Land Law - topic 4 - Co-ownership notes PDF

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Co-ownership notes...

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Land Law – Co-ownership and Trusts of Land What is Co-ownership? •

Where two or more people enjoy the rights of ownership of land at the same time •

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Raise the issue and state it, in a problem q, how co-ownership arises ^

Concurrent rights •

Occur at the same time

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Happens when you enter into a lease and a freehold agreement

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Freehold or Leasehold

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Two types of co-ownership •

Joint Tenancy •

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Tenure – how the land is held

Tenancy in Common

Joint Tenancy •

All owners own all of the land together

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No question of the individual owners being entitled to a specific share

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All owners own the land as a single unit

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A Joint Tenant cannot unilaterally dispose of his/her interest in land, unless he or she severs the Joint Tenancy •

If you want to treat the tenancy as a share and leave the property, will not have a share unless you sever the share out of it

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Makes it easy to pass it on, as there are no shares, it is a whole, nothing is missing

At law there is a maximum of 4 joint tenants Scenario •

Dani and Jack purchase their house as joint tenants

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They split up and Dani wants to sell her share to Wes

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Q - Can she do this?

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A – not without severing the joint tenancy

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As joint tenants, Dani and Jack own the WHOLE of the house together

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Dani does not have a ‘share’ to sell

Tenancy in Common •

Each of the owners holds his or her individual share of the land

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The share can be quantified according to the proportion that the owner put into the property in the first place

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The owner can do as he or she pleases with it (sell/gift/leave it in a will) •

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Cannot do this in a joint tenancy

‘Undivided share in the land’ •

= although can quantify share – cannot point to a specific part and say ‘that’s mine’

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The share exists but cannot be taken out of the land

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A conceptual share

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Land remains ‘undivided’

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Even though each owner can say ‘I own x%’ •

if you put 25% into a property you know you will get 25% out

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even if it is unequal, a person still has rights to their amount. Still important – can still sell it to someone else

Scenario •

Frankie, Geraldo and Herbert, three friends, have pooled their finances to buy a house together

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They hold it as tenants in common •

They each have a share in the property

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Frankie wants to sell her share to Jan

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Q – can she do this?

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A – Yes, as a Tenant in Common, Frankie can dispose of her share in any way she wants

Legal and Equitable Ownership Problem of a pre-1925 Tenancy in Common

This was a problem because…? Prior to 1925, you could have so many tenants in common and they could all have shares  As a purchaser you had to contact all the people who had shares in the property, in order to make sure you had title to the property o There was only one level of ownership o There wasn’t a trust in land o Fragmentation of title o The title became so fragmented that it became very difficult to sell and purchase land 

The solution – The Trust of Land To incorporate a trust in land whenever property is co-owned 1. The Legal Title

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Whose name is on the title

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Documentation

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Held by the trustees

2. The Equitable Title

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The interests of the beneficiaries

Trustees and Beneficiaries Trustees •

Co-owners of the legal estate •

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Names on the title to the land

Must be Joint Tenants of legal title (NO CHOICE) •

Can never sever it

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At law they hold the whole title and can pass the whole title to someone else. There is no fragmentation.

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Rids of the problem of having to find out who the co-owners were

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At law they are trustees

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Role of trustee is to look after the interests of the beneficiaries – a duty

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Have right to sell the property as a whole – have a duty to take into consideration the beneficiaries’ interests in equity

Beneficiaries •

In equity – Joint Tenants or Tenants in Common

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Depends on what you want the outcome to be

The Legal Title •

s.1(6) Law of Property Act 1925

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“A legal estate is not capable of subsisting or being created in an undivided share in land…”

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i.e. Co-owners can only ever hold the legal title to property as JOINT TENANTS

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s.36(2) LPA 1925“No severance of a joint tenancy of the legal estate, so as to create a tenancy in common of land, shall be permissible, whether by operation of law or otherwise…”

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i.e. it is not possible to sever the joint tenancy of a legal title

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it is always a whole unit

Only a Joint Tenancy is Allowed for the Legal Title (s.1(6) LPA 1925) Legal Title • •

Always a Joint Tenancy (Can only be 4 legal owners)

Equitable Title •

Choose:  Joint tenants/  tenants in common

Limit of 4 Legal Owners •

s. 34(2) LPA 1925

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“Where, after the commencement of this Act, land is expressed to be conveyed to any persons in undivided shares…the conveyance shall…operate as if the land has been expressed to be conveyed to the grantees, or if there are more than four grantees, to the first four named in the conveyance, as joint tenants in trust for the persons interested in the land.”

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Can have more than 4 people buy a property together, but only 4 names will hold legal title.

