Law of Property - Term Paper Example

The property ownership rights in Greengables (the Property) will be dependent on the legal principles governing co-ownership1. In respect of legal ownership, section 1(6) of the Law of Property Act 1925 (LPA) asserts that “a legal estate is not capable of subsisting or of being created in an undivided share of land”2. Therefore, legal co-ownership of property is governed by joint tenancy and in order to constitute a valid legal joint tenancy, the following requirements must be complied with: 1) Unity of possession; 2) Unity of interest; 3) Unity of Title; and 4) Unity of Time3. With regard to unity of possession, it must be established that each co-owner is legally entitled to possession of the whole property irrespective of any equitable interests in parts of the property4. The unity of interest element requires parties to a joint tenancy to have the same type of interest and equal share in the property5. If the unity of interest requirement negated, this results in severance of the joint tenancy into a tenancy in common6.With regard to the unity of title requirement, this stipulates that the parties’ proprietary interests in the property must derive from the same legal title and at the same time. Commonly this will require evidence through deed or will7. Unity of time can often be problematic and academic discourse has significantly criticised this requirement particularly due to the requirement that property rights must vest in each joint tenant simultaneously8. In applying these principles to the current scenario, Albert used the proceeds of the sale of Sunrise Lodge to purchase Greengables. It is evident that Barbara’s mortgage payments to Sunrise Lodge accounted for 30% of the overall purchase costs and as such, the proceeds of the sale of Sunrise Lodge were held on trust for Barbara under constructive trust9. With regard to Greengables, Albert, Barbara and Charles bought the Property together in 1997 with the conveyance expressed as being in the joint names of all three parties. On this basis, it would appear that at the time of purchase, the four unities requirement for the existence of a joint tenancy have been complied with. Accordingly, at the time of purchase, Albert, Barbara and Charles held the Property as joint tenants in equal shares. However, the legal joint tenancy can be rebutted if the factual reality of the ownership arrangement falls within the equitable presumption of a tenancy in common10. The conditions for the equitable presumption of a tenancy in common were extrapolated in the case of Robertson v Fraser11, where Lord Hatherley highlighted that any express agreement regarding the unequal division of the property or any other indication “which in the slightest degree indicates an intention to divide the property12” would negate the existence of a legal joint tenancy. In the current scenario, the proceeds of the sale of Sunrise Lodge were held on constructive trust for Barbara and it is therefore arguable that Greengables was also held in equity on resulting trust on behalf of Barbara’s contribution of 30% to the purchase price. As such, this may result in equity presuming a tenancy in common on the basis of unequal contributions to the purchase price13. Additionally, Albert told Charles that the Property would be his family home and as a result, Charles continued to live in the Property, gave up a job opportunity abroad and undertook significant renovations to the Property, which resulted in a significant increase to the Property’s value. Therefore, Charles may also have an equitable proprietary interest in the Property under common intention constructive trust14. The requirements for the common intention constructive trust were laid down in the case of Lloyds Bank plc v Rosset15 . In this case it was held that it must first be established that the parties had a common intention to share the property in question. Moreover, with regard to the intention requirement, it was acknowledged that this could be express or implied from conduct of the parties16. Moreover, in the Lloyds Bank v Rosset case, the House of Lords expressly referred to the dictum in the Gissing v Gissing17 case with regard to the correlation between detrimental reliance and constructive trust18. Therefore on this basis, Charles will have strong grounds to argue that he has equitable rights in the property under common intention constructive trust. Alternatively, as Albert told Charles the Property would be his family home and Charles continued to live there and undertake significant work on the Property, Charles may also be able to rely on proprietary estoppel to claim equitable proprietary rights in the Property19. The doctrine of proprietary estoppel, was acknowledged in Ramsden v Dyson20 and is further supported by the judicial rationale in Wilmott v Barber21. Accordingly, the factual scenario indicates that it is highly likely that Charles will be able to assert equitable proprietary rights in the Property. To this end, it is arguable that the prima facie legal joint tenancy is in fact rebutted by the tenancy in common presumption. Alternatively, if the Property is held as a joint tenancy the survivorship presumption is applicable22. On this