3. Co-Ownership - Detailed exam notes for Land Law, Part A of the Bar Course by the Singapore PDF

Preview

Summary

Detailed exam notes for Land Law, Part A of the Bar Course by the Singapore Institute of Legal Education....

Description

3. Co-ownership Introduction Co-ownership refers to the forms of ownership in which two or more persons are concurrently entitled to an interest or interests in the same property. In Singapore, the majority of property is coowned e.g. HDB flats jointly owned by spouses. This is due to a number of factors including rising property prices, joint-income families, gender equality, greater longevity, tax planning and the function of a home both as a residence and an asset.

Practical Ramifications of Co-Ownership i) Additional Buyers’ Stamp Duty (ABSD) Liable buyers are required to pay ABSD on top of the existing Buyer’s Stamp Duty (BSD). ABSD and BSD are computed on the purchase price as stated in the dutiable document or the market value of the property (whichever is the higher amount). The ABSD liability will depend on the profile of the buyer as at the date of purchase or acquisition of the residential property: a) Whether the buyer is an individual or an entity - if a property is jointly purchased by buyers of different profiles, the profile with the highest ABSD rate will apply on the entire value purchased. b) Nationality of the buyer - Buyer must have been granted residency status by ICA as at the date of purchase in order to enjoy lower ABSD liability. c) Number of residential properties owned by the buyer – ABSD liability increases with number of properties owned. There is a transitional remission for residential properties acquired on or after 6 July 2018 such that the former ABSD rates will apply. For buyers to be eligible for the remission, all of the following conditions must strictly be met: a) The OTP is granted on or before 5 July 2018; b) The OTP is exercised on or before 26 July 2018 or the date of expiry of the OTP validity period, whichever is earlier; and c) The OTP is not varied (including any extension of the validity period) on or after 6 July 2018.

1

ii) Total Debt Serving Ratio (TDSR) The TDSR is a framework to ensure borrowers are not overleveraged (carrying too much debt and unable to pay interest payments from loans and other expenses) and to curb property speculation, with regard to property loans granted by financial institutions (FIs). It is a standard implemented by MAS. The TDSR limits the amount borrowers can spend on debt repayments to 60% of their gross monthly income. The TDSR framework does not apply to refinancing of owner-occupied housing loans. This means that someone can refinance their home loan without worrying about the TDSR if they are living in the property for which they are repaying the loan. For properties that are not owner-occupied but were purchased for investment purposes, the TDSR framework will not apply if they commit to a debt reduction plan with their financial institution to repay at least 3% of the outstanding balance in not more than three years, and fulfil their financial institution’s credit assessment.

Types of Co-ownership and Characteristics i) Joint Tenancy Joint tenancy is a form of co-ownership in which each individual is fully entitled to the whole of the estate. As against the world, the joint tenants are viewed as one entity. They enjoy as between themselves a right of survivorship and there is always a presumption of the four unities being present. Right of Survivorship and Muslim Law A unique feature of joint tenancy is that if one tenant dies, the surviving tenant takes the entire interest. This right ensures that the entitlement of each joint tenant is simply extinguished upon his/her death as no share devolves upon those who take under the deceased’s will or on his intestacy because a joint tenant does not have a share within the property. Section 39, Conveyancing and Law of Property Act (1994): Power for corporations to hold property as joint tenants 39.—(1) Subject to the provisions of the Residential Property Act [Cap. 274], a body corporate shall be capable of acquiring and holding any real or personal property in joint tenancy in the same manner as if it were an individual; and where a body corporate and an individual, or two or more bodies corporate, become entitled to any such property under circumstances or by virtue of any instrument which would, if the body corporate had been an individual, have created a joint tenancy, they shall be entitled to the property as joint tenants: Provided that the acquisition and holding of property by a body corporate in joint tenancy shall be subject to the like conditions and restrictions as attach to the acquisition and holding of property by a body corporate in severalty.

(2) Where a body corporate is joint tenant of any property, then on its dissolution the property shall devolve on the other joint tenant.

