Daily Archives: November 8, 2013

Co ownership

Standard

this is situation when 2 or more people are entitled to the simultaneous enjoyment of land

situations occur a lot in everyday life.         when married couple buy a house  this happens or when someone dies and leave the house to their 3 childrne

1925 act imposed a scheme about statutory trust  for sale in all cases of co ownership

this was intended to conveyancing easier

it caused problesm because it caused when it came to applying to co ownership principles

there are express trusts for sale

tRUSTS of land and appointment of Trustees act 1996 came into force

trusts for sale have been converted into trusts of land

co ownersup takes effect behind a trust of land

1925 Law of Property Act priviosns govern co ownership remian good ;aw

TLATA has brought reform.

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TWO FORMS OF CO OWNERSHIP

co ownership is when 2 or more people are simultaneously entitled to possession to an interest in the same land

although there were historically other methods of shared ownership (and there arguably still are) the joint tenancy and the tenency in common are the only forms of co ownership that can exist in english private law now

difference is conceptual and substantive

under joint tenancy, the joint tenants collectively own the whole and when on dies their interest dies with them until after the death of the penultimate joint tenant, the co ownership comes to an end and the survivor becomes the sole owner.

that is the right of survivorship and it follows that a joint tenant has no interest that he can leace under a will becayse by the time the will comes into effect he has no interests to bequeath as his joint interest died with him

thus the only one who survives to the end can leave the property in his will.

in contrast there is tenancy in common in which each co owner has a share in  in the co owned  property

such a share is intangible but real in the sense that the property has not been physically divided  which is why such interests are often referred to as undivided shares but represents a solely owned  interest in part of the whole which can be disposed of either during the lifetime  or on the death of the tenant in common.

it is important to understand what us meant when we speak of the share under a tenancy in common being undivided

for tenants in common like joint owners have unity of possession – meaning that each co owner possess the whole with the other co owners

consequently  apart from under certain statutory provisions to be considered later if any occupier has the right to exclude another from part of the property this is incapable of being co ownership under either a joint tenancy or a tenancy in common but is simply two separate ownerships

another idea – beneifical ownership. this signfies a person with the right to beneft from the property

example – in simplest form of ownership   where there is a single legal owner of a propety (eg a car ir an estate in land)   that person is said to have an absolute title

inclduing not just the formal legal title but the beneficial interest

such an owner can both manage the poperty via his legal title and enjoy it as beneficial owner

it would be a mistake to see these as two separate concepts.  they are united in absolute title

in contrast to absolutel ownership consider a trust – this was described as a mechanism based on the division of ownershgip into separate lega and equitable titles with the former vested in trustees who manage the property on behalf of the beneficiaries who as equitable owners have the right to enjoy the fruits

in terms of beneficial ownership  under a simple trust it is not the legal owner but the equitable iwbner who have the beneficial interest which is why we call them beneficiaries

the term beneficial ownership is therefore often used as a synonym for the equitable interest behind a trust and there is no reason why you should not to dht same

be cautrious because although a beneficial interest and equitable interest often coincide this is not alwsys the case

we have seen that ownership of an absolute owner – who has no separate equitable interest but just an absolute legal title –  necessarily includes the beneficial interest and thise benefiia ownership can and often does exist quite independnet of a trust.

surprisingly but infrequently even where a trust exists the equitable and beneficial titles might not coincide

for example under a bare sub trust where the equitable owner declares that she holds her equitable  interest in trust for another, the beneficial interest resides int he person on whose behalf the interest is being held for they now rather than the beneficiary  under the initial trust have the right to enjoy the property

thus the legal , equitable and beneficial title   are now held in three different hand by respectively the trustee, the beneficiary (or should we call her the sub trustee)  and the sub beneficiary (who might more logically now be called simply the beneficiary, but we tend not to do so for fear of confusing  matters by changing the identity of the beneficiary dependent ipon whether or not there is a sub trust).