basis, Barbara’s interest in the Property would vest in both Charles and Albert on death23. However, another method of negating the joint tenancy is by establishing severance24. With regard to Charles’ interest in the Property, his relationship with Albert had deteriorated and they had initially agreed for Albert to buy Charles’ share. The decision in Williams v Hensman set out the grounds upon which severance of a joint tenancy could be established as follows: “In the first place, an act of any one of the persons interested operating upon his own share may create a severance as to that share……..Secondly a joint tenancy may be severed by mutual agreement. And, in third place, there may be severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common.25” With regard to the act operating on “his own share” element, the common law stipulates that failure of the four unities to subsist results in termination of the joint tenancy26. With regard to possession, this will cease to exist if the co-owners vest parts of the property to others through partition27. Alternatively, whilst Albert and Charles initially agreed for Charles to sell his share, Charles subsequently changed his mind, which may negate mutual agreement as a ground for severance unless an enforceable estate contract can be established28. However, whilst initially agreed, Charles has now changed his mind and therefore it would have to be established that Charles severed the joint tenancy through course of dealings. The approach to course of dealings was set out in Nielson-Jones v Fedden29, where it was acknowledged that ultimately this will be question of fact. It was further established that course of dealings would result in common intention to sever being implied. Moreover, in Gore & Snell v Carpenter 30it was held that the course of dealings test for severance could be established in circumstances where “over the years the parties have dealt with their interests in the property on the footing that they are interests in common31”. In applying to current scenario, it is unclear whether the joint tenancy has been severed unless it can be established that there was an enforceable mutual agreement or Charles’ original agreement to sell his share constituted severance by course of dealings at that point. Alternatively, it would appear from Charles rights and Barbara’s contribution to the Property that there is an equitable presumption of a tenancy in common. As stated above, the presumption on severance of a joint tenancy is that the tenants in common will have equal shares in the Property unless any of the parties can rebut this with evidence relating to their contributions to the purchase price32. Contributions to the purchase price was determined to be a relevant factor when considering the rebuttal of the joint tenancy in Westdeutche Landesbank Girozentrale v Islington LBC33. Moreover, in Drake v Whipp34it was asserted that post-purchase contributions to the property and the conduct of the parties were also relevant in calculating the size of each tenant’s share in the property. If we apply this by analogy to the current scenario, Barbara’s 30% share and Charles’ contribution depends will impact the presumption regarding the value of shares in the Property. Additionally, Barbara died and left her share to Charles and therefore Charles can claim this interest as the right of survivorship is not applicable to tenancies in common35. Similarly, Deborah can claim an interest under tenancy in common with Albert’s share in the Property passing to her. Moreover, whether the resultant tenancy in common is through the equitable presumption or severance; the tenancy in common will be equitable. Section 36(2) of the LPA 1925 prohibits severance of a legal estate into another legal estate and expressly provides that severance of a joint tenancy will result in an equitable tenancy in common36. Additionally, in the current scenario there is no evidence of any express declaration of trust, and as such, the Trust of Land and Appointment of Trustees Act 199637 (TLA) imposes a trust of land. Under the TLA provisions, both Deborah and Charles will be trustees of the Property. As trustees they both have absolute power in the Property, which means that Deborah can effectively sell, lease or mortgage the Property in respect of her share.38 Moreover, the general trust law principles impose a positive obligation on trustees to act in the best interests of the trust and therefore Deborah will have to apply to the court for a sale of the Property, which will only be granted if determined to be in the best interests of the trust39. BIBLIOGRAPHY Gravells, N. P. (2010). Land Law: Text and Materials, 4th Edition. Sweet & Maxwell. Gray, K. & Gray, S. F. (2010). Elements of Land Law. Oxford University Press. MacKenzie, J & Phillip, M. (2008). Land Law. 12th Edition Oxford University Press Megarry & Wade (2008) The Law of Real Property. Sweet & Maxwell. Smith, R. (2009). Property Law. 6th Edition. Longman Wilson, S. (2009) Todd & Wilson’s Textbook on Trusts,. 9th Edition, Oxford University Press Legislation The Law of Property Act 1925 The Trust of Land and Appointment of Trustees Act 1996 All available at www.opsi.gov.uk accessed January 2011. Read More