Shafeeg v Fatimah [2010] SGHC - Muslim law of intestacy dictates that if a person dies intestate, his estate is to be divided according to the number of heirs as determined by Muslim law. The issue was whether property held in joint tenancy could be considered part of the deceased’s estate. Held: Jointly owned property is held fully by the surviving joint tenant through the right of survivorship. It does not form part of the deceased’s estate. Muslim law on inheritance does not apply to joint tenancies. Four Unities 1) Unity of possession - Each of the joint tenants is entitled to present possession and enjoyment of the whole property.  

One cannot sue the other for trespass. No joint tenant may say they own a certain part of the land which is restricted to the other joint tenants. The remedy of a joint tenant who has been excluded from possession is to ask for a partition.

2) Unity of title - Joint tenants must derive their title from the same source (e.g. the same conveyance or will). 3) Unity of time - The interests of the joint tenants must be vested at the same time. 4) Unity of interest - Joint tenants must have the same type of interest of the same duration (e.g. ‘to A and B in fee simple’ or ‘to A and B for life’ but not ‘to A for life and B in fee simple’).  

A joint tenant has all the rights of ownership except the right to devise his interest in his will, because of the right of survivorship. If he were to dispose of his interest in his lifetime, he would effect a severance of the joint tenancy and turn it into a tenancy in common.

Joint Tenancy and Collective Sales Goh Teh Lee v Lim Li Pheng Maria (2010) 3 SLR – The judge upheld the Strata Titles Board’s decision to grant an order for the collective sale of a development comprising a four-storey block containing 24 flats and 9 pre-war terrace houses. The appellant was a co-owner of one of the flats and was the sole dissentient of the collective sale. The other co-owner was his ex-wife, who had agreed to the collective sale and appended her signature to the relevant documents. Held: Where there is a joint tenancy, both owners must dissent to a collective sale of any property. If there is only one dissenting owner, he does not have locus standi to object. In the context of a collective sale, none of the joint tenants can support or oppose the proposed collective sale

3

unilaterally. The collective sale regime also interprets “proprietor” as including both co-owners in either a joint tenancy or tenancy in common. Crown, “En Bloc Sales and Joint Tenancy: Goh Teh Lee v Lim Li Pheng Maria” [2011] 2 SJLS 564: Judgment stated obiter that for tenancies in common, both tenants would also need to act in unison to object to a collective sale. A single tenant in common does not hold the entire interest in the property, he only owns a share. Because of the use of the words "entire estate" in s 3 (a) of the Land Titles (Strata) Act 1999, a single tenant in common would not come within the definition and could not raise any objection to the sale on their own. Creation of Joint Tenancy A joint tenancy at law is created where land is conveyed to two or more persons with no words of severance, indicating that they take the land in undivided shares. An example of wording used would be a conveyance “ to A and B” or “ to A and B jointly”. Under s 53(1) of the Land Titles Act (LTA), there is a presumption that persons registered as cotenants hold property as joint tenants unless otherwise indicated. Manner of holding by co-owners 53. — (1) In every instrument affecting registered land, co-tenants claiming under the instrument shall, unless they are described as tenants-in-common, hold the land as joint tenants ; and if they are described as tenants-in-common, the shares in the registered land to be held by them shall, subject to subsection (2), be specified in the instrument. (2) Persons described as tenants-in-common shall, in the absence of any expression to the contrary, be presumed to be entitled in equal shares.

Tenants in common may convert their co-ownership arrangement to joint tenancy under s 66A of the CLPA:  

Tenants in common may jointly declare by a deed of declaration that they hold the estate or interest in their respective shares in the land as joint tenants of the entire estate or interest. Where A, B, and C are tenants in common and only A and B declare that they want to hold their shares as joint tenants, they become joint tenants as to their combined share of the estate, and hold it as tenants in common with C.

