Co-ownership problem Q structure 1 PDF

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Co-ownership Problem Structure Wherever two or more people buy property together, automatically it is a trust property. Those who are legal owners are the trustees. And those who are equitable owners are the beneficiaries – s.1 TLATA 1996. Firstly before starting, establish whether this is an express trust. For or it to be a valid express trust it would need to comply with s.53(1)(b) LPA. The formalities of an express trust are: a) in writing and signed by the person declaring trust (the trustees). Always assume there is one, unless otherwise stated. Step 1) Establish the initial position in legal and equitable title Legal title: At the start the legal title will be held automatically, unless otherwise stated, by only the first four named of conveyance, who are of age s.34 (2) LPA. The legal cannot be held as anything but a joint tenancy as there is no distinct level of shares. The nature of joint tenancy is that it is a collective ownership. The individual joint tenant has nothing which he can truly describe as ‘mine’; it is all ‘’ours’’. Equitable title: Equitable title can be held in joint tenants or tenants in common. Tenancy in common is individual ownership; each have a definite share - you have a share of the property, i.e. the value of the property, not a share of is the physical land. To be JTs in equity there must have 4 unities with other joint tenants (PITT) (AG Securities): o Possession - All the joint tenants are entitled to possession of the property and none has the right to exclude any other member of the group. o Interest – (must all have the same proprietary right in the land) they all share interest in the freehold of the property. All joint tenants must have the same estate or interest in the property. It’s not possible to vest the property in Person A in fee simple and in Person B for 99 years as joint tenants. All joint tenants must claim by virtue of the same title deed; I cannot by one deed vest a joint interest in A and by another deed vest a joint interest in B, even if the two deeds are executed contemporaneously (at the same time). o Time (interests of everyone must vest in the same time) – they have in this scenario. o Title (they must all have their title in the same document) – they all have become owners of the same document. Presumptions that determines whether individuals are joint tenants or not (in equitable title): 

If parties haven’t made express declaration, the first assumption is that equity follows the law; the equitable title will be held in the same way as the legal title if all else is equal.

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Words of severance could indicate tenancy in common in equity (pane vs webb) Words of severance are words which indicate an intention that the tenants shall have separate shares – in equal shares, ‘equally’, ‘divide between’, ‘amongst’, ‘respectively’.

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Unequal contributions to purchase price raises presumption of TIC (Bull v Bull). Parties purchasing for business venture presumes TIC (Lake v Cradick). But if parties expressly state they hold property as beneficial JT’s then this declaration prevails (Pink v Lawrence).

2) Identify events (happenings that change the way co ownership is held; either acts of

severance or deaths)

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Death/will situations: Legal title: The legal title would be a joint tenancy, thus you apply the right of survivorship here. State who remains on the legal title after death of tenant? Equitable title: The equitable title will change, the principle of survivorship also applies here in regards to the joint tenancy. If you die as joint tenant you don’t own anything at point of death, there is nothing for the will to bite on. As an operative document a will only takes affect only after your death. But severance can only occur during lifetime: Re Caines. Only if you sever before your death, would your will be effective, after you die as a tenancy in common.

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Loans made by tenant and securing mortgage on house Legal title: This issue doesn’t affect legal title, even though a tenant is one of the owners of the property. A loan only concerns the value of the property rather than the legal title. Equitable title: Williams v Hensman combined with s.36(2) LPA describes how you can sever, s.36(2) says that it is possible to sever writing, OR by ‘other’ actions – like an act operating on your own share (Williams’s v Hensmans). Mortgaging your own interest in the land, is an act operating on your own share, and has the effect of severing you from the joint tenancy (First national v Hegarty). So once you are severed you do have a share, you have a tenancy in common. The formalities for a mortgage in an equitable interest are: s.53(1)(c); transfer of an equitable interest in a property requires writing by the person transferring that interest. Unilaterally selling the house entirely, through forging signature of other legal title holders, would be a total alienation, not partial - First National Securities Limited v Hegerty. The person who forged the signature, is the person whose share would only be effected if the house was sold or subject to a mortgage. Taking out a mortgage/lease would be partial alienation (First National). Becoming bankrupt is involuntary alienation (Re Gormon) – their share will vest in the trustee of bankruptcy. State what the equitable title will look like after a mortgage (severance) by one of the tenants? The proportion of the value of the title that tenant in common would have after severance is calculated by, firstly taking into consideration how many tenants there are at the point of when a tenant severs and the proportion that the joint tenancy holds. So for e.g. at the point of severance, if the tenancy comprises of 5 people, together they hold 100% of the equitable title - apply Goodman v Gallant and the split would 80:20 for the favour of the tenant who has severed (1/5, one fifth). So a mortgagee can only claim 20%.

