Co-ownership in NI - Lecture notes on Co-ownership in NI PDF

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Lecture notes on Co-ownership in NI...

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Land Law

Co-Ownership Deals with concurrent interests in land ie. two or more people sharing the same interest in land at the same time (land is rarely owned by one person). Fundamental differences between NI and England & Wales. 

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Examples? o Couples and domestic home o Inherited property within families (children as co-owners) o Business partners and partnership property o Trustees and trust property Why opt for co-ownership? o Suits the parties’ relationship o Makes financial sense o Tax implications (eg. inheritance tax) o Succession law planning

Possible for freehold estates (eg. a conveyance of land in fee simple to A and B as joint tenants) and leasehold estates (eg. a lease of land for 10 years to A and B as tenants in common). May arise voluntarily (parties decide to be co-owners) or by act and operation of the law (eg. a parent dies intestate, and their children inherit the family home or family land as co-owners).

I. Joint Tenancy Distinguishing features: 1. Right of Survivorship (Jus Accrescendi) 

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No joint tenant is entitled to a specific portion of the land; as each of JT dies, the property passes automatically to the survivors (see diagram). o Who gets the property will depend on who outlives everyone else o Number of co-owners will always reduce over time – makes it easier to trade land o Used for spouses in family homes and trustees in trust property Right of survivorship cannot be defeated unilaterally by will.

Land Law  Corporations ? (legal entity) Bodies Corporate (Joint Tenancy) Act 1899 Corporations can be joint tenants – this allowed banks to act as trustees  Commorientes (simultaneous deaths)? If all joint-tenants die together and you cannot tell who died first Some jurisdictions presume the elder person died first In NI – heirs to asset all collect property as joint tenants Heirs of the deceased joint tenants succeed to the property as joint tenants.

2. Four Unities Required Four unities must be present:  Unity of Possession (applies to every type of co-ownership) Each co-owner has as much right to possession of all the land as the other co-owners. Cannot exclude fellow co-owner from the property – if you do others can force you to pay occupation rend Consequences? Possibility of ouster/exclusion- eg. Glass v McManus (1996) (padlock was exclusion) and Dennis v McDonald (1982) (domestic violence case; partner no longer felt safe in house; court said it was exclusion as she felt threatened) as examples of domestic property; Paroz v Paroz (2010) (prevented other J-T from doing anything with the land – was exclusion) as an example of agricultural land.

 Unity of Interest Each JT must have the same estate in the land. (eg. can’t have fee simple and life estate) However, one JT may have an additional interest in the land so long as it was created when the joint tenancy was created.  eg. To A and B for their joint lives and the life of the survivor, with remainder to A in fee simple.  Unity of Title Each JT must derive his title from the same source eg. title deed, will/intestacy, adverse possession.

 Unity of Time Interest of each JT must vest at the same time.

II. Tenancy in Common  Can own distinct portion of the land legally  Common with partnership property – can benefit family rather than business partner

Land Law

Distinguishing features: 1. No Right of Survivorship When you die you can pass it on to someone in a will 2. Only Unity of Possession Required But tenancy in common leads to fragmentation of title (see diagram); what are the practical consequences of that? Makes land transactions more prolonged and costlier

III. Which Type of Co-Ownership? Check the deed or document (usually specified in purchase deed/will)under which the co-owners acquired the property. Resort to presumptions if (and only if) the relevant deed or document is not clear (though bear in mind the consequences of Stack v Dowden [2007] and Jones v Kernott [2011]). 1. Common Law - always presumes a joint tenancy Presumption that a conveyance to two or more persons creates a joint tenancy. Neater as it reduces over time and makes things simpler However, this presumption is rebuttable. Two circumstances:  Lack of Unities – if one is absent then tenancy in common  Words of Severance- eg. ‘in equal shares’ ‘to be divided between’ ‘respectively’ ‘share and share alike’

2. Equity Equity leans against joint tenancies. It felt survivorship was arbitrary and unfair, whereas tenancy in common allows you to choose who the land goes to. But cannot directly overrule common laweffect? Co-owners hold the legal estate as JT's- therefore right of survivorship applies. However, hold property on trust for themselves in equity as TC (see diagrams).

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Situations in which a tenancy in common will be presumed in equity:  Purchase Money in Unequal Shares- remember the constructive trust decisions in Stack v Dowden (2007), Jones v Kernott (2010)  Mortgage Loans (ie. Joint Lenders)  Partnership Property – business partners don’t want survivorship But, these are only presumptions!!

IV. Severance ie. Conversion of a joint tenancy into a tenancy in common. In other words the original co-owners are still co-owners just without survivorship. Why would this happen?  JT’s may all expressly agree to sever the joint tenancy. After severance, they become TC in equal shares according to the number of JT’s at the time of severance (see diagram 5).  However, severance may be confined to the share of one JT. He then holds his share as a TC, while the other co-owners remain JT's (see diagram 6).

Land Law 1. Severance at Law Co-owners become TC both at law and in equity (no survivorship operating in either portion). Not possible in England and Wales (see lectures next week), but still possible in Northern Ireland. 2 methods:  Acquisition of a Further Interest JT acquires an additional interest in the property after the joint tenancy has been created. eg. 10 year leasehold interests as joint-tenants; at some stage A buys out the landlord’s interest; A acquires an additional interest and becomes TIC  Alienation Joint tenancy severed if one JT alienates his interest in the property- but must be an inter vivos or lifetime alienation; joint tenancy cannot be severed by will. Examples:  sale to a third party – eg. joint-tenant sells interest to a third party  involuntary alienation – bankruptcy (any property in joint tenancy is immediately severed)  partial alienation – lease particular interest (severs joint tenancy; also mortgaging) Unilateral severance (voluntary) is an important mechanism in practice. Why? No severance where all the JTs join in alienating the property.