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THE MEANS BY WHICH CO OWNERSHIP MIGHT ARISE

the majority of homes in the UK are shared by two or more adults and very often each will contribute directly e g by paying the deposit or mortgage or indirectly (e g by building work or child care  to its value as both a home and an investment

in such situations the parties  are best advised to regulate their co ownership by means of  aa formal express agreement  between the parties

this should set out rights and obligations in relation to the land and including an express declaration of trust which as it comprises land should fulfil the requirements of LPA 1925 and be evidenced by signed writing

unfortunately   the cohabitees  often fal to formalise the basis which such an important asset is to be ehld often because couples rarely consider  that their relationship might come to an end nor what will happen if it does

where no express trust has been declared  in accordance   with section 53  – co ownership will often arise informally (even by conduct without the parties realising the implications of their behaviour) usually under the provisions of section 53 which exempts implied trusts from the formalities of an express trust.

in addition to express trusts such equitable co ownership may occur through the application of principles  of resulting trusts constructive trusts or rarely proprietary estoppels

the relationship between constructive trusts and proprietary  estoppel is uncertain and difficult  one which will need to be considered later

inter related doctrines:

RESULTING TRUST – among other cases, when a person contrinutes directly towards the purchase of a home but does not have their name on the legal title known as purcahse in the name of another. in such a case trheerw will be a presumption that the contributor has a beneficial interest in a land behind the resulting trust

CONSTRUCTIVE TRUST

– this mainly comes when:      a person has contributed directly or indirectly to the purchase and or establishment of a home but does not have thier name on the legal title in circumstances where the court is willing to recognise a common intention on the basis of that contribution and or other evidence

resulting and constructive trusts will be examined later.

it should be noticed that there are important recent cases which indicate that the basis on which co habitees rights in the home are calculated is evolving

there are also recent relevant reform proposals which would intriduce radical change if they became law there is cirrently no prospect of this occurring.

when analysing a situatuon of co ownership or answering a problem  question it is therfore necessary to discuss the legal and equitable  positions relating to ownership separately  and it is helpful  to draw diagreams to represent the changing positions

if land is conveyed to A and B in law  they will tke t as join tenants

if B paid 2 /3rds of the purcvhase price and A paid one third  then in equity A and B will be tenants in common

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DISTINCTION BETWEEN JOINT TENANCY AND TENANCY IN COMMON

although there were historically  other methods  of shared  ownership of land , the joint tenancy     and the tenancy        in common   are the only significant    forms  of co ownership today and it is the right of survivorship that is the most significant difference

dunbar v plant   1998

we have already discussed but to recap  it means   that on the death  of each joint tenant   their interest  in the land dies with them until only one of the original co owners remains who then holds the land as sole owners . by contrast on the death of a tenant in common his ”undivided share”   passes under his will or intestacy    survivorship does not apply      to tenancy in common

whilst in equity  it is possible to co own land via either or both a joint tenancy or tenancy in common it is only permitted to do so via joint tenancy at law. the reason for what sounds like a strange rule is purely practical

before 1925 land could be co owned legally via either a tenancy in common or a joint tenancy – as personality still can be co owned today –

as we shall see under a tenancy in common there is no unity of title which means that tenants in common could have different documentary title

as anyone who has ever bought a house will know investigating title is expensiceand tme comsuming. to speed up conveyancing the 1925 legislation limited legal co ownership to joint tenancies meaning there was only one legal titel to investigate

and also limtied the maximum number of legal joint owners

four to further reduce the complication of dealing with legal title

LPA

so if legaql title is convedy to more than four co owners or as tenancyu u cmmon it wll simply be taken effect as a legal joint tenancy limited to no more than the first four legal owners named in the conveyance

althpggh ths makes dealing with legal title  much simpler it lacks felxibility

after all there might be more than four peope with an interest and co conwrrs might not wish their interest to be bound by the right of survivroship

the co owners might not wish their interest to be held via joint tenancy

to simplify consequently played a simple but neat trick by imposing   a trust whenever land  was co owned .

this squared  the circle of simplifying   dealings with legal title  by imposing limits on how it might be held

but maintain flexibility with regard to the beneficial interest by allowing the equitable interest to be held under a joint tenancy and or tenancy in common with no limit to the number of beneficiary owners

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THE FOUR UNITIES

it is therefore particularly important to know whether co owners hold as joint tenants or as tenants in common. to determine this, three questions need to be asked:

there are 4 unities. all must be presnet. if not – no joint tenancy.

