#19927 - Co Ownership - Land Law

Co-ownership 1

Express co-ownership: two or more people simultaneously hold the title to a freehold or leasehold estate in land. They express themselves to be, legally and beneficially entitled to the land and its value.

Implied co-ownership: A alone holds legal title to the land, but a court determines that A isn’t exclusively entitled to the value of the land, because B has acquired a right against A for a share of that value of the land. (sole title-holder cases or acquisition cases)

Express co-ownership

Joint tenancies and tenancies in common

• If you’re express co-owners, holding title to land together, there exists a trust of land subject to overreaching (scenario 2).

• At law, express co-owners are always joint tenants, wholly entitled to the whole (i.e. no shares in the title).

• In equity, they can be either joint tenants or tenants-in-common (with undivided shares, like shares in a company).

  • If they have distinct shares, they are equitable tenants-in-common

No legal tenancies in common

• After 1926, disponees only had to investigate one legal title. LPA 1925, s 36(1) prohibits legal tenancies in common.

  • In other words, as a co-owner of the legal title to land, you can only be a joint tenant.

  • (Note: the number of joint tenants is restricted to four. If more than four are named on the land register, “The first four named … shall be the trustees”. Trustee Act 1925, s.34(2).)

Express co-owners’ equitable (beneficial) rights

• In law, express co-owners always hold freehold or leasehold title to land as joint tenants. When they sell their land, they have a beneficial or equitable right to the proceeds of sale. They can hold the equitable right in unity (as joint tenants) or as separate shares (as tenants-in-common).

• So: the co-owners can’t have distinct shares in their legal title, but they can have distinct shares in the value of their title. Legal tenancies-in-common are prohibited, but equitable tenancies-in-common aren’t.

• Default rule is that A and B are both legal and equitable joint tenants

Survivorship

• As a co-owner, you can decide how your right in the value of land will be treated when overreaching occurs.

• If the co-owners are beneficial joint tenants (joint tenants in equity as well as in law), they have an undivided right to the proceeds of sale.

• This avoids probate difficulties: when one of you dies, the surviving joint tenant is already invested with the entire estate (survivorship)

• Advantage of survivorship is that it’s a good default rule. A & B, as co-owners, often want to be automatically entitled to the other’s property rights in the event of his or her death.

• However, co-owners sometimes don’t want to be treated as beneficial joint tenants – imagine four students buying a house together; or business partners, holding land together for a commercial purpose. If you don’t want to be treated as a beneficial joint tenant, the burden is on you to displace the default rule.

  • If co-owners want their beneficial entitlements in the land to be dealt with as shares, they have to make it clear that in equity that they want to be tenants-in-common.

  • Important that there are means to ensure that if one dies, the principle of survivourship does not operate (so you will have a distinct share in the value of the land that will not be absorbed by the surviving joint tenants)

• How do co-owners do this: the Land Registry provides a conveyancing form for them to complete.

• The default presumption is that co-owners want to be equitable joint tenants. But they can rebut this by completing the Land Registry’s form, which enables them to opt to be beneficial tenants-in-common instead.

Severance

• Problems emerge where co-owners’ intentions change over time – where they start out as legal and equitable joint tenants, but then something (severence) happens which gives one, both, or all of them the status of equitable tenant-in-common.

• There can be express and implied severance

Express severance

• A and B set out to be joint tenants in law and equity, then typical case is that they divorce. There is a divorce petition where one or both will say they want to sever the joint tenancy

• Example of severance: a co-owner’s written and communicated declaration to the other co-owner(s) indicating that she now wants to be an equitable tenant-in-common rather than an equitable joint tenant.

• Evidence of this intention is drawn from the severing co-owner using language to the effect that the property should be considered to be held in distinct shares, or divided between them. The language of shares/division = intent to sever.

• LPA 1925, s. 36(2): severance is normally accomplished by a co-owner providing ‘notice in writing’ to the other co-owner(s) of his ‘desire’ to sever.