2. Severance in Equity Co-owners remain JTs at law, but are TC in equity (as discussed above). Often referred to as the Williams v Hensman (1861) methods of severance: (If you sever a joint tenancy in equity there is no impact on the legal interest – ie. still joint tenancy of the legal estate but in equity becomes tenancy in common)  Alienation Includes an enforceable contract to alienate: “equity regards as done that which ought to be done”. (eg. contract to sell/lease)  Mutual Agreement (needs some sort of mutual agreement to sever) Burgess v Rawnsley [1975] 3 All ER 142- agreement need not be enforceable; can have an oral agreement if you can prove its existence Must usually be a firm agreement between the parties to sever the joint tenancy. Effect of mere negotiations? Nielson Jones v Fedden [1974] 3 All ER 38 cf. Burgess v Rawnsley [1975] 3 All ER 142 Gore & Snell v Carpenter (1990) 60 P & CR 456 – never got round to settling – not an agreement  Course of Dealing (separate from mutual agreement) Lower threshold than mutual agreement. Includes negotiations falling short of an agreement; manner in which the property has been dealt with by the co-owners. (Behaviour that indicates they don’t want survivorship)  Gore & Snell v Carpenter- need for a common intention.  Barton v Morris (1985)- separate bank accounts for tax purposes only; not indicative of common intention

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Co-habiting joint tenant; woman is killed in accident; partner argues that the property should fall to him  Kept separate bank accounts – wasn’t showing expectation of survivorship  Court says that the separate accounts were for tax purposes and the property fell to partner Re Wilford’s Estate (1879)- significance of ‘mutual wills’? – making wills leaving portions to other people is a severance (can’t sever a joint tenancy by will)

Note the problems where negotiations have not produced a final outcome; unlikely to constitute mutual agreement but may be regarded as a course of dealing. However, this is not always the case- see Conway, ‘Saleeba v Wilkie: Joint Tenancies, Negotiations and Mutual Severance’ [2009] Conv 67-78 (also confirming that mutual agreement and course of dealing are separate and distinct methods).

3. Unlawful Killing and the Forfeiture Rule “ A man shall not slay his benefactor and take the bounty.”  Can’t profit form you crime  eg. murder husband – his interest severs automatically 4. Unilateral Severance? Many common law jurisdictions have introduced a specific statutory method of unilateral severance. Why, and in what scenarios would this be extremely useful? 

For England and Wales, see s 36(2) of the Law of Property Act 1925- joint tenancy may be severed by a notice in writing indicating an intention to sever.

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There is no equivalent mechanism in Northern Ireland to date though the NI Law Commission has proposed one- see Land Law Report (NILC 8, 2010), ch 7. – could sell, lease, mortgage to sever share

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Important policy issues here- in particular should it be possible for one joint tenant to sever without the knowledge and/or consent of the others?

5. Commorientes? NI Law Commission has taken the view that commorientes should be treated as an event which severs a joint tenancy- see Land Law Report (NILC 8, 2010), ch 7.

V. Ending Co-ownership

Land Law “Co-ownership of land has many benefits, especially at its inception. Two or more parties who cannot afford to purchase or maintain desired realty alone may join forces to accomplish a shared purchase. One who desires to give or devise real property to the objects of his or her bounty can do so in a manner treating all equally if that is the desire. For its benefits, however, co-ownership also carries considerable burdens. These burdens are most troublesome when cotenants cannot agree on the use, occupation, improvement or, ultimately, disposition of the shared realty.” Thompson on Real Property (1994) pp 445-44 1. Union in a Sole Tenant  joint tenant who outlives all others and ends up as sole owner 2. Partition or Sale in Lieu of Partition Partition- land divided according to the beneficial interests/ respective shares of the individual coowners.  not always practical  more practical for farmland than homes; however, issues re. rights of way Sale in lieu of partition- land sold and the proceeds of sale divided between the co-owners according to their beneficial interests in the property.  Voluntary Partition or Sale Co-owners agree to divide the land (requires agreement of all co-owners), or to sell the land and divide the proceeds of sale.  Compulsory Partition or Sale Partition Acts 1868 and 1876- allow one co-owner to force a sale or partition of the land against the wishes of the others.  1868 Act, s 3: co-owner with less than half interest; sale if “more beneficial” than partition  1868 Act, s 4: co-owner with more than half interest; sale unless “good reason to the contrary” – people opposed must offer a very good reason  Court has very little discretion with Partition Acts – can’t refuse both options  Normally sale as more practical When is sale “more beneficial” than partition? What constitutes “good reason to the contrary”? See extracts from Conway, Co-Ownership of Land (2nd edn, 2012) on reading list. Note also art 49 of the Property (NI) Order 1997 which allows the courts to attach conditions to an order for partition or sale, or to postpone/suspend the other. 

Partition Acts are an important mechanism where the relationship between the parties has broken down- but are there policy implications? Remember it’s an ‘either/or’ outcome!

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Fundamentally different mechanism for attempting to force sale of co-owned property in England and Wales (and very different statutory criteria)- see lectures next week.

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NI Law Commission has recommended that Partition Acts be replaced with legislation which gives courts more discretion and greater flexibility- Land Law Report (NILC 8, 2010), ch 7....