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They have legal title as trustees but will have the duty to take into consideration the interest of the beneficiaries

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i.e. the LPA restricts the number of legal owners to four

Scenario •

A, B, C, D and E bought a house together. They decide to hold the legal and equitable title as joint tenants

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Q – Whose names will appear on the land register as the legal owners of the property?

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A - A, B, C and D will all appear as the registered legal owners

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Why? Because they are the first four named

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E has beneficial interest

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Q: how does this affect E?

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A: E is still an equitable co-owner of the property

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A, B, C and D hold the house on trust for themselves and E

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As Trustees they have a legal responsibility to E that prevents them from acting inconsistently with her interest

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If A, B, C or D were to die, E could be added to the land register as a replacement

Equitable Title – can be held as JT or TiC

Why have a Joint Tenancy in Equity? •

Right of Survivorship

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Protect co-owners against your death •

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Avoids probate (tax) implications •

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Your interest will go to the other co-owners when you die

Your interest is absorbed by the others so there are no inheritance tax complications

Makes conveyancing simpler •

Everything is owned as one unit

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No shares to be thinking of

Right of Survivorship – Jus accrescendi •

If one of the Joint Tenant dies, surviving tenant(s) absorb his or her interests in the property

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Operates immediately on death

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So an interest in a JT cannot be passed on in a will •

Do not have a share so have nothing to pass on for someone to inherit

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On death the deceased JT disappears from the JT and the other JT(s) remain

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Automatic process - no conveyance or written document

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People do this when they have a high degree of confidence in their relationship, so there is no financial struggle or worry for the other JT.

Scenario – at the outset

Scenario – If A dies, A’s share is absorbed

Scenario – After A dies E can be added to Legal Title

If everyone dies, the last person left gets sole ownership of the land, winner takes all approach. There will be no more co-ownership Scenario •

Amelie and Bob bought a house together

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Hold the property as joint tenants in equity

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Amelie leaves her share of the property by will to her daughter Shamyla

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Q- When Amelie dies can Shamyla inherit Amelie’s share?

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A – No

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As joint tenants Amelie and Bob both own the whole of the property

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Amelie has no ‘share’ to leave

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When she dies principle of survivorship operates

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Bob, as remaining joint tenant absorbs Amelie’s interest

Requirements for a Joint Tenancy: The Four Unities •

Possession: each joint-tenant must enjoy the right to possession simultaneously with the other joint-tenants, and no joint-tenant can have exclusive right to possess the whole property

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Interest: the interest of all joint tenants must be identical in duration, extent, and nature

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Can be a leasehold interest (lasts for a specific time period)

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Or a freehold interest (forever)

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For it to be in unity all tenants must have the same type of interest

Title: all joint tenants must have equal title to the property, created by the same act, transaction or instrument •

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Documents should be identical

Time: the interest of all joint tenants must vest at the same time and for the same period •

The property should be purchased at the same time

Why have a Tenancy in Common in Equity? •

Used to protect an individual share

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Focused on your own interests

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Each owner is free to do what they want with their share

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Principle of ‘Undivided Share in Land’ •

Can sell it but cannot take it out of the property

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Quantified share relates to value of property NOT ownership/possession of part

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Only unity needed is possession – each TiC is entitled to occupy the whole property

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A TiC may have contributed 25% of purchase price

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= entitled to 25% of Value

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AND possession of 100%

Tenancy in Common – summary •

There is a notional undivided share in land

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There is unity of possession

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No other unity must be present, although others may be

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There is no right of survivorship and so the share may be passed on in the normal way on death or in writing during the co-owner’s life

Why a Tenancy in Common might be considered ‘fairer’ than a Joint Tenancy Contributions to purchase: A = 50% (£100k), B = 40% (£80k), C = 10% (£20k)

Something to think about 1. You and your partner decide to buy a house. •

You haven’t got much money at the moment so can only contribute 10% of the purchase price.

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Your partner pays the other 90%

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Do you want to be tenants in common or joint tenants?

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Joint tenants – because if he dies you get the whole lot

2. You and your partner decide to buy a house.

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Your partner hasn’t got much money at the moment so can only contribute 10% of the purchase price.

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You pay the other 90%

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Do you want to be tenants in common or joint tenants?

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Tenant in common – if you die can leave all their share to someone they want to

Recap •

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Two types of co-ownership: •

Joint Tenancy – all owners own land as single unit

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Tenancy in Common – undivided share in the land

Ownership is split into two titles: •

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Legal - Can only be held as joint tenancy •

Limit of 4 legal owners

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Right of Survivorship

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4 unities

Equitable – can be held as joint tenants or tenancy in common •

Only unity of possession needs to be present

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No right of survivorship

The Doctrine of Severance •

What happens if you change your mind and don’t want to be joint tenants any more?

