Co-ownership of Land

Introduction

  • Co-ownership occurs where two or more people hold a beneficial interest in the same land at the same time or where two people jointly own or buy land jointly. Or
  • Co-ownership occurs when two or more persons are simultaneously entitled to land.
  • Their interests in land must be concurrent rather than consecutive
  • In any co-ownership situation, a trust will arise. The legal joint tenants will be trustees, holding the property on trust for the beneficiaries who will be either joint tenants or tenants in common in equity.
  • Co-ownership is created expressly and impliedly.
  • Express co- ownership is such that the land is conveyed through an express act of deed or conveyance and the name of co-owners will appear on the deed or conveyance
  • Implied co-ownership occurs, where a grant of land to co-owners is silent as to how the land is to be held, there is a presumption at law that the land will be held as a joint tenancy provided that:
  • The four unities are present; and
  1. The presumption of a joint tenancy is not rebutted by:
  2. words of severance; or
  3. factors showing that a tenancy in common was intended; or
  4. factors giving rise to an equitable presumption of a tenancy in common.

Example

  1. Sheldon, Raj and Howard contributed the deposit equally/by varying share and bought 20 Sydney Avenue. They agreed to joint tenancy. They are all co-owners and joint tenants of 20 Sydney Avenue.
  2. Sheldon, Raj and Howard contributed the deposit equally or by varying share and bought 20 Sydney Avenue. However, the grant of the land does not indicate whether it is a tenancy in common or a joint tenancy. In law, it will be presumed or implied as a joint tenancy. They are all co-owners and joint tenants of 20 Sydney Avenue.

Types of Co-ownership

  • The types of co-ownership are, ‘Joint Tenancy’ and ‘Tenancy in Common’.

Joint Tenancy

  • In Joint Tenancy co-owners hold the land as joint tenants, they hold the land as ‘One Unity’, and each tenant owns the whole of the land.
  • Joint tenants together own the whole interest in the property. None of them can identify an individual share as belonging to him/her.
  • Joint tenancy is created by ‘four Unities’, these unities must be met to create Joint Tenancy. These unities are unity of Possession, the unity of Interest, the unity of Time and unity of Title.
  • Under unity of Possession, each tenant has an equal right of possession of all of the land.
  • Under unity of Interest, each tenant has the same interests for the same period of time.
  • Under unity of Time and Title, all joint tenants must have received their interest in the land at the same time and in the same way from the same deed of sale or conveyance

Example

Sheldon, Raj, Ammi and Howard contributed towards the deposit equally/by varying share and bought 20 Sydney Avenue. They agreed to hold the tenancy as Joint Tenancy instead of Tenancy in Common. They are all co-owners of 20 Sydney Avenue. They all possess the property equally, each holds the same interest and the conveyance includes everybody’s name and it is done at the same time from the same conveyance document or deed. They are joint tenants and their tenancy is a joint tenancy.

Important Note

It does not matter what the individual contribution of each tenant is in the purchase price of the property. Whether it is equal or varying, if they agree to joint tenancy and fulfil the conditions of joint tenancy, they will be treated as joint tenants, irrespective of their individual contribution and they will own the property equally.

Right of Survivorship

  • A joint tenant cannot dispose of his interest by will.
  • The right of survivorship will take precedence over any attempted disposition by will and over the usual rules of intestacy.
  • The main effect of holding the land in joint tenancy is on the “right of survivorship”.
  • The rules on the right of survivorship dictate that if any joint tenant dies, his interest will automatically pass to remaining joint tenants, as in joint tenancy the tenants hold the land as ‘a whole’ and tenants do not have individual rights/share
  • In joint tenancy, a tenant cannot leave his interest in the land to his family in a will or on their intestacies.

Example

Sheldon, Raj, Ammi and Howard contributed towards the deposit equally and bought 20 Sydney Avenue. They are all co-owners of 20 Sydney Avenue. They all possess the property equally.

Sheldon had an accident and died. His share under joint tenancy will pass on to the remaining joint tenants. Consequently, now Raj, Ammi and Howard are the joint owners.

