REAL Property – EXAM Notes PDF

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REAL PROPERTY – EXAM NOTES CO-OWNERSHIP Definition When two or more persons hold interests together in the same parcel of land. There are two forms of concurrent ownership: 1. Joint tenancy (most common form) 2. Tenancy in common. JOINT TENANCY A joint tenancy is where each joint tenant owns the whole of the entire interest, subject only to the right of other JTs. There are two distinguishing features to a joint tenancy: 1. The Right of Survivorship 2. The Four Unities The Right of Survivorship The right of survivorship (jus accrescendi) means that a joint tenant’s interest cannot be passed on to heirs after their death; the whole estate will remain with the other joint tenants. The deceased co-owner cannot leave their interest to another because joint tenancy does not hold an identifiable share. However, a joint tenant can still transfer or alienate their share of the interest while still living (inter vivos). Presumption of Survivorship – section 35 of the Conveyancing Act 1919 (NSW) contains a presumption of survivorship: In all cases where two or more persons have died under circumstances rendering it uncertain which of them survived, the deaths shall for all purposes affecting the title to any property be presumed to have taken place in order of seniority, and the younger be deemed to have survived the elder. In other words, the older person will be presumed to have died first and any gift made in their Will to their spouse/partner will pass to the beneficiaries of their spouse/partner’s Will. However, a gift the spouse/partner has made to them will fail and will not go to the beneficiaries nominated in their will. The consequence is likely to be that the beneficiaries nominated in the spouse/partner’s Will will share disproportionately in the assets of the relationship. The Four Unities Four elements, or ‘unities’, must be present in order for a joint tenancy to exist: 1. Unity of possession: each co-owner is entitled to enjoy possession of the whole of the property, not exclusively to himself, but to be enjoyed with the other joint tenants.  If one co-owner occupies the entire property, the other cannot sue in trespass in the absence of ouster.  No co-owner can exclude the other from occupation of the entire property. 2. Unity of interest: the interest of each joint must be the same in nature, extent and duration. 3. Unity of title: all the joint tenants must derive their interest from the same document or the same act of adverse possession.

REAL PROPERTY – EXAM NOTES 4. Unity of time: the interests of all joint tenants must vest at the same point in time.  If the time of vesting is different, a tenancy in common will arise.  Exceptions – conveyance executed to a trustee for beneficiaries, or any disposition in a will. Tenancy in Common    

A tenancy in common requires only unity of possession, however, other unities may also be present. There is no right of survivorship. On the death of a tenant in common, their share passes to beneficiaries by will. The size of each tenant’s share is fixed from the time of creation of the interest or by subsequent dealings. Tenants in common hold ‘undivided shares’ of the property, that is, they each hold an identifiable fraction of interest which has not yet been formally divided up between them.

CREATION OF CO-OWNERSHIP Co-ownership interests can be created at law and in equity. Creation at law will confer the party with formal title, while through equity the party has beneficial ownership. Statutory presumption of tenants in Conveyancing Act 1919 (NSW) states that:

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In the construction of any instrument… a disposition of the beneficial interest in any property whether with or without the legal estate to or for two or more persons together beneficially shall be deemed to be made to or for them as tenants in common, and not as joint tenants. Section 26(2) provides that subsection (1) does not apply where the instrument creating co-ownership expressly states that the persons are to take as joint tenants. Both provisions apply to legal and equitable interests. Addressing a problem question: it is important to always check the status of the co-owners at law and equity. Start with the legal interest:  Presumption of tenancy in common (s 26(1) CA), unless expressly joint tenants (s 26(1) CA) Then work out equitable interest:  Equity follows the law; therefore, whatever the tenancy is at law, it will also be in equity unless one of three exceptions apply: o The co-owners contribute unequal amounts to the purchase price o The co-owners advance money on a mortgage (whether in equal or unequal shares) o The property is acquired by a partnership or joint business venture.  If any of the three exceptions applies, equity will presume tenants in common. Co-Ownership and Torrens Title Section 100(1) of the Real Property Act 1900 (NSW) states that:

REAL PROPERTY – EXAM NOTES Two or more persons who may be registered as joint proprietors of an estate or interest in land… shall be deemed to be entitled to the same as joint tenants. Hircock v Windsor Homes [1979] – s 100(1) imports the laws of joint tenancy into Torrens. It does not create a presumption of joint tenancy or serve to reverse the presumption of tenancy in common. SEVERANCE Severance occurs when one of the unities is destroyed, thus, ending a joint tenancy by converting it into a tenancy in common. The right of survivorship is destroyed, but only with respect to the severing co-owner’s share. Other co-owners cannot prevent severance unless they can rely on some other contractual or equitable limitation. Severance may operate at law or at equity. Severance can be affected in six ways: Unilateral act by one joint tenant – this can occur in three ways: Alienation/transfer to third party: If a joint tenant transfers his interest to a third-party, the unity of time between the third-party and the other joint tenants is destroyed and the third party becomes a tenant in common. The alienation will be effective at law when the legal interest is transferred, which, for Torrens Title land, is upon registration of the transfer – s 42 Real Property Act 1900 (NSW). In equity, the severance will be effective where the joint tenant has entered into a specifically enforceable contract to transfer they share to a third party. The result: the original joint tenant will hold legal title on trust for the purchaser as a tenant in common – Wright v Gibbons (1949). If legal title is transferred, that is, severance has occurred, but there has been no registration of the transfer, will equity recognise severance of the joint tenancy? Corin v Patton (1990): in this case, the main issue was that no severance had occurred at law because the transfer had not been registered. Therefore, the question remained whether equity would recognise it? An intending donor must have done everything which is necessary for him to have done in order for severance to exist at equity. Mrs Patton failed to authorise the release of the Certificate of Title by the bank. So no severance at equity. Alienation/transfer to self: A joint tenant may transfer their interest to themselves in order to sever the joint tenancy. It is permitted by section 97 of the Real Property Act 1900 (NSW). There is no need to produce the Certificate of Title in this instance, but notice must be given to the other tenants before registration of the transfer occurs. If there is no registration, severance will fail – McCoy v Caelli [2008]. If a joint tenant has created a mortgage over their interest, the occurrence of severance may be impacted. E.g. A and B are joint tenants. A grants a mortgage to mortgagee, C, over his portion of the property’s interest. If A dies before B, the mortgagee’s interest will no longer apply to the property. However, if B dies before A, the mortgagee’s interest will extend to cover the entirety of the property.

REAL PROPERTY – EXAM NOTES Declaration of a trust: A joint tenant may declare that they hold their interest property on trust for designated beneficiaries. Since this alienates the equitable interest in the property to another, it severs the interest in equity. Severance in this instance will only occur if the declaration of trust is in written form and signed by person entitled to the property – s 23C(1) of the Conveyancing Act 1919 (NSW). Mutual agreement by joint tenants – If all the joint tenants agree to severance and to hold as tenants in common, the joint tenancy is severed in equity – Lysaght v Edwards (1876). Severance will only be effective at law if the agreement was in writing – s 54A(1) of the Conveyancing Act 1919 (NSW). Course of dealing/conduct by joint tenants – A joint tenancy can be severed when a course of dealings or conduct between the parties indicates an intention to be treated as tenants in common. The conduct must show that all the co-owners agreed and assumed that each held an undivided proportionate share and no right of survivorship – Williams v Hendsman (1861). Negotiations to sever will not be sufficient if there was no ultimate consensus about the sale – Magill v Magill (1997). Court order – a court order may affect severance. Under the Family Law Act 1975 (Cth), the court has the power to make orders in relation to property, that may expressly or by implication, sever the joint tenancy. The court may also exercise power under s 66G of the Conveyancing Act 1919 (NSW) to end co-ownership. This can occur in two ways: 1. By action of the parties  For tenants in common, when one co-owner acquires the shares of the other co-owners.  For joint tenants, when one co-owner remaining after death of all other joint tenants.  When all co-owners together transfer their interests to a third party.  By partition – dividing the property physically to reflect their shares. 2. By order for sale or partition by the court  Any one or more co-owners may apply to the court to hold property on statutory trust for sale or partition – s 66G Conveyancing Act 1919 (NSW).  Sale is the primary remedy under s 66G, and partition is allowed only in special circumstances. Unlawful Killing/Homicide – a joint tenant that murders another joint tenant cannot profit from their crime. If this situation occurs, the perpetrator will hold on trust for victim’s heirs. They will retain the legal estate by right of survivorship, however, in equity the estate is held by the perpetrator and victim’s heirs as tenants in common. This is the forfeiture rule. Section 5 of the Forfeiture Act 1995 (NSW) confers direct discretion on a court to vary the forfeiture rule if it is satisfied that justice requires the effect of the rule to be modified. Bankruptcy – an order of court declaring a joint tenant bankrupt will sever the joint tenancy. The bankruptcy of a joint tenant vests the joint tenant’s interest in the land in the Official Trustee in Bankruptcy.

