Introduction

• two ways co-owners can own land
• joint tenants:
  co-owners not treated as having separate shares
  treated as single person not two individuals
  right of survivorship (if one owner dies other becomes sole owner) applies
  cannot make gift of land in will to third party
  share proceeds of sale equally
• tenants in common:
  co-owners own distinct shares, which may be equal or unequal
  right of survivorship does not apply
  land passes under will or rules of intestacy
  share proceeds of sale proportionate to share of ownership
  
• process of severance: if parties originally bought as joint tenants may convert to tenants in common
• co-owners either expressly declare land is held on trust or land or law will impose implied trust of land

Co-ownership since 1 January 1926

• restriction on capability to create an undivided share in land (tenancy in common)

  Law of Property Act 1925

  • s.1(6): legal estate cannot be created in undivided shares (tenants in common)
  • s.34(1): undivided share in land cannot be created except as provided for under Settled Land Act 1925
  • s.36(1): where joint tenants own a legal estate in land, a trust of land will be implied
  • s.36(2): no severance of joint tenancy of a legal estate to convert to tenants in common
• tenancy in common may give rise to equitable rights

  Bull v Bull [1955] 1 QB 234

  Facts:

  • land purchased by P with his mother contributing some of purchase price

  Issue:

  • how should unequal share be recognised?

  Held:

  • resulting trust arose & in equity a tenancy in common due to unequal contributions
  • Lord Denning: Since 1925 there has been no such thing as a legal tenancy in common. All tenancies in common now are equitable only...
• there are maximum number of trustees who can own legal estate in land

  Law of Property Act 1925

  • s.34(1): undivided share in land cannot be created except as provided for under Settled Land Act 1925
  • s.34(2) : maximum four trustees can own legal estate in land, if more than four named in deed - first four hold land as joint tenants on trust of land for all in equity
• to establish if co-owners hold equitable interests joint tenants or tenants in common four tests applied

First test: are all four unities present?

• for unity of interest to be present co-owners must have the same interest in land (unity of interest)
• A fee simple absolute to A & B:
  unity of interest present: same interest in land (a fee simple absolute)
• A fee simple to A & B in unequal shares (A 3 quarters & B 1 quarter):
  unity of interest present: same interest in land but size of share different
• to A for life, remainder B in fee simple absolute:
  unity of interest not present: A has life interest & B has fee simple in remainder
• unity of title: co-owners must receive interest under same document
• unity of time: co-owner's interest must vest at same time
• unity of possession: co-owners must each be entitled to possession of whole land & cannot exclude other co-owners
• if all four unities are not present:
  is there unity of possession?
  yes: tenancy in common
  no: not co-ownership
• if all four unities are present:
  it must be determined whether co-ownership is capable of taking form of joint tenancy or tenancy in common

Second test: express declaration in transfer?

• under second test wording of declaration transferring land to co-owners is considered

  Goodman v Gallant [1986] Fam 106

  • if transfer of land to co-owners contains an express declaration of how co-owners should hold the equitable interest , declaration is conclusive
• if no express declaration in transfer, the third test must be applied

Third test: word severance in transfer?

• third test requires looking at whether declaration transferring land to co-owners contains words of severance
• words of severance: words indicating that co-owners intend to own separate & distinct shares in the property (including equally, unequal, among)
• if words of severance: co-owners take equitable interest in land as tenants in common
• if transfer not declare how equitable interest should be held or contain words of severance, then fourth test applies

Fourth test: does equity presume a tenancy in common?

