Property Law and Concurrent Estates - Case Study Example

 PROPERTY LAW AND CONCURRRENT ESTATES Background Property law is that field of law which governs the different types of ownership in real property (land as dintinguished from personal or movable assets) and in personal property, within the common law legal system. Likewise, in the civil law system, there is a classification between movable and immovable properties. Movable property relates to personal property, while immovable property talks about real estate or real property, together with the associated rights and obligations intrinsic to it. This philosophy of property underlies all property law. Historically, in some areas, property was owned by the monarch and it devolved through feudal land tenure or other feudal systems of loyalty and fealty. Though the Napoleonic code was among the first government acts of modern times to introduce the notion of absolute ownership into statute, protection of personal property rights was present in more feudalist forms in the common law courts of medieval and early modern England. Property – Definition Black's Law Dictionary states that "in the strict legal sense, [property is] an aggregate of rights which are guaranteed and protected by the government" and that the term "includes not only ownership and possession but also the right of use and enjoyment for lawful purposes." On the contrary, Barron's Law Dictionary classifies property as "one's exclusive right to possess, use, and dispose of a thing" [ . . . ] "as well as the object, benefit, or prerogative which constitutes the subject matter of that right." Divisions Property law can be divided into personal and real property. Real property concerns itself with rights in rem, or relating to land. Personal property concerns itself with rights in personam, or relating to chattels. Using contemporary descriptions, property has been depicted as oscillating between 'competing models of property as a fact, property as a right, and property as a responsibility. Declared ownership in and of itself is insufficient to constitute property in a legal sense. Rather, the idea of property arises where one can have his/her right to land or chattels respected and enforced by a court of law. Therefore, to possess good title (and thus enforceable rights) on property one must acquire it legitimately, according to the laws of the jurisdiction in which one seeks enforcement. Real property does not just talk of the ownership of property and buildings — it also involves several legal relationships between owners of immovable property (real estate) that are basically conceptual such as the easement, where a neighboring property may have some right on your property, right-of-way, or the right to pass over a property, and incorporeal heridiments such as profit a prendre. Real property can also be held in various ways. In some jurisdictions real property is held absolutely, in England it may still be considered to be carved out of Crown's ownership of all property in the realm. Such distinctions are important in terms of the law of escheat or when property reverts to the state because it lacks an owner or has been abandoned. Estates may also be held jointly as joint tenants with rights of survivorship or as tenants in common. The difference in these two types of joint ownership of an estate in land is basically the inheritability of the estate. In joint tenancy (or in marriage this is sometimes called tenancy of the entirety) the surviving tenant (or tenants) become the sole owner (or owners) of the estate. Nothing passes to the heirs of the deceased tenant. In some jurisdictions the magic words "with right of survivorship" must be used or the tenancy will assumed to be tenants in common. Tenants in common will have a heritable portion of the estate in proportion to their ownership interest which is presumed to be equal amongst tenants unless otherwise stated in the transfer deed. There are other types of estates in land that are used to prevent the alienation of land (also used in the law of trusts). Generally these are called future interests, an example being the rule against perpetuities. Real property may not only be owned it may be leased in which the possession of the property is given to the tenant for a limited period of time. Such leases are also called estates such as an estate for years, a periodic tenancy or an estate at will. Real property may also be owned jointly through the device of the condominium or cooperative. Concurrent Estates In the sphere of property law, there exists a model that explains and illustrates the different ways in which property can be owned by more than one person at a given time. This concept is called concurrent estate or co-tenanacy. The individuals who mutually own the property are referred to as joint tenants or co-tenants. Consequently, there are three kinds of concurrent estate recognised by most common-law jurisdictions – joint tenenacy with right of survivorshihp, tenancy in common and tenancy by entirety. The type of ownership establishes the rights of the individuals involved on how to pass on their interests in the property to others, whether to will the property to their heirs or to break off from the joint ownership status. Since each of these provides a