Sheldon in his will left his potential share of 20 Sydney Avenue to his girlfriend Sarah, unfortunately for Sarah, Sheldon’s potential share in 20 Sydney Avenue will not pass on to Sarah as there is no right of survivorship under Joint Tenancy

Tenancy in Common

  • Each tenant in common owns a specific share in the property.
  • The share is ‘undivided’ which means that it is tied up in the property until the property is disposed of.
  • The undivided shares may be equally shared between the tenants in common or may be unequal shares, for example, to reflect unequal contributions to the purchase price
  • In tenancy in common, the only unity required is unity of possession,
  • Under unity of possession, all tenants have the right to possess all of the land.
  • The remaining three unities of time, title and interest are not required to be satisfied,
  • Which effectively means that a tenant in common can acquire a different interest in the land at a different time from other tenants and does not have to receive his interest in the same deed of sale or through the same conveyance document.
  • In a tenancy in common, each tenant holds an individual share in the land, whereas in joint tenancy the land is equally held by all of the tenants.

Express Creation: (Tenancy in Common)

  • A conveyance to co-owners stating that they are to hold as tenants in common creates an equitable tenancy in common, provided that there is unity of possession

Implied Creation: (Tenancy in Common)

  • Where the grant is silent as to how the land is to be held will take effect in equity as a tenancy in common if:
  1. Any of the four unities (apart from unity of possession) is missing; or
  2. Words of severance were used in the grant (distinct but undivided shares – to Raj and Sheldon equally, to Raj and Sheldon in equal shares, to be divided among, Raj and Sheldon)
    • The words must be clear.
  3. The grant as a whole showed that a tenancy in common was intended.
  • In general, these are circumstances where it would be inequitable for there to be a joint tenancy with the consequent right of survivorship and equal division of the proceeds of the sale.

Example

Sheldon, Raj, Ammi and Howard contributed towards the deposit 50%,20%,20% and 10% respectively, bought 20 Sydney Avenue and agreed on tenancy in common. They all are co-owners and tenants in common of 20 Sydney Avenue. They all occupy the property but, each holds a different interest in the property.

Right of Survivorship under Tenancy in Common

The “right of survivorship” does not affect tenancy in common. As a tenant in common, the tenant holds his own individual share in the land and he can leave his individual share in his will to his family or on their intestacies.

Example

  1. Sheldon, Raj, Ammi and Howard contributed towards the deposit 50%,20%,20% and 10% respectively, and bought 20 Sydney Avenue and agreed on tenancy in common. They all are co-owners and tenants in common of 20 Sydney Avenue. They all occupy the property but, each holds a different interest in the property.
  2. Sheldon has an accident and dies. His share under a tenancy in common will pass in accordance with his will or in the absence of a will to his estate.
  3. Sheldon in his will left his 50% share of 20 Sydney Avenue to his girlfriend Sarah. She will get Sheldon’s share in 20 Sydney Avenue and will be a new tenant in common
  4. Sarah now wants to sell her share to Jessica, she can do so and upon the sale of Sarah’s share, Jessica will be the new tenant in common.
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Rules on Title of Land

  • The legal title of the land is held as legal joint tenants under co-ownership irrespective of whether it is joint tenancy or tenancy in common. (Important. This section deals only with rules on holding the TITLE of the land, every other rule of tenancy in common or joint tenancy still apply as discussed above)
  • The maximum number of people on the legal title can be four.
  • When the land is sold to more than four people, the first four people named on conveyance, who are eighteen years of age or over, and who are willing to be on the legal title will hold the legal title as legal joint tenants
  • To deal with the situation of more than four people, s 34(2) Law of Property Act imposes a trust of sale.
  • Section 36(1) Law of Property Act, splits the title of express co-ownership of land into ‘legal title’ and ‘equitable title’. Where there are more than 4 people gathered to purchase a piece of land, the first four people on the conveyance hold the legal title as joint tenants and are made trustees of the land. As a trustee of the land, the joint tenants and the remaining tenants will also hold an equitable title, which effectively means that in the case of remaining tenants although their name will not appear on the deed or in the conveyance, however, there are also tenants of the property. They all also collectively hold equitable title as well under the trust of land.
  • The legal title provides the joint tenants with the ability to manage the property. But all of them collectively are the beneficiaries of trust as well, which creates an equitable title due to an equitable beneficial interest of enjoyment in the property. The imposition of trust allows the rights of beneficial enjoyment to be recognised on the equitable title even though a tenant is not on the legal title.
  • In summary, the legal title is always held as joint tenants and equitable title is held either as joint tenants or as tenants in common

