Co-ownership Property Purchase
In 1998 Ahmed, Belinda, Chloe, David and Eugenie purchased a house together, which was called Greenacres. Greenacres was registered at the District Land Registry. All contributed to the purchase price. In 1999 Ahmed mortgaged his share in the property in writing to Xavier. In 2000 Eugenie had an argument with the others and moved out stating she was going abroad for five years and would return in 2005 for her share of the money. In 2002 Chloe wrote to Ahmed, Belinda and David stating that she agreed to leave her share in Greenacres in her will to the Southampton Dogs Home. In 2004 David contracted to sell his share in Greenacres in writing to Sonal. Recently, Ahmed, Belinda and Chloe were killed in an accident. Eugenie has returned from abroad to live in Greenacres and is demanding a sale of the property in order to realize her interest. David is refusing to sell the property. Advise on the devolvement of both the legal and equitable title. Advise Eugenie whether Greenacres can be sold and, if so, whether any precautions should be taken by a purchaser.
The co-ownership of Greenacres by Ahmed, Belinda, Chloe, David and Eugenie has given rise to issues of severance that need to be resolved in order to make a final determination of the interests, both legal and equitable, that each person holds in the property. Only then can we properly advise Eugenie if Greenacres can be sold in order to release her interest.
of Greenacres
All five have contributed to the purchase of Greenacres but the LPA 1925 s1 (6) clearly states that a legal estate cannot exist in undivided shares. By s. 34 (2) of the Act the legal title to land can be vested in a maximum of four persons but, once shared, it must be held as a joint tenancy. By operation of s. 34 (2) of the Trustee Act 1925, only the first four persons named on the conveyance will be deemed as the legal owners of the property under a joint tenancy and, in creating a trust of land, they will hold the legal title on trust for the benefit of all the beneficiaries including themselves. In our case therefore Ahmed, Belinda, Chloe and David hold the legal title to Greenacres as trustees of the equitable interest for all five. Eugenie is not a trustee but holds an equitable interest in Greenacres.
Joint Tenancy or Tenancy in Common?
The distinction between an equitable joint tenancy and a tenancy in common is significant. In a joint tenancy all parties own a full and undivided interest in the property. Upon the death of an equitable owner, the right of survivorship automatically operates to vest the deceased’s interest in the remaining equitable owners. Section 36 (2) of the LPA 1925 prohibits any severance of a legal joint tenancy. The case of Williams v Hensman (1861) 1 John & H 546, however, still holds as authority that severance of (an equitable)joint tenancy need not be in writing; it can be severed by conduct and by any one of several means including: ‘an act of any one of the persons interested operating upon his own share… by mutual agreement’ or ‘by a course of dealing.’
In a tenancy in common only the unity of possession need be present and, following the case of Bull v Bull [1955] 1 QB 234, each equitable owner has a quantifiable share of the property (proportional to their contribution) and, as such, is free to deal with or dispose of their interest in the property without any encumbrances.
The facts of the case do not explicitly reveal equal monetary contribution, but based on other information provided and issues raised as to severance, testamentary disposition and the right of survivorship, we can infer that the equitable ownership of Greenacres commenced as a joint tenancy.
Ahmed’s Mortgage
Under the law of trusts, Ahmed, as a joint trustee of Greenacres, cannot deal with the legal title of the property without the agreement of the other trustees. As in the case of Banker’s Trust v Namdar [1997] EGCS 20, he is, therefore, only dealing with his equitable title and, by mortgaging part of the property, has effectively severed his equitable joint tenancy from that of Belinda, Chloe and David. The legal title of the property is unaffected but Ahmed now becomes a tenant in common, with his one-fifth share of the equitable title being held against the mortgage by Xavier. Belinda, Chloe, David and Eugenie are still, at this point, joint tenants, in equity, of four-fifths of Greenacres.
Eugenie’s Move
Eugenie’s move from the household does not, prima facie, break her unity of possession with the others, however, as found in Hensman, her expression of a desire to act upon her share, albeit in the future, implies her wish to sever her interest. As in the case of Burgess v. Rawnsley [1975] Ch 429, this will be sufficient to separate her co-ownership from that of the others so that Eugenie’s equitable interest will now be held as a tenant in common. Her equitable share and title in Greenacres has not been altered.