• the circumstances of purchase considered as to whether equity presumes a tenancy in common
• three situations where tenancy in common is presumed:
  partnership property: co-owners are business partners & land bought as partnership asset
  lenders: where more than one person lends money to a borrower, relationship between lenders is that of tenants in common
  unequal contributions towards purchase price: where two or more people buy land & make unequal contributions, equity presumes tenants in common & size of each tenant in common's share proportionate to contribution
• if all four unities are present, no express declaration how equitable interest is held, no words of severance & no equitable presumptions apply: co-owners hold as joint tenants

Title

• if land is registered: co-owners will be registered proprietors
• if tenants in common in equity: should place a restriction on proprietorship register to warn buyer of need to overreach
• if joint tenants in equity: no restriction on the register

Severance of the joint tenancy in equity

• co-owners may be able to use severance to change their equitable interest from joint tenancy to tenancy in common
• provision for severance by notice under s.36(2) LPA 1925

  Law of Property Act 1925

  • s.36(2): co-owner may sever joint tenancy in equity by serving a notice
    notice must be: written, show correct intention (immediately effective) & served correctly (on all joint tenants)

  Harris v Goddard [1983] 1 WLR 1203

  • prayer in divorce petition did 'no more than invite the court to consider at some future time whether to exercise its jurisdiction' so did not satisfy immediate intention for severance
• rules serving notice contained in s.196 LPA 1925

  Law of Property Act 1925

  • s.196(3): notice sufficiently served if left at last know address or place of business of other joint tenants
  • s.196(4): notice sufficiently served if sent by registered post & recorded delivery, unless returned by post office as undelivered
• s.196(4) applies even if proved notice never actually arrived at destination, whereas s.196(3) requires proof of physical service

  Kinch v Bullard [1999] 1 WLR 423

  • Neuberger J suggested possible to withdraw notice of severance if prior to other co-owners receipt

  Re 88 Berkeley Road NW9 [1971] Ch 648

  • notice correctly served: even though serving co-owner had signed on behalf of the recipient to prove receipt of notice
• other methods of severance existed at common law prior to LPA 1925 still exist

  Williams v Hensman (1861) 1 J & H 546

  • three methods of severing a joint tenancy in equity:
    act by joint tenant operating on his share may sever that share
    mutual agreement
    course of dealing by joint tenants showing interests should be treated as a tenancy in common not joint tenancy
• act by joint tenant which can sever: if unity of interest, title of time ceases to be present there is no longer a joint tenancy
• if co-owner sells or gives their equitable interest to third party or mortgages it, transaction will have the effect of severing the equitable joint tenancy
• bankruptcy also has effect of severing equitable joint tenancy (involuntary alienation of the equitable interest - co-owner's equitable interest vest in bankruptcy trustee )
• actual alienation required is required

  Nielson-Jones v Fedden [1975] Ch 222

  • a co-owner's unilateral declaration did not destroy any of the three crucial unities & could not sever joint tenancy
  • Walton J: Moreover, if it did, it would appear that a wholly unconscionable amount of time and trouble has been wasted by conveyancers of old in framing elaborate assignments for the purpose of effecting a severance, when all that was required was a simple declaration
• making gift of equitable interest to third party in will insufficient method of severance: before gift takes effect, right of survivorship will vest legal estate & equitable interest in land in surviving co-owner
• mutual agreement and course of dealing may sever a joint tenancy

  Burgess v Rawnsley [1975] Ch 429

  • mutual agreement: if co-owners expressly agree to sever joint tenancy in equity or if parties agree to deal with land in way which would have effect of severing
  • agreement need not be binding, if common intention to sever can be shown
  • course of dealing being relied on does not have to amount to an express or implied agreement to sever
  • course of dealing sufficient: if co-owner has made clear to other he wants to hold property under tenancy in common not joint tenancy
  • course of dealing sufficient: if co-owners intend shares to be held as tenants in common (executing simultaneous mutual wills which direct future distribution of each testator's 'share)
• forfeiture occurs when a co-owner kills the other co-owner

  Re K [1985] Ch 85

  • if a co-owner kills the other this severs joint tenancy in equity to prevent murderers benefitting from crime
  • victim's equitable interest passes to beneficiaries under will or intestacy
  • murderer takes legal estate in and as result of survivorship
  • legal estate held on trust of land for murderer & victim's estate as equitable tenants in common
• if equitable joint tenants sever their equitable interest: the severing joint tenant takes a share in the property as a tenant in common
• effect of severance: if two each co-owner takes an equal share in the equitable interest as tenants in common
• if three co-owners: severing joint tenant takes a third share in the property as a tenant in common & other two having remaining equitable interest as joint tenants