REAL PROPERTY – EXAM NOTES Severance in this manner will occur at law when the joint tenant’s property vests in the trustee – s 58 of the Bankruptcy Act 1966 (Cth). In equity, it occurs from the moment the joint tenant is declared bankrupt – Re Holland. THE RIGHTS OF CO-OWNERS The right to possess and occupy the property Unity of possession means that all co-owners, whether joint tenants or tenants in common, have a right to possess and enjoy the whole of the property – Thrift v Thrift (1975). A co-owner occupying the property is generally not liable to pay an occupation fee/rent to any co-owners not in occupation – Forgeard v Shanahan. There are however two situations where the party in possession will owe an occupation fee to the part not in possession: 1. If the co-owner was ousted by the other co-owner.  This amounts to a denial of the other co-owners right to possession and thus the other co-owner can bring an action for trespass. The trespass is resolved by way of an occupation fee. 2. If the parties have an agreement for occupation rent.  Sometimes, the parties might agree that one party will vacate the land in exchange for an occupation fee. Right to be reimbursed for money spent on repairing or improving the property There are various outcomes if the co-owner in possession has made improvements to the land and wishes the co-owner in possession to contribute.  In common law, the co-owner has no claim on recovering costs from other co-owners – Leigh v Dickeson.  In equity, the co-owner can claim for improvement costs, but not for maintenance – Squire v Rogers. o They can however claim the lesser between the cost of improvements or the increase in value of the property – Boulter v Boulter. Rights to collect rent In a situation in which one co-owner collects rent from a co-owned property, equity sees one co-owner acting as an agent for the other co-owners, and hence liable to account for rent received. – Forgeard v Shanahan.

REAL PROPERTY – EXAM NOTES

EASEMENTS SUBSTANTIVE REQUIREMENTS FOR AN EASEMENT Re Ellenborough Park – there are four key characteristics of an easement: 1. There must be a dominant and servient tenement; 2. An easement must accommodate the dominant tenement, that is, be connected with its enjoyment and for its benefit; 3. The dominant and servient owners must be different persons; and 4. The right claimed must be capable of forming the subject-matter of a grant. Dominant and servient tenement An easement requires the existence of at least two parties. The party gaining the benefit of the easement is the dominant tenement, while the arty granting the benefit or suffering the burden is the servient tenement. Section 88(1) of the Conveyancing Act 1919 (NSW) provides that an easement is not enforceable against a person unless the instrument clearly indicates: (a) The land to which the benefit of the easement or restrict is appurtenant, (b) The land which is subject to the burden of the easement or restriction, (c) The persons (if any) having the right to release, vary, or modify the restriction, (d) The persons (if any) whose consent to a release, variation, or modification of the easement or restriction is stipulated for. Must accommodate the dominant tenement Whether an easement benefits the dominant tenement and is connected with its enjoyment is a question of fact. It must be established that the nature of the easement claimed serves the dominant tenement and is necessary for the enjoyment of the land. A practical benefit must be conferred on the dominant land. If the right confers a personal benefit only on the owner of the dominant tenement, this is not classified as an easement. Clos Farming Estates v Easton [2002] – the majority stated that the right must be reasonably necessary for the enjoyment of the dominant tenement and not merely confer advantage on the owner of that tenement, as would a mere contractual right…depending upon whether the right granted was connected with the normal enjoyment of the dominant tenement. The court held in this case that a right benefitting a trade carried out on the dominant tenement may in appropriate circumstances be a valid easement, but, this

