17.4 Co-ownership and Trusts of Land

Whenever two or more people hold a legal estate in land, a trust of land arises. LPA 1925 section 1(6) forbids a legal tenancy in common. Sections 34 and 36 channel co-ownership onto a legal joint tenancy, with a maximum of four trustees. Behind that legal title, equity may be a joint tenancy or a tenancy in common. FLK2 expects you to keep those two layers separate, then apply survivorship, severance, and TOLATA 1996 sections 14 and 15 when co-owners disagree.

Joint tenants and tenants in common: law and equity

A joint tenancy treats the co-owners as a single owner. Each is entitled to the whole. A tenancy in common gives each a distinct undivided share (one-half, one-third, or some other fraction) in a single piece of land.

The four unities must be present for a joint tenancy:

Only unity of possession is essential for a tenancy in common. If A is given a life interest and B a fee simple, they cannot be joint tenants of the same estate.

At law, A and B can only be joint tenants. A transfer "to A and B as tenants in common" still vests the legal estate in them as joint tenants. The words of severance operate in equity, where they take as tenants in common. If more than four people are named as legal owners, the first four who are willing and able hold the legal estate on trust for all of the beneficial owners.

In equity, look first for an express declaration of trust. A declaration in the transfer of the shares in which the property is held is generally conclusive (Goodman v Gallant), subject to rectification or a later variation. Words such as "in equal shares," "equally," "to be divided between," or "in the proportions X and Y" are words of severance and point to a tenancy in common.

If there is no effective declaration, resulting-trust and common-intention constructive-trust analysis may fill the gap (Stack v Dowden; Jones v Kernott), especially in family-home cases. Unequal contributions to the purchase price historically raised a presumption of a resulting tenancy in common in commercial or investment purchases. Do not let that presumption overwrite a clear express declaration.

A Form A restriction on the proprietorship register is the practical flag that the beneficial title is a tenancy in common, or at least that a sole surviving proprietor must not receive capital money alone.

Survivorship

The right of survivorship (ius accrescendi) is the defining consequence of a joint tenancy. When a joint tenant dies, that person's interest is extinguished. The survivors own the whole. The deceased's will or intestacy does not pass the joint tenancy share.

Worked figures: Amal and Blake hold a house worth £300,000 as legal and equitable joint tenants. Amal dies leaving a will that gives "all my property to Charlie." Blake becomes the sole legal and beneficial owner. Charlie takes nothing in the house.

Change one fact: they were equitable tenants in common in equal shares. On Amal's death, legal title still passes to Blake by survivorship, because the legal estate cannot be a tenancy in common. In equity, Blake holds on trust as to one half for himself and as to the other half for Amal's estate, so Charlie can take Amal's share under the will.

If three equitable joint tenants lose one member, the remaining two continue as joint tenants of the whole. Survivorship is why lenders and cohabitants care whether severance has occurred before death.

Severance of an equitable joint tenancy

You cannot turn the legal title into a tenancy in common. Severance operates in equity. After severance, the legal joint tenancy continues, but the severed share is held as a tenancy in common. The remaining unsevered joint tenants, if more than one, may still hold their combined share as joint tenants between themselves.

LPA 1925 section 36(2) provides a statutory method: a joint tenant may give notice in writing of a desire to sever to the other joint tenants. The notice must show an immediate intention to sever. Harris v Goddard held that a prayer in a divorce petition asking the court to vary property rights in the future did not sever. Service is governed by LPA 1925 section 196: leaving the notice at the last-known abode or business address in England and Wales can suffice even if the recipient never reads it (Kinch v Bullard; Re 88 Berkeley Road).

Williams v Hensman adds three common-law methods:

1. An act operating on the joint tenant's own share — for example, selling or mortgaging that equitable share, or a charging order against it (First National Securities Ltd v Hegerty). The act must be valid as a disposition of an equitable interest, so section 53(1)(c) signed writing is usually required.
2. A mutual agreement between the joint tenants to hold as tenants in common. The agreement can be oral and can sever even if it is not a specifically enforceable land contract (Burgess v Rawnsley).
3. A mutual course of dealing sufficient to show that the interests were treated as tenancies in common. Mere negotiations that go nowhere are not enough (Gore and Snell v Carpenter).

Bankruptcy severs: the bankrupt's equitable share vests in the trustee in bankruptcy as a tenancy in common share. Unlawful killing of a joint tenant engages the forfeiture rule and is treated as severing so that the killer does not take by survivorship.

What does not sever: a secret uncommunicated intention; a will (a will speaks from death, which is too late if survivorship has already operated); and, generally, unilaterally moving out of the property.

Disagreements under TOLATA 1996 sections 14 and 15

TOLATA 1996 replaced the old trust for sale with a trust of land. Trustees have, in relation to the land, all the powers of an absolute owner (section 6), but they must observe any restriction in the trust and consult beneficiaries of full age beneficially entitled to an interest in possession so far as practicable (section 11). A beneficiary whose interest includes a purpose of occupation may have a right to occupy under section 12, subject to the trustees' power to exclude or restrict occupation under section 13 (with conditions about reasonableness, payments, and consent).

When co-owners cannot agree on sale, occupation, or the exercise of trustees' powers, section 14 allows an application to the court by a trustee of land or by any person who has an interest in property subject to a trust of land. That includes a beneficiary and a secured creditor who has a charge over a beneficial share.

On a section 14 application, section 15(1) requires the court to have regard to:

• the intentions of the person or persons (if any) who created the trust;
• the purposes for which the property subject to the trust is held;
• the welfare of any minor who occupies or might reasonably be expected to occupy any of the land as a home; and
• the interests of any secured creditor of any beneficiary.

Section 15(2) adds, in case of dispute among beneficiaries, the circumstances and wishes of any beneficiaries of full age entitled to an interest in possession. Section 15 is not a rubber stamp for a chargee, but the creditor's interest is a mandatory factor (Mortgage Corporation v Shaire; Bank of Ireland Home Mortgages Ltd v Bell). A purpose of providing a family home, especially with minor children in occupation, can justify postponing sale for a defined period. An investment property bought "to sell at a profit" points the other way.

Section 15 does not apply to an application by a trustee in bankruptcy. Insolvency Act 1986 section 335A then governs. After one year from the vesting of the bankrupt's estate, the court assumes that the interests of the bankrupt's creditors outweigh all other considerations unless the circumstances are exceptional. Ordinary hardship of the family is not exceptional (Re Citro). Terminal illness or truly extraordinary facts may be.

In practice

Amina, Ben, and Chen are registered as legal joint tenants of a flat. The transfer declares they hold in equal shares. Amina, needing cash, assigns her beneficial share to Dana by signed writing and tells nobody at HM Land Registry. Legal title remains in Amina, Ben, and Chen. In equity the joint tenancy is severed as to Amina's one-third: Dana is a tenant in common of that third, and Ben and Chen remain joint tenants of the other two-thirds between themselves. If Amina then dies, survivorship does not carry Dana's third to Ben and Chen.

Later Ben wants to sell; Chen refuses because their child lives in the flat. Either can apply under section 14. The court must consider the original purpose (a home), the child's welfare, and any lender's interest. Do not act for both Ben and Chen on that application: their interests conflict. If the application is made by Chen's trustee in bankruptcy, switch statutes — section 335A, not section 15, supplies the test, and delay beyond one year is hard to justify.