4

ii) Tenancy in Common Unlike joint tenants, tenants in common hold distinct “shares” in a single piece of land, although the land is not physically divided among them. They therefore hold the interest in land in undivided shares so as to preserve unity of possession. There is no right of survivorship due to the distinct and irreducible share of each tenant; therefore if one tenant dies, his share will form part of his estate. Unity of Possession Tenants in common have only unity of possession. Each tenant has a right to any part of the land which he holds in common. This means that if one tenant occupies the entire premises to the exclusion of the other with the other’s approval, he need not pay compensation to the other. The exception to this is when there is an ‘ouster’ i.e. where one tenant evicts or excludes the other from the land without their approval. Dennis v McDonald [1982] 1 All ER 590 – Wife was forced to leave the property she owned with her husband in equal shares because of his violent behaviour. The court held that he should pay rent to her since he had remained solely in occupation and she had been excluded involuntarily. Only in cases where the tenants in common not in occupation were in a position to enjoy their right to occupy but chose not to do so voluntarily, and were not excluded by any relevant factor, would the tenant in common in occupation be entitled to occupy the premises free of liability to pay an occupation rent. Tan Chwee Chye v Kulandayan Chettiar [2006] 1 SLR 229 - A clubhouse was situated in an area of land made up of two plots. The trustee of the clubhouse sought to establish adverse possession by an ouster. Held: “The rights of co-owners of property are to equal occupation of the land. Evidence of single and exclusive possession by itself is not enough to constitute dispossession where co-owners are concerned. The possession to the exclusion of the other co-owner can be read as referable to the rights which the claimant already has as co-owner. The question is whether the claimant ever had the necessary intention to possess the property so as to dispossess the other co-owner . The fact that each co-owner is necessarily entitled to the use and occupation of the whole land is a factor to be borne in mind.” Creation of Tenancy in Common 1. Severance If there are words of severance in the conveyance (e.g. ‘to A and B in equal shares’ or ‘to A and B to share and share alike’ or ‘to A and B as tenants in common’), a tenancy in common at law will be created. S 53(2) of the LTA provides that persons registered as tenants in common shall be presumed to hold property in equal undivided shares unless the shares are specified.

5

Severance of a joint tenancy will also create a tenancy in common. S 53(5) Land Titles Act: “Without prejudice to any rule or principle of law relating to severance of a joint tenancy, any joint tenant may sever a joint tenancy of an estate or interest in registered land by an instrument of declaration in the approved form and by serving a copy of the instrument of declaration personally or by registered post on the other joint tenants.” 

S 66A(3) CLPA also provides that a joint tenant may make a unilateral declaration by deed to sever the joint tenancy and make it into a tenancy in common

S 53(6) LTA: “Upon the registration of the instrument of declaration which has been duly served as required by subsection (5), the respective registered estates and interests in the registered land shall be held by the declarant as tenant-in-common with the remaining joint tenants, and the declarant shall be deemed to hold a share that is equal in proportion to each of the remaining joint tenants as if each and every one of them had held the registered land as tenants-in-common in equal shares prior to the severance.” Example:  A, B, and C are joint tenants of property and A wants to sever the joint tenancy between him and B and C. He may do so by executing a deed unilaterally and having the deed served on B and C.  When this is done, A holds the property as a tenant in common with B and C, taking a onethird share while B and C take two-thirds.  B and C remain joint tenants between themselves for the two-third share.  If B dies, C takes his share of two-thirds by the right of survivorship and becomes a tenant in common with A for the whole. S 66A(4) CLPA – Implies that once the deed of severance is made and served on the other joint tenants, a tenancy in common arises, even if the deed is not yet registered. Diaz v Diaz [1998] 1 SLR 361 CA – Mother and daughter were joint tenants. Mother executed a deed in the required form to sever the joint tenancy, but before it could be registered, she died. Daughter argued that no severance had occurred since the deed was unregistered, and therefore by the right of survivorship, she owned the whole property. Held: Mother had done everything correctly to effect a unilateral severance except that the instrument was not registered. In the circumstances, the severance was effective as between the two co-owners but there remained a joint title on the register . The court reasoned that although s 53(5) and (6) contemplated registration as a necessary part of the procedure of unilateral severance, referring to the Minister’s speech in the 2 nd reading of the Bill, it was clear that parliamentary intention was to facilitate severance of joint tenancies and the requirement of registration could instead hamper this objective. The court therefore concluded that while registration was necessary in relation to dealings with third parties, between the joint tenants themselves the severance was good. 6

Crown suggests that the court inferred that the mother had operated on her own share in equity, thereby effecting a severance in equity. This reasoning would stay within the existing law rather than introduce another method of severance which would be unnecessarily confusing. The act of executing the deed and serving it might be rationalised as the mother’s act of operating on her own share. It would amount to a severance in equity but not in law; the estate of the mother would then have a caveatable interest in the property. 2. Total Alienation by Joint Tenant A tenancy in common can be created when a joint tenant alienates (transfers) his interest during his lifetime. 