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Tenants falling out or leaving house and/or selling their shares to other tenants Legal title: leaving a house as a tenant doesn’t alter the legal title. The act of walking out is not a severance, it’s not an acting operating on your own share. You can be part of a joint tenancy even from a far distance. Any discussion a joint tenant has with the others, about selling his/her share to them, will not change the legal title as you cannot sever the legal title. Equitable title: any discussion of sale can have an effect on the equitable title a tenant could be deemed to be treating his interest separately which can constitute severance; through one of the three heads of severance (Williams’s v Hensmans) – A) by an act of one person acting on his or her own share. B) by mutual agreement of all the JT's, no need for a firm agreement per se, but there must be common intention, not a gesture of intention (Burgees v Rawnsley) C) any course of dealing through mutual conduct, it doesn’t have to be in writing - the dealings have to go far enough, must be common intention. There has to be finality, not just speculation (gore v carpenter).

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Letters that state tenant wants property to be sold and their share paid to them

Legal title: A Letter of such nature have no effect on the legal title. Because you can’t sever the legal title, whatsoever. Equitable title: A letter of such nature can have the effect of severance in the equitable title for the tenant who created the letter. It will come under the s.36(2) head of written notice. The requirements for a severance by written notice is, a) in writing, b) must show immediate (Harris v Goddard), unequivocal, irrevocable (re Drapers) intention to sever – there must be clear intention by using words such as ‘share’ etc , c) served on all other JT’s – but they don’t have to sign it, or even acknowledge its existence, as long as it’s sent to the last known abode of the JT’s by hand or postal service– s.196(3) LPA & (Kinch v Bullard) – registered post is important as it will be delivered served as soon as it’s given to post office, for recorded delivery, if not recorded, its deemed served once delivered at the property - you can’t change mind once it’s served (Re 88 Barclay Road). State who would be under the equitable title after these events. The test is: At the time of severance what did the joint tenants hold % wise and how many JT’s were there? 

A tenants death and their will

Legal title: A death will cause a change in the legal title as the deceased will no longer be on the legal title. Equitable title: Only a tenant who’s effectively severed beforehand, can have their will in regards to their share, actioned upon. If he severed then the effect on the equitable title will turn into a TIC; his 20% as a TIC will go to whomever he has mentioned in his will, who will then have 20% as TIC. So the person who was on the will, for e.g. another JT, will receive 20% in TIC from the deceased as well as having another share (20% as a joint tenant. This is dual status in equity – this can be confirmed to be allowed in Wright v Gibbons. In an equitable title, murder of another JT is a severing act, you cannot kill fellow JT and take their interest by survivorship, what it does it severs the murderers interest so the murderer becomes TIC and the person who dies will be usurped up by other JT’s of the property Step 3) Termination Initial position: Legal title: State who the legal owners are of the property. Equitable title: The equitable title would be tenants in common with equal splits only if designated from the outset. If not, then the first assumption is that equity follows the law; the equitable title will be held in the same way as the legal title if all else is equal. S.6(1) TLATA; says that trustees have all the powers of absolute owner and can do what they wish to the property and have power to sell. The trustee should consult all beneficiaries who are of full age, and give effect to their wishes, or if they’re in dispute the wishes of the majority by value, but they only do so far as the general interest of the trust so the trustees have a duty to act in the general interest of the trust – s.11 TLATA. S.14 TLATA allows the trustees to apply for a court order, or anyone with ‘’an interest’’ meaning beneficial or mortgagees apply may also apply for a court order of sale (anyone with a beneficial interest or third parties like a mortgagee/creditor who has an interest in property).