unique set of rights and duties to the property’s joint owners, each type likewise requires a varied set of conditions in order to exist. Rights and Duties Joint tenants, regardless of the kind of tenancy, share specific rights to the property: Every tenant has a clear right of access to the property. In cases where a co-tenant wrongfully prohibits or leaves out another from enjoying the use of the estate, the left out tenant can file a cause of action for ouster and may obtain a just and reasonable rental value of the property for the time that he/she was cast out. Every tenant has the right to an accounting of profits earned from the asset. If the property yields income (for instance, rent) then each tenant is entitled to a fraction of the proceeds. Each tenant possesses the right of contribution for the expenditures of owning the estate. Co-tenants are compelled to give his/her share for the payment of significant outlays like property taxes and mortgages on the entire property. However, co-tenants are not required to contribute to any of the costs of repair or improvement to the property. For example, X decides to plant crops on the land he has purchased together with his brothers Y & Z (the land’s co-owners/tenants). Such addition to the property increased the land’s real estate value, nonetheless, X has no right to compel Y & Z to share the financial burden related to the decision to develop, even if Y & Z also obtained profits from the property’s development. But during partition, X is entitled to recoup the value added by his/her enhancements of the property. On the other hand, if X’s improvements bring down the market value of the said asset, then X is responsible for such decline. In addition, each co-tenant can separately impede their own share in the property by getting a mortgage on that share; the other co-tenant/s have no duty to assist in paying a mortgage that only runs to another tenant’s portion of the property, and the mortgagee can only close out on that share. Lastly, co-tenants owe one another an obligation of responsible and reasonable dealing. Because of this, any co-tenant who attains a mortgage claim against the property must provide her/his co-tenants an evenhanded opportunity to purchase balanced shares in that claim. New Well Farm Scenario Ernest, Fredrick, George, Hubert and Ian are brothers. In 1999 each of them inherited £100,000 from his parents. They consequently decided to purchase a property together which was to be used partly as a family home and partly as a place from which to run their various business interests. In 2000 they purchased New Well Farm. Each contributed £100,000 to the purchase price of £500,000. New Well Farm consists of a large farmhouse and 50 hectares of land, on which are situated two cottages (which are part of the farm). The brothers have now quarreled. Ernest wishes to marry his girl friend, Emma, and set up home with her and their baby son, Eric. Fredrick’s business interests in the farm are failing. Both Ernest and Frederick want New Well Farm to be sold and the purchase price distributed amongst the five brothers. Hubert and Ian, on the other hand, do not wish the farm to be sold. They are happy living there. The business interests in the farm of both are thriving at New Well Farm. George has no particular opinion on the matter, other than that he wishes to remain on good terms with all of his brothers. Advise Ernest, Fredrick, George, Hubert and Ian on: The nature of their property interests in New Well Farm Ernest, Frederick, George, Hubert and Ian are co-owners/co-tenants in the New Well Farm property and the kind of ownership that can be attributed to this situation is “tenancy in common.” In this type of ownership, each of them has an undivided interest in the property and each one has equal rights to use the property even if the proportion of interests are not equal or the living spaces may vary in size. Likewise, with this kind of ownership, there is no right of survivorship; each co-owner is allowed to choose who will inherit his ownership interests upon death. Finally, if one of the brothers dies, there must be a probate of the asset of the one who died to facilitate the transfer of interest or ownership (Fee, 1998). In this situation, the brothers do not have to acquire title at the same time, have access to the use of the entire asset and obtain interest from similar sources. Also, because the brothers’ property is not legally divided, it has a single assessed value and the brothers will have a single property tax bill (rather than separate bills for each brother). Here, financial outlays are divided into "individual expenses" and "group expenses". Individual expenses would mean repairs and upkeep and improvements to individual interiors/areas, personal property insurance, and separately metered utilities; these are paid directly by the individual co-owners. On the other hand, group expenses will include mortgage payments (in case the brothers have availed of a group loan), building/real estate insurance, property taxes, upkeep and improvements to common areas, and shared utilities (e.g. water and trash removal), these are paid through a group bank account employing a monthly evaluation scheme. Under this scheme, each brother contributes a single monthly