REAL PROPERTY – EXAM NOTES is provided that the conduct of the trade is a necessary incident to the normal enjoyment of the land, not merely an independent business exercise. Dominant and servient tenements must be owned and occupied by different persons Subsection 3(c)(ii) of the Conveyancing Act 1919 (NSW) modifies the previous common law requirement stating that an easement can be created in spite of the land benefitted and the land burdened may be in the same ownership at the time when the plan is registered or recorded. Section 46A(1) of the Real Property Act 1900 (NSW) states that an easement that burdens and benefits separate parcels of land may be created even though the same person is the proprietor of those separate parcels of land. Section 47 of the Real Property Act 1900 (NSW) provides that an affecting interest recorded in the Register shall not be extinguished solely by reason of the same person becoming proprietor of separate parcels of land. Capable of forming the subject-matter of a grant The right must be certain and definite in its purpose, that is, there must be clarity in regard to the servient owner’s obligations and the scope of rights of the dominant owner. – National Provincial Bank v Ainsworth. If the grant is too wide in scope or vague, it may not be capable of forming the subject matter of a grant. The rights exercised must have been within the reasonable contemplation of the parties at the time of the grant – Jelbert v Davis. Moncrieff v Jamieson – court adopted the test which asks whether the servient owner retains possession and, subject to the reasonable exercise of the right in question, control of the servient land. Noted that it is relevant to consider the extent of the interference with the rights of ownership on that part of the servient tenement. CREATION OF EASEMENTS EXPRESS EASEMENTS Formalities Legal Easements: Section 46 of the Real Property Act 1900 (NSW) provides that the proprietor must execute a transfer in the approved form for an easement to be created. Section 47 of the RPA states that when an easement is created, the RegistrarGeneral is to record particulars of the dealing in the folio of the Register for the land burdened and in the folio of the Register for the land benefited. Section 88(1) of the CA also contains requirements for the creation of easements (mentioned above). Equitable Easements: Section 23C(1)(a) of the CA states that no interest in land can be created except by writing signed by the person creating the interest.

REAL PROPERTY – EXAM NOTES Section 54A(1) of the CA states that no action may be brought upon any interest in land unless the agreement upon which such action is brought or some note thereof, is in writing, and signed by the party to be charged. Imposed by the Court: Section 88B(2) of the CA states that a plan shall not be lodged with the RegistrarGeneral for registration unless it indicates: (a) What easements, if any, are intended to be created, (b) What easements if any, … are intended to be created burdening land comprised in the plan and in whose favour those easements are intended to be created, (c) What other easements or profits à prendre, if any, are intended to be created appurtenant to or burdening land comprised in the plan Section 88K(1) of the CA states that the Court may make an order imposing an easement over land if the easement is reasonably necessary for the effective use or development of other land that will have the benefit of the easement Subsection 2 states that such an order may be made only if the Court is satisfied that: (a) Use of the land having the benefit of the easement will not be inconsistent with the public interest, and (b) The owner of the land to be burdened by the easement … can be adequately compensated for any loss or other disadvantage that will arise from imposition of the easement, and (c) All reasonable attempts have been made by the applicant for the order to obtain the easement or an easement having the same effect but have been unsuccessful. The case of Shi v Abi-K Pty Ltd (2014) is a leading common law authority on section 88K Court ordered easements. In this case, the Court stated the following: The critical element in this provision is the requirement that the easement be “reasonably necessary” for the effective use or development of the land sought to be benefited (the developer’s land). Whether or not the condition is satisfied in a particular case is likely to require consideration of the following factors: (a) The capacity of the developer’s land for use or development of particular kinds; (b) The nature of the specific proposed development; (c) The manner in which the proposed development is to be affected; and (d) The effect of the easement, if granted, on the servient tenement. IMPLIED EASEMENTS Where there is no express easement, but the easement is necessary for the proper enjoyment of the dominant tenement, there may be an implied grant of easement for various reasons including: by general words, by the manner of description of the property, by common intention, by necessity (see North Sydney Printing v Sa...