How will the court determine whether sale is appropriate or not?: Court must have regard to s.15 factors when making a decision. Factors: 1(a) – intentions of the persons who created the trust (this is more suited to situations where the creators are no longer in existence, i.e. a will, Barclay v Barclay), 1(b) purposes for which trust property held - a court may decline ordering a sale where the purpose to which trust property was initially purchased for can still be fulfilled (a consideration under s. 15 TLATA 1996). If the home owners have covenanted not to sell the land without unanimous or majority vote, then courts can decline the order of sale by one party (Re Buchanan Wolloastons). 1(c) welfare of minors. 1(d) secured creditors. S.15(3) sweeps up the provisions – ‘’circumstances and wishes of any beneficiaries of full age, or, if in dispute, majority by value’’ (cf s.11). In regards to ‘majority by value’ even if you went to look at the majority by value, this wouldn’t help if the parties hold equal shares of the equitable title, because that would mean one hasn’t got the advantage over the other with a greater share. State which of those factors come into play here for the property in question? Is there a formal statement of intent? Was there an agreement when they bought this property that when buying it, they did so for a particular reason?. The other level is the issue of purpose (doctrine of continuing purpose) is the purpose of the trust continuing? Has it been varied? And is there some reason for that purpose? 

Step 4) Repossession + sale by creditor (event) If legal title owner fails to make loan repayment etc. then a creditor can apply for an application of sale; s.14 TLATA. A secured creditor has sufficient interest in the land to apply for a sale. The factors that the courts will apply to consider whether sale is appropriate is: s.15(1)(a) and (b), s.15(1)(c) and s.15(1)(d).

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s.15(1)(a) and (b) – ‘’the purpose coming to an end’’: - there is an argument from the case of bankers trust v namdar and from mortgage corp v share; that from the moment a JT mortgages his interest he would potentially change the purpose of a trust, as such move would be making the property held as security, ‘a financial generator of funds’. Thus the party who gave you the finance should be entitled to take the property. Argue why the loan was needed?

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s.15(1)(c) – in regards to minors: The court could also on the other hand take into account the fact that there are children living here and more to the point, vulnerable children too, with dyslexia and mental support issues.

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s.15(1)(d) – secured creditor: most likely court will side with secured creditors. In Boi v Bell and Tsb v Marshall, you can see the courts have stuck to the old standing principle that, the creditor is supreme.

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S.15(3) – wishes of beneficiaries would be taken into account– The equitable title owner would effectively be deemed as being usurped by the secured creditor as a mortgagee. Though the wishes of other beneficiaries can be important.

Application for sale by trustee in bankruptcy (if appointed) Under the insolvency act s.306 (1) the assets of the bankrupt party vest in the person called the trustee in bankruptcy. For e.g. their equitable share of this property will be taken by the trustee in bankruptcy. That persons duty is to get into his assets realise their value and sell them, then distribute the proceeds to the creditors.

A trustee in bankruptcy, as a beneficiary (as he’s now a beneficiary) can apply for a s.14 forced sale. When doing this the court will take into account the factors listed in s.335(a) insolvency act 1986. S335(a) says the court must make an that is reasonable with regards to: - the interest of the creditors, - the conduct of the spouse/civil partner who’s contributing (she cannot be the cause/contributor) - The court will not take into account the bankrupts individual’s needs (evett v budram case). The court may postpone the sale for a short while. However after one year of the date of bankruptcy, the creditors needs become all important, unless there are exceptional circumstances. The trustee of bank will wait one year, then apply, and know that the court will order a sale. If there is exceptional circumstances then greater postponement can be granted; -

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In Re Citro / Barca v Mears: Children’s educational needs aren’t important, in a general sense. But in, Re holiday: courts allowed postponement because of the extensive education needs of the children, and that the postponement wouldn’t have affected the interest of the creditors anyway, particularly, even if there was a delay they would have got their money back. If creditors aren’t adversely effected, then there could be an exception to this rule. Ill health is the only thing that can be held exceptional if someone was living in the property who were very ill, their needs may justify postponement. As yet, it has been held that the narrow interpretation is in accordance of article 8 ECHR.

Protection of benetifial interests: for registered land; restriction in properiotrship register s.40 lra 2002. If not done then overriding jinterest its an overding interest if there is actual occupation (sch.3 para 2) unless enquriry is made and interests is not revealed. Overreaching applies; city of London building society v flegg (money paid to two trustees then persons interests move from house to purchase money). For unregistered land: cant be procted by registrion of a land charge as theres no category for bemefiical interests Overreafching applies But if there is only one trustee then the doctrine of notice applies: kingsnort fincance. s.2+s.27 LPA 1925: a purchaser of value needs only 2 trustees to buy the land free of beneficial interests (over-reaching). If there are 4 trustees on legal title then all of them get the money for over-reaching to work....