payment to the group account. The monthly payment is assessed and based upon the total of the brother’s share of each of the expected group expenses. For predictability and protection against default, even semi-annual and annual expenses, like property taxes and insurance, should be included in the brothers’ monthly payments. What action the parties can take in order to resolve their differences over the property The brothers can resolve the issue by resorting to a partition and a sale. With partition, the property is physically divided into separate shares, that is, proportion to the ownership of the co-tenants. Upon resorting to this remedy, the court will decide what share a co-owner has. It must be borne in mind that in co-tenancy, a fiduciary relationship does not exist, meaning, Ernest and Frederick do not have to act in the best interests of the rest of the brothers (they can sell their share of the property if they want to) and Hubert and Ian can hold on to their share of the property as long as they like. As to George, since his only concern is to be in good terms with all of his brothers, it is really up to him if he wants to also sell his part of the property or just stay and hold on to it. If in case, the brothers were not able to agree to a partition, any or all of them can go to court and seek its ruling to impartially determine how the land should be divided up, that is, to physically divide it between the brothers (partition in kind), leaving each with ownership of a portion of the property representing each one’s share. Courts can likewise order a partition by sale in which the entire property is sold and the proceeds are distributed among the five brothers. Remedies available to the court /Criteria the court would use in coming to a decision Where there is a conflict over property, either between joint owners or between a sole owner and another individual claiming to have a beneficial interest in that property, the claimant may apply to the court for an order under the Trusts for Land and Appointment of Trustees Act, 1996. It is in that venue that relevant matters will be decided upon and consequently settled in the absence of specific agreement between the parties. Depending upon which of the parties actually paid the purchase price, mortgage capital repayments, for substantial alterations, repairs or improvements to the property, the court will decide that in practice, in spite the nature of the title, a sole owner holds the property in trust for him or herself and the other, or in the case of a tenancy in common in which the shares have not been defined, describe and classify them through similar application of trust law. The court can likewise, decide that alleged contributions were of insufficient value or of the wrong nature to affect property interests. Legally, this is an extremely complicated area which arises from general land law and is not specific to cohabitation. Joint tenancies make several individuals into a single legal entity for the purpose of co-ownership; a juridical being whose existence persists until all the individuals except one cease to exist, in this case, the survivor becomes the sole owner of the originally co-owned property (Harpum, 2000). Since 1925, disjointing, or legally termed as severance, of a joint tenancy of a legal estate was not possible. Therefore, no action by a single joint tenant can be effective in dealing with any legal estate, unless he/she acts on behalf of the other joint tenants. Subsequently, it has been established that a single joint tenant cannot unilaterally surrender a lease nor exercise a break clause in a lease. This follows from the very nature of a joint tenancy. No one joint tenant has any legal interest of which he can dispose (sell, transfer, and mortgage); there is only one owner with powers of disposition (powers to deal with the lease) in the eyes of the law, the joint tenants acting together. From 1925 onwards, the law has insisted that any legal estate in land owned by more than one person, including a periodic lease, must be held by the co-owners as joint tenants (Property Act 1925, s. 34). The Law of Property Act 1925, ss. 34 and 36, and the Settled Land Act 1925, s 36(4) provide that legal joint tenants must hold the legal estate upon a trust. The beneficial interests under the trust may, or may not, reflect the joint tenancy of the legal estate. To this complex legal foundation must be added the various statutory schemes governing periodic leases entered into for different purposes (e.g. residential, agricultural, and business). Finally the whole situation can be subject to the application of legal regimes that originate from the nature of the relationship between the co-owners (e.g. family law, the law of partnership). The end result is that the functionally straight-forward shared periodic lease is legally a nightmarishly complex institution. This is significant because such shared periodic leases are commonplace, and are economically and socially important. References/Readings Fee, E.G. (1998). New disclaimer regulations, and other rules affecting jointly owned property. Estate Planning, 25, p. 117 Harpum, C. (2000). Megarry & Wade The law of real property. 6th ed. London: Sweet & Maxwell www.law.com.dictionary www.bbc.co.uk Read More