Sale by co-owners

• where land is co-owned there is an implied land of trust
• as trustees of land holding the legal estate: have power to sell the trust land, but issues can arise in relation to co-owners
• sale by two or more co-owners: no issue if both joint the sale as buyer pays purchase price to both legal owners to buy whole legal estate & as from at least two trustees, equitable interests under implied trust of land are overreached (s.2 & s.27 LPA 1925).
• Sale by sole surviving owner can cause issues:
  A & B originally bought land as beneficial joint tenants
  B dies & A wishes to sell to P
  problem: P cannot be sure joint tenancy was not severed in equity before B's death
• if not severed:
  A & B continued to hold equitable interest as joint tenants
  on B's death legal estate & equitable vested in A by survivorship
  A can sell alone
• if severed:
  legal estate would still have continued to be held by A & B as joint tenants
  on B's death legal estate would vest in A by survivorship
  however, B's equitable interest was held as tenant in common
  on B's death equitable interest would pass under will or intestacy
• if B's equitable interest not passed to A:
  A holding land on trust for himself & beneficiaries under B's will or intestacy
  P needs to ensure interests beneficiaries are overreached by insisting A appoints a second trustee
• if registered land: A can prove ownership to P by copies of entries on the register of title:
  if there is no restriction on the proprietorship register, P entitled to assume A & B held land as joint tenants in equity before B's death
  A can show P copy of B's death certificate & P can assume A has taken whole legal estate & equitable interest by survivorship

Reform

• number of arguments surrounding the benefits & disadvantages of types of equitable interests
• if co-owners initially buy as beneficial joint tenants & later decide they decide they would rather hold as beneficial joint in common (relationship breakdown & would now wish interest in property passes to someone else), the joint tenancy must be severed or survivorship will apply
• if tenants in common from outset: parties could leave respective shares to each other or third party
• alternatively right of survivorship allows for automatic transfer on death to the surviving co-owner: can be simpler if co-owners buy land as beneficial joint tenants & continue to hold as such without need to ensure correct will in place
• problems arise in checking whether severance has occurred for personal representatives: if co-owners could only hold as tenants in common the property would always pass under terms of will or intestacy
• if purchasers make unequal contributions towards purchase price, but declare in conveyance wish to hold the land as beneficial joint tenants & later joint tenancy is severed in equity, co-owners will end up tenants in common in equal shares, if co-owners had to hold as beneficial tenants in common in proportion to their contributions problem would not arise
• the Law Commission highlighted a number issues with the severance procedure in 1985

  Working Paper on Trusts of Land (1985)

  • Law Commission raised concerns over methods of severance:
    severance by acts: uncertain what would be sufficient act to sever joint tenancy in equity
    severance by mutual agreement: unclear if oral agreement is sufficient
    severance by mutual conduct: seems that negotiations may be sufficient to sever joint tenancy in equity, but there no recent case law
  • Law Commission proposed abolishing all existing methods of severance other than severance by notice under s.36(2) LPA 1925
  • Law Commission also proposed introducing severance by will: joint tenant may sever joint tenancy by making specific & explicit gift in will of their joint tenants' share in the property (my half share of X property)
• may increase litigation if severance by alienation abolished: need to serve notice to sever joint tenancy in equity before trustee in bankruptcy could acquire bankrupt's interest in the land
• would decrease litigation in relation to disputes over severance by mutual agreement or conduct but would lose flexibility of informal arrangements severing joint tenancies
• severance by will may have advantages in acrimonious relationship breakdowns or to help avoid errors regarding right of survivorship, but means joint tenants do not have security of knowing must be served with notice if tenancy is to be severed in equity