • Payment of rates and other outgoings.

• Action for waste (tort) is available; positive acts or omission of one co-owner is considered by the law to be "waste" - e.g. destruction or removal from the property. One co-owner may be liable to pay damages to others for losses arising from acts or omissions (PLA 2007, s 69).

• There is no fiduciary relationship between co-owners (Kennedy v de Trafford)

• They therefore don’t have to act in the other co-owners' best interests.

• Each co-owner has the right to alienate their interest (e.g., lease to a 3rd party) .

Tenants in Common

• Historically, JTs were favored in common law due to the feudal nature of property. However, TICs have been preferred in equity as the right of survivorship is a completely unequitable mechanism.

Creation

• Expressly

• By the implication of equity

• Severance of a joint tenancy

Express Creation

• Occurs when words of severance are included in the transfer instrument, indicating an intention for co-owners to take separate shares.

• Examples of such words include "equally", "equally divided amongst", "between", and "among".

• "Jointly and severally" - created a joint tenancy in a deed but tenancy in common in a will (Slingsby's Case)

• "to hold in fee simple as beneficial joint tenants in common in equal shares" - Held to create a joint tenancy in a deed (Joyce v Barker Bros).

Creation by Implication of Equity

• Where purchasers provide purchase money in unequal shares.

  • Equitable presumption that purchasers take as tenants in common - Delehunt v Carmody (1986)

  • Presumption may be rebutted, burden on party claiming beneficial interest was a joint tenancy.

  • Where there is no evidence as to shares, prima facie the owners will be treated as JTs, absence of circumstances indicating that a joint tenancy was not intended or severed - Cameron v Smith (1910)

• Where 2 or more persons jointly lend money on mortgage

  • Joint tenancy should not exist between the ownership rights of mortgagees.

  • Equity dictates that interest on the loan should not be subject to survivorship.

  • Although they take a joint security, each lender means to lend, and take back, their own contribution.

• When land is purchased as part of partnership assets

  • Partners in a commercial venture acquired land as partnership assets, they were assumed to hold the land as TICs.

  • Underlying rationale is that the mechanism of survivorship has no place between business partners. Similar to mortgages - business partners put in what they intend to get back.

  • Under Partnership Law Act 2019 (s 37) any land belonging to the partnership devolves according to the nature and tenure of the estate and interest and the general rules of law that apply. Survivorship operates in trust for the persons who are beneficially interested in the land.

• Stirling v Stirling (2005)

  • Brothers operated a quarry business together. The land the quarry was situated on was owned in joint tenancy.

  • Brother died, was he able to leave the half-share to his wife or did survivorship operate.

  • Issue: Was the land partnership property under the Partnership Act 1908, and therefore subject to the trust in favor of the wife?

  • Yes, The fact that the brothers entered into a joint tenancy did not mean that it was not partnership property. Under the 1908 act, the land had to be presumed to be partnership land until the opposite could be proven, it was not.

  • Joint tenancy can operate between parties but at law the land could be held in partnership property. Depends if there is enough evidence for the contrary to be proven.

Determination

• Union in a sole tenant

• All TICs transfer their share to 3rd party

• All TICs agree to transfer and release their interests to a single co-owner

• Where a court order is made in accordance with the Property (Relationships) Act 1976.

• Conversion into a joint tenancy

  • Under the Property Law Act 2007, TICs may declare themselves as JTs in deed.

• Partition

  • Division of land into separate holdings

Co-Ownership Agreements

• Desirable for both JTs and TICs

Joint Family Homes

• The Joint Family Homes Act 1964 was intended to offer some advantages for residential homes owned by married couples. Originally provided for:

  • Savings on death duties (Inheritance tax)

  • Protection against unsecured creditors

  • Security for a spouse not on the title

  • Ability to vest the house in the names of both spouses as JTs without incurring stamp or gift duty.

  • Saving of legal costs in small estates when registering the property by way of a survivorship transmission.

  • Most of these advantages no longer apply stamp, death, estate and gift duties have been abolished and Property (Relationship) Act 1976 enable family trusts to be used to protect family homes.

Issues

• Act applies only to a "husband" and "wife"

  • This excludes couples in de facto relationships (even though de facto couples are given protections in PRA 1976).

  • However same sex marriages are included but are still conforming under the "husband" and "wife" context.

  • Joint family homes registrations have shrunk from 30,000 in 1974, to 151 in 2011.

  • The NZLC has recommended that the act be repealed and not replaced; Joint Family Homes Repeal Bill introduced in 2012 but did not pass.

Remaining advantages

• Today, main advantages to registering property as a JFH are protection from creditors and minor savings in legal costs.

• Protection does not extend to mortgagees of the home

  • Rights of the mortgagees are not affected by settlement of the property as a JFH. Today, main advantages to registering property as a JFH are protection from creditors and minor savings in legal costs.