E.g. A and B are joint tenants in fee simple of property. If A in his lifetime sells and conveys his interest to X, X and B will be tenants in common.

Where there are three or more joint tenants, the alienation by one joint tenant of his interest does not affect the joint tenancy of the remaining joint tenants. 

E.g. A, B, and C are joint tenants and A alienates his interest to X. X becomes a tenant in common, taking a one-third ‘share’, with B and C. As between B and C, they remain as joint tenants. If B dies, C has the right of survivorship and X and C are tenants in common, with X taking a one-third and C taking a two-third ‘share’ respectively.

3. Partial Alienation by Joint Tenant To effect a severance, even a partial alienation will suffice. Partial alienation involves creating a legal mortgage involving a conveyance of title to the mortgagee (even though the mortgagor joint tenant has an equitable right of redemption of the mortgage to get title conveyed back to him), or a lease. 

Crown cautions that in deciding this matter the courts should have regard to the fact that modern law provides a simple and effective means of severance. The courts should not therefore be astute to discover new methods of severance and in particular should avoid legitimising any forms of severance which can be effected by one party without the knowledge of the other joint tenants.

Cowper v Fletcher [1865] – A lease executed by one joint tenant severs the joint tenancy. This is because the lease will continue to bind the other joint tenant even after the death of the lessor. Such a position is inconsistent with the right of survivorship and so the joint tenancy must be converted into a tenancy in common by severance. 

Crown agreed that there will only be severance if one of the joint tenants dies during the duration of the lease. 7

Wright v Gibson [1949] 78 CLR 313 - Alternative view that a lease by one joint tenant operates to ‘suspend’ the joint tenancy during the period of the lease, rather than effect complete severance.

Common Law The common law favours joint tenancies, as reflected in the presumption in s 53(1) of the Land Titles Act i.e. if there are no words of severance, the common law presumes that the tenancy created is a joint tenancy. In practice, joint tenancies are sometimes more convenient because they allow for the avoidance of further formalities (e.g. when a trustee joint tenant dies, his interest simply devolves on the other trustee joint tenants without any formality).

Equity Equity leans in favour of tenancies in common because of the inherent unfairness of the right of survivorship that applies where there is a joint tenancy.

i) Unequal Contributions to Purchase Price Where A and B have contributed unequally to the purchase price of property conveyed to them jointly at law, the presumption is that they hold the property as tenants in common in equity. While they are joint tenants at law, they hold the property on resulting trust for themselves, and each party is beneficially entitled to the property in proportion to his financial contribution.  

If A dies first, B will be the sole owner of the property at law by right of survivorship, but will hold the property on trust for himself and A’s estate. Equitable accounting can be used to bolster a party’s financial contribution – e.g. if the wife took out a term loan, but the actual person financing it is the husband, it is attributed to the husband.

Where the joint tenants contributed to the purchase price equally and the property is conveyed to them jointly at law, they hold the property as joint tenants both in law and in equity. Section 51(10), Housing and Development Act (Cap 129, 2004 Rev Ed): “No person shall become entitled to any protected property (or any interest in such property) under any resulting trust or constructive trust whensoever created or arising.” Sitiawah Bee v Rosiyah Abdullah [1999] 3 SLR 606 – Mother and daughter purchased HDB flat as joint tenants. The flat was paid for with a deposit from the late father and funds from the daughter. The mother later wanted to sell the flat but the daughter would not consent. The mother sought that the 8

proceeds of sale be distributed between the two parties in proportion to their relative contribution to the purchase price, and that the joint tenancy be severed and the parties hold as te...