Severance of Joint Tenancy

  • A severance is an act of converting an equitable joint tenancy into a tenancy in common.
  • In order to avoid the lottery effect of the right of survivorship (please refer to survivorship Above) and to move from the joint tenancy to tenancy in common ‘severance’(ending/conclusion) is required.
  • Severance can only be made during the lifetime of the joint tenant.
  • If tenant does not severe his/her interest before death, the right of survivorship will apply and will take precedence/priority over any will tenant may have made
  • The legal title cannot be severed.
  • The names on legal title upon death or in other circumstances can be removed by statutory provisions of Trustee Act 1925, but fundamentally Legal Title cannot be severed.
  • The equitable title of joint tenancy can be severed by statutory and common law provisions.
  • Joint tenancy can also be severed by bankruptcy, forfeiture or killing of a joint tenant by another joint tenant.

Statutory Severance

  • Statutory severance is carried out by notice in writing sent by one joint tenant to all other joint tenants.
  • A statement to severe or unequivocal intention to hold interest as a tenant in common in the form of notice must be sent to all the remaining tenants and delivered to their last known home addresses.
  • Severance will be deemed upon sending the notice through recorded delivery.
  • Where the notice of severance is sent through standard mail, severance will be deemed upon delivery of the letter even where the letter has not been received by the intended joint tenant as long as it can be proved that the notice was delivered
  • A statutory notice can be a unilateral act of severance.
  • The unequivocal intention to severe has to be immediately, future intention to severe will not be sufficient to end the joint tenancy

Common Law Severance

  • Common Law methods include severance by a joint tenant by acting on his own share, or by mutual agreement, or by the mutual conduct of joint tenants.
  • A joint tenant can also end the joint tenancy by acting on his own potential share.
  • Selling equitable interest, giving it away or mortgaging it will severe the joint tenancy and convert it into a tenancy in common.
  • Disposition of the interest has to be in writing in order to prevent fraud.

Important

A joint tenant can use any method provided by common law or statutory severance to end the joint tenancy

Example

In 2016, Raj decided to severe his joint tenancy and wrote a letter to the other tenants, posted it and died in a car accident all on the same day, however, Raj wished to severe the joint tenancy on the future date of 1st January 2018’.

Raj’s wish to severe the joint tenancy in 2018, will not severe the joint tenancy. As a result, the rules of survivorship will apply and his interest in the land will devolve automatically to the remaining joint tenants.

Example

1.Howard, on the other hand, had acted on his share and sold it to Barry, as a genuine sale it will severe the joint tenancy and Howard’s interest in the land will pass to Barry, who will be a new equitable tenant in common.

2.Barry has acquired his interest in the land at a different time and instrument to the remaining joint tenants and the only unity present here is of possession.

Severance by Mutual Agreement

  • In severance by mutual agreement one or more joint tenants will agree to hold their share as a tenant in common, a notice can be used for mutual agreement.
  • Everybody has to agree as it is a mutual
  • Bankruptcy of a joint tenant and forfeiture will also result in severance of joint tenancy
  • In cases where one joint tenant kills another joint tenant, the act of killing will severe the joint tenancy and the right of survivorship will not apply. Under the forfeiture rules, the killing will forfeit any gains so no one will benefit from the crime.

Trust of Sale

  • The trust of sale imposes a binding duty on trustees to sell the property to resolve the dispute between tenants regardless of the wishes of the tenants.
  • The trust of sale has been replaced by the Trust of Land and Appointment of the Trustees Act 1996 (TOLATA).
  • Section 4 TOLATA abolishes the duty to sell the land in a trust for sale.
  • Section 14 of TOLATA deals with disputes and any person, who is either a trustee or has an interest in the property subject to a trust of land, can apply for dispute resolution under this section.
  • It allows the court to determine whether the property should be sold or not.
  • Section 15 of TOLATA provides a court with relevant factors to consider in deciding the disputes.
  • These considerations include the intentions of parties, the purpose for which the property was bought and held, the welfare of any minor who occupies or may occupy the property, and the interest of any secured creditor

Disclaimer

While every effort has been made to ensure the accuracy of the information provided in this article, it does not constitute legal advice and cannot be relied upon as such. Each legal case and issue may have unique facts and circumstances, as a result legalally does not accept any responsibility for liabilities arising as a result of reliance upon the information provided. For further help and guidance, you can always rely on and seek advice from our experienced lawyers.