Chloe’s attempted Testamentary Disposition
While Chloe’s letter arguably evidences an intention to operate upon her share, Gould v Kemp (1834) 2 My & K 304, holds that the passing of a share by will is unenforceable in a joint tenancy. Chloe’s letter does not expressly sever her joint tenancy in equity and on this point the judgement of Sir William Page Wood V-C in Hensman is instructive as it states that:
…an inference of this kind without any express act of severance, [w]ill not suffice to rely on an intention, with respect to the particular share…
Further, as a mere agreement to leave something in one’s will is not enforceable, (and we have no evidence that Chloe took any further action to give effect to such a disposition), I submit that Chloe did not sever her joint tenancy. Both her equitable and legal titles remain unchanged.
David’s Contract for Sale
The written contract for sale, in effect an ‘estate contract’, between David and Sonal, is valid only if it meets the requirements of s. 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Assuming that their contract fulfils these requirements, the effect is that David has severed his joint tenancy and passed equitable title of his one-fifth share in Greenacres to Sonal.
At this stage the various interests and titles in Greenacres are as follows:
- Ahmed, Belinda Chloe and David still hold the legal title to Greenacres.
- Ahmed is now a tenant in common with his one-fifth equitable share held by Xavier against the mortgage.
- Sonal has acquired equitable title to a one-fifth share in the property and
- Belinda and Chloe are still joint tenants with a two-fifths equitable share in Greenacres.
The death of Ahmed, Belinda and Chloe
Upon the death of Ahmed, Belinda and Chloe the right of survivorship takes effect automatically; vesting legal and equitable title in the remaining joint tenants. This means that David would now be the sole owner of the legal title to Greenacres. Ahmed’s equitable title (and his mortgage liability) would pass according to his will or, if he died in testate, to his next of kin.
Under the right of survivorship, if joint tenants die at the same time, and no surviving joint tenants remain, then the youngest of the deceased is presumed to have outlived the others. The full title relating to the joint interest will pass to their estate.
Eugenie may therefore wish to pursue a claim for a three-fifth share of the equitable title in Greenacres – being her one-fifth and the two-fifth share of Belinda and Chloe’s interest. Unless she successfully disproves the severance of her joint tenancy, then Belinda’s and Chloe’s equitable title will pass according to the right of survivorship.
Advice to Eugenie
The Trusts of Land and Appointment of Trustees Act 1996 (‘TOLATA 1996’) has repealed the old rules of the 1925 legislation so that land held jointly can no longer be held under a strict settlement or an automatic trust for sale. In order to realise her interest in Greenacres Eugenie will have to make application to the court under s. 14 of the Act for a determination of her interest and for an order of sale to release this interest. In an attempt to determine her interest a court would follow the guidelines laid out in s 15 (1) of the act giving regard to the intentions of the purchasers, the purposes for which the property was purchased and the interests of any secured creditors. The court would also apply precedent of cases such as Midland Bank plc v Cooke [1995] 4 All ER 562 and would:
Undertake a survey of the whole course of dealing between the parties relevant to their ownership and occupation of the property and the sharing of its burdens and advantages.
In coming to a decision the court will:
Take into consideration all conduct which throws light on the question what shares are intended.In this case the court would grant an order for sale of Greenacres as a means of realising the various interests in the property. As David had previously contracted to dispose of some of his interest in Greenacres a court would not likely find any exceptional circumstances mitigating in his favour against the sale of the property.
Having regard to the conduct of the parties and applying the rules of equity, the court may be minded to imply or presume the creation of a tenancy in common upon the initial purchase of Greenacres. In this way they could make allocations to the respective interested individuals and estates based on the proportional contributions made towards the purchase of Greenacres.
Any purchaser of property should take precautions by making enquiries and paying visits to the property in order to determine the existence of any equitable interests not reflecting on the register. Upon purchase, further precaution should be taken to register their charge at the Land Registry.
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