• Judgments on the rule: written notice as issued by paper document, make delivery of the document a condition of notice, but not its receipt:

  • Kinch v Bullard [1999]: Husband (B) and wife (A) divorce. B has a heart attack and it becomes clear that he won’t live for long. A had already served a severance notice and put it in the post, and soon discovered that B had a heart attack. She realised severance was a bad idea because if she did not, she would become wholly entitled to the land. A goes to B’s house to collect the severance notice. Severance occurs because it was delivered

• In matrimonial breakdown cases, the notice will usually appear in the divorce petition.

• A co-owner can’t effect severance by a will because a will does not take effect immediately upon death. Survivorship operates immediately on a joint tenant’s death - so the taking effect of the equitable joint tenancy precedes the taking effect of the severance declaration in the will.

• The intention to sever has to be clear:

  • Harris v Goddard [1983].

    • Facts: Mr H died before divorce hearing. Mrs H’s petition stated her wish for a settlement that ‘may be just’. If severance had occurred, G would be entitled to Mr H’s beneficial share.

    • Held: severance hadn’t occurred. The words used were insufficient to sever because there was no reference to shares. Since Mrs H hadn’t petitioned for a share of the property, she retained the right of survivorship.

  • Gore & Snell v Carpenter (1990) .

    • Facts: H & W owned 2 houses. Divorce petition. W dies. Petition contained suggestion they should keep one each.

    • Held: not sufficient to secure severance of equitable joint tenancy because suggestion not tantamount to intent to sever.

• Two general points about severance

1. Petitioners won’t always have had severance implications in mind when the divorce petition was drafted. Just a few words (e.g., “may be just” versus “will be equal”) could be the difference between an equitable joint tenancy having been and having not been severed. A lot is read in into the words used. Divorcing parties may not realise they have to be careful with their wording

2. In severance litigation, the defendant is usually the surviving divorcing party and the claimant will usually be the couple’s child/children or the deceased divorcing party’s partner. The claimant wants to establish that severance has occurred (that the defendant doesn't benefit from the survivorship rule) and that they’re entitled to their deceased parent’s/partner’s share of the property.

Implied severance

• s 36(2) LPA: severance may be achieved by written notice, or by doing ‘such other acts or things as would…have been effectual to sever’

• What sorts of other ‘acts or things’? The four main instances in which severance can occur without a written declaration are set out in Williams v Hensman (1861):

1. By ‘acting on your own share’: taking action to sell or give away your share in the co-owned property. The action needn’t be voluntary: if you go bankrupt, severance occurs (and your share in the value of the property vests in your trustee in bankruptcy).

• Usually leads to a dispute because imagine 3 people own a house together (legal and equitable joint tenants). C decides to sell their shares to D - they can do that but usually A and B will say how much C thinks their share is worth. The fact that C has done this indicates that C is severing the joint tenancy

• If C goes bankrupt, it will have the effect of severing the equitable joint tenancy so C will become an equitable tenant-in-common and will have a share in the value of the land. The share of the value of the land becomes available to C’s trustee in bankruptcy. If C’s trustee in bankruptcy can sell the land, they can use the money to satisfy the creditors

2. By mutual agreement: A & B agree to sever the equitable joint tenancy, either by agreeing on distinct shares between them, or by agreeing that one of them will transfer her rights to a share of the sale proceeds to a third party.

• (Given that the agreement might have been reached orally, or might have to be inferred from the parties’ conduct, the courts will want evidence of common intention to sever: Burgess v Rawnsley [1975])

3. By a ‘course of dealing’: entering into negotiations with the other joint tenants over the value of ‘your share’. This is the most controversial of the four heads, because the courts have sometimes acknowledged (Gore & Snell v Carpenter) that severance could occur even though the negotiations eventually break down. Difficulty: impossible to say how far ultimately failed negotiations would have to advance before the equitable joint tenancy is severed.

• Joint tenancy can be severed if B says to A that they want to be bought out. If negotiations do not go anywhere, A is in a position where they can say B has already...