Severance – Legal Title •

Severance of Joint Tenancy in Law is NOT possible

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s1(6) LPA 1925 A legal estate is not capable of subsisting or of being created in an undivided share in land

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s36(2) LPA 1925 No severance of a joint tenancy of a legal estate, so as to create a tenancy in common in land, shall be permissible, whether by operation of law or otherwise

Severance – Equitable Title •

Co-owner can sever his or her joint tenancy in equity at any time

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Severance converts the status of a co-owner from Joint Tenant to Tenant in Common

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He/She free to ‘act on his own share’

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Survivorship no longer operates – on death property passes according to will or intestacy

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Can affect the whole joint tenancy or part of the joint tenancy •

Only the co-owner who severs his/her Joint Tenancy becomes a Tenant in Common

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If more than 2 owners, some of the owners in equity and others tenants in common

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Remaining Owners continue to hold as Joint Tenants

Severance – example 1 (when everyone decides to sever)

Share of Property on Severance •

Proportionate to the number of joint tenants – equal shares

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REGARDLESS of the initial contribution to the purchase price (Goodman v Gallant [1986] Fam 106)

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Four joint tenants share = a quarter

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Three joint tenants share = a third

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Two joint tenants share = a half

Quantification determined on the value at the point of sale

How do you sever? •

Five ways to sever •

Statutory Severance: written notice s36(2) LPA 1925

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Three Common Law methods: Williams v Hensman (1861)

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Forfeiture Act 1982: unlawful killing

Statutory Severance – Notice in Writing •

S.36 (2) LPA 1925

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“where… any tenant desires to sever the joint tenancy in equity, he shall give to the other tenants a notice in writing of such desire…”

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Form: no particular form of writing required (Re Draper’s Conveyance [1969] 1 Ch 486) •

can be handwritten, formal, post it note

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as long as it is in writing

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Content: Intention: To satisfy section 36 severance must be in writing and unconditional (Harris v Goddard [1983] 3 All ER 242) (Goodman v Gallant [1986] Fam 106). •

Should demonstrate the intention to sever

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From language it must be able to infer immediately and unconditionally the intention to sever. (Harris v Goddard [1983] 3 All ER 242)

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E.g. ‘ I want to sever my joint tenancy now’ ‘I would like to sell my share immediately’

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Ordinary people change their mind on joint tenancy.

Service: Once delivered it cannot be withdrawn (Re 88 Berkeley Road [1971] Ch 648) (Kinch v Bullard [1999] 1 WLR 423)

Statutory Severance – Service of the Written Notice •

Must be evidence that the notice has been delivered

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It does not necessarily have to be read or even received •

LPA 1925, s. 196(3):

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“This subsection provides that notice shall be sufficiently served if: … it is left at the last-known place of abode or business in the UK of the … person to be served…” •

1st/2nd class post – once the postman has delivered it through the letterbox the notice is sufficiently served.

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Note left on the table if it is the last place, they lived then it is sufficiently served.

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Leaves more scope for different methods – doesn’t dictate method of delivery

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LPA 1925, s.196(4):

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“This subsection provides that: … notice… shall be sufficiently served if it is sent by post in a registered letter … and if that letter is not returned through the post office undelivered…” •

This sufficient to sever

S196(4) LPA 1925 by post in a registered letter Re-88 Berkeley Road, NW9 [1971] ALL ER 254 •

Miss Eldridge and Miss Goodwin were joint tenants of 88 Berkeley Road.

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Later, Miss Eldridge decided to get married.

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Miss Goodwin’s solicitors, therefore, advised her to sever the joint tenancy. Because she didn’t want her interest to automatically go to Miss Eldridge. As if Miss Eldridge was going to get married, then her husband would provide for her.

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The notice of severance was sent by recorded delivery to Miss Eldridge at 88 Berkeley Road.

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When the postman called, Miss Eldridge had already gone to work so Miss Goodwin signed for the letter.

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Miss Goodwin died shortly afterwards. Miss Eldridge said that she had never seen the letter.

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Had there been an effective severance of the joint tenancy? YES: the letter was not ‘returned undelivered’ and therefore notice of severance was deemed to have been properly served.

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Heirs of Miss Goodwin said that Miss Eldridge did see the letter, there was an almighty row and pots and pans were thrown

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Miss Eldridge was a reliable source and believed her story that she had never seen the letter

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The courts believed both sets of witnesses to be honourable

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What actually happened is that Miss Eldridge found a draft of the letter whilst going through Miss Goodwin’s stuff. Miss Eldridge gave the draft to her own solicitors. Was written severance, had not been returned undelivered, in the correct form. Therefore, her not seeing it was irrelevant. As it was delivered.

Is Ordinary First C...