——— UNITY OF TITLE. requires that all co owners derive their interests from the same dicument or act

———– UNITY OF TIME. requires that the interests of all co owners vest in them at the same time

———-  UNITY OF INTEREST     requires that all co owners have the same interest in the land e g   freehold estate

————– UNITY OF POSSESSION         requires that each co owneer  is as much entitled to possession of land as any other co owner

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unity of possession is essential lement of tenancy in common

therefore a co-owner who is not in occupation is generally  not entitled to claim an occupation rent from a co-owner in occupation although the matter  is now governed by TLATA which contains some exceptions to this general style

only if four unities are present is their joint tenancy

tenancy in common only needs unity of possession t be shown

——————-  SECOND are there any words of severance in the grant indicating that the tenants were to take as tenants in common – e  g X and Y in equal shares

———————- THIRD     is the situation one where equity  presumes a tenancy in common?

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THE EFFECT OF UNEQUAL SHARES

the most important situation of this kind occurs where purchasers provide the purchase money in unequal shares. If land is conveyed  to X and Y   as joint tenants  and X contributes two thirds and Y one third of the purchase money .

They are presumed to hold as tenants in common in equity in proportion to their contributions

they hold legal estate jointly  on a RESULTING TRUST   for themselves as TENANTS IN COMMON in equity

but that a presumption simply assigns te burdern of proof to the party seeking to  overturn the prsumption   and can always be rebutted by contrary evidence

equitable presumption of a resulting trust cannot therefore be invoked where there is evidence of an express declaration that the parties  are to hold as beneficial joint tenants as the evidence of express  declaration rebuts the presumption of resulting trust in such a case they hold the equitable interest jointly under an express trust

goodman v callant

despite unequal contributions there is an express beneficial joint tenancy  and thus no resulting trust in that above case

house of lords –        stack v dowden

legal title of residential property  is conveyed in joint names – the court will resume a joint tenancy in equity even if there has been unequal contributions despite lord neubergers s strong dissent

difficultues where land is bought in sole name of one person –  X   and another person then – Y – cliams beneficial interest in land under resulating trust  or constructive trust

if Y has made a direct contribution t the urchase price three possibilities exist

i.    the money could have been intended as a gift to X

ii      the money could have been intended as a loan to X

iii          the money could have been intended to give Y   a beneficial interest in land

it is only where a beneficial interest was intended that one will be created in equity but often of course the parties wil dispute this issue

provlem s arise when Y relies on indirect contributions  to the purchase price of land

house of lords in  stack   v   dawden   has recently rewritten   the rules on hw a constructive turst is to be established  via common intention  nad has cast adide  the narrowness of the previuosu leading case

lloyds bank v rosset

under stack case there are now three ways of proving common intention

———- where the defendant has promised  ditec payments to the purchase of the property as in rosset

——————-   where the claimant   has made      direct payment  to purchase  of the property  as held in rosset

————— where one can be implied   from all the circumstances

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HISTORY

grant v edwards the CA             held that for constructive trust  to arise there must be three conditions

———– there must be evidence of a common intention that the claimant should have a beneficial interest

————-  the claimant must have acted to his detriment on the basis of that common intention

—————- there must be equitable faud on the part of the legal owner by him acting against his conscience, disclaiming his prior greement and denying the claimant’s right

grant v edwards the common intention  was demonstrated    by the defendant’s   statement  that the   plaintiff’s  name was not going  on the title because  ut would prejudice  her position  in matrimonial  proceedigs pending between ehr and her husbnad and moreover she acted to her detriment  by applying her earnings to the household expenses  by housekpeeoing nad childcare   thus making indirect contrubtuibs to the mortgage

lloyd’s ban v rossett  the house of lords stressed that the finding of agremenet or arrangement  that the property  is to be shared beneficially must be based on evidence  of express   discussions   between    the parties

in absence of such evidence  the courts  would only infer   a common intention    where a person who is not the legal owner made a  direct contribution     to the purchase    price, usually known as a resulting trust

see

hammnond  v mitchell 1991

midland bank v cooke

oxley v      hiscock  2004     Court of appeal    considered that  where two persons contributed to the purchase of land conveyed into the name of one of them and where there was no agreement about the quantification  of their respective shares the court was entitled   to take into account tht whole course   of conduct between the parties in determining    what would be a fair share

interesting   application of the principles  is seen in le foe   v le foe 2001

a wife has made indreict financial contributions which enabled her husband to pay the mortgage

the mortgagee was seeking possession  of the house but the first instance  court showed a greater willingness to regard indirect contributuons as triggering a share:

”  the family   economy  depended   for its function   on the wife’s earnings   it was an arbitrary allocation of responsibility  that the husband   paid the mortgage  whereas the wife paid the day to day expenditrue   ”

as far as improvements to property  are concerned trhe Matrimonial Proceedings  and Property Act  1970  provides for a spouse may obtain a  a beneficial interest   by substantially  contributing in money  or money’s worth  to the improvement  of the property

where the person   who contributes    is not  a spouse  he or she may still obtain  a beneficial interest  in accordance    with the principle discussed  above if the evidence  is sufficiently strong

thomas v   fuller  brown 1988

equitable presumption  arises in other   situations

e g where two or more persons advance money  on mortgage  or where partners  acquire land  as part of their partnership    assets  and the privy council  in malayan credit  ltd v jack chia MPH  ltd   indicated in obiter dicta       that the equitable presuptiopn    could arise in new situation   e g where a person acquire land   for their several individuals     busines purposes

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CURRENT LAW.

there have been  plenty of development   in this field in recent eyars. further cases  applied and clarified  the principle in court of appeal’s judgment  in oxley   v hiscock  the house of lords  gave an important   judgment   in one of those cases   stack   v  dowden

due to quick    nature of change it is good to look at each case

 

lightfoot v lightfoot brown        2005         CA applied   oxley  v hiscock  holding the payment  of money     alone will not   give rise           to an equitable interest    in property

as said by Chadwick  LJ  in  oxley        there must also be an agreement   or understanding between the parties   between the parties that the payer         should have such an interest

arden LJ          ”it is quite clear that chadwick LJ   in oxley  did not dispense   with the requirement  for communication of common  intention   when determining       whether a constructive   trust had arisen.  indeed the concept     of communication of common intention has much in common    with the manifestation of    intention . an intention to share     a beneficial   interest in property  has to be manifested   to give rise   to a rival            obligation …the need    for communication   was only   held to be unnecessary  in the oxley    case in respect to the size of the parties  beneficial interest.”

 

stack v dowden   2005  chadwick LJ ” there is no reason    in principle   why the approach   to the question ‘what is the extent   of the parties respective   beneficial interests in the property?’   should be different in a case where the property   is registered   in the joint names of cohabitees  fro what it would e if the property wrre   registered in the sole name    of one of them; although  the fact  that it has been registered    in joint    names is plainly to be taken        into account   when having   regard   ”to the whole course of dealing  between them in relation to the property. ”

 

crossley    v crossley        2005   oxley was distinguished by the CA

”where the parties have reached a consensus   on the beneficial   interest in property  the court will give    effect to it   unless there s very good    reason  for not doing s such as a subsequent   renegotiation . the task  of  determining     the fair share   having regard to the whole course of dealing in a accordance with oxley v hiscock   need only be performed in the absence   of an agreement, arrangement or understanding a t the nature   and extent   of the respective   beneficial interest of the parties.”

 

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Trust of land.

Standard

according to section 1 of TLATA 1996 ”trust of land ” means ”… any trust  of property which consists of or includes land …” whether express or implied, resulting or constructive and whether created before or after the act itself, implied  , resulting ir constructive and whether created before or after the act itself  came into force

EXCEPT FOR EXISTING STRICT SETTLEMENTS

where a settlement takes effect by way of a trust of land (as all post 1996 settlements will) the legal estate  is vested  in the trustees of land

all trusts for slae of land are thus converted into ”trusts of land”

 

trustees of land have broader  powers than  those previously enjoyed by trustees for sale  under LPA    and TLATA 1996 including the power  to delegate any of their powers to beneficiaries  of full age beneficially entitled to possession

 

unlike pre 1997 trustees for sale they are under no duty to sell the land – TLATA 1996

doctrine of conversion   (whereby the interest of a beneficiary under a trust for sale  was regarded as an interst in personal property) is abolished

 

but the overreaching  machinery (whereby the payment of purchase money to two trustees  or a trust corporation  ine interests of beneificaries are overreached) is retained

 

beneficiaries will generally have the rights to occupy  the trust land 1996 TLATA

 

the reusl about consent and consultation are siilae to thosw whch aplied to trusts for sale and which wee formerly in the LPA

 

but TLATA goes further than LPA in its provisions alloing a trustee or beneficiary   to apply to the court for a n order relating to the exercise  of the trustees functions and in the provisions setting  out the matters  to be considered by the court in determining  suc an application

 

it is important      that you fully understand   the effect of TLATA   on both   settlements of land  and the co ownership of land