The Legal Principles Applicable to Co-Ownership of Property - Assignment Example

PART A (i) In order to explain the effect of the facts on ownership of the house (the Property), it is necessary to evaluate the legal principles applicable to co-ownership of property. With regard to property ownership in law, 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”. Accordingly, the sole mechanism for legal co-ownership of land is by joint tenancy. A valid joint tenancy in law must satisfy the requirements of the four unities, namely; unity of possession, unity of interest, unity of title and unity of time1. Unity of possession requires that each co-owner be entitled to possession of the whole and the possession requirement distinguishes legal co-ownership from separate ownership of parts of the land. With regard to unity of interest, all joint tenants must have interests of the same kind and quantum and it is impossible at law for one tenant to have a different size share to the other tenant and consequently, if a joint tenancy is severed the shares as tenants in common will automatically be of the same size2. It has also been propounded that the unity of interest rule explains the requirement that joint tenants must act together in order to bind the land3. The unity of title requirement demands that the proprietary interests derive simultaneously from the same title (usually by deed or will). The fourth requirement of unity of time is arguably the weakest requirement4. The essence of this requirement is that each of the joint tenants must vest at the same time5. The use of the trust has become more common to circumvent this requirement and it is questionable whether unity of time is now a relevant requirement in the modern co-ownership model6. In applying these principles to the current scenario, all three parties bought the Property together in 1995 and the Property was registered in the joint names of the three of them, with no declaration of beneficial interests. The purpose was to get on the property ladder with all three living in the Property. Accordingly, the requirements of unity of possession, time, title and interest have been satisfied and as such, all four parties at this point had equal shares in the whole title of the Property unless the joint tenancy can be rebutted by an equitable presumption of a tenancy in common. Lord Hatherley LC in Robertson v Fraser7 asserted that an express agreement to create a joint tenancy or indeed anything “which in the slightest degree indicates an intention to divide the property must be held to abrogate the idea of a joint tenancy8”. The other three situations where equity will presume a tenancy in common is where property is held by business partners, co-mortgagees and unequal contributions to the purchase price9. Accordingly, as all three contributed unequal contributions to the purchase price, this appears to suggest that the joint tenancy presumption will be rebutted and the Property is held as a tenancy in common. If the Property is then held on a tenancy in common, then 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 price10. This was held to be a relevant consideration in the case of Westdeutche Landesbank Girozentrale v Islington LBC11, where Lord Browne-Wilkinson asserted that “where A makes a voluntary payment to B or pays for the purchase price which is vested in…….. the joint names of A and B, there is a presumption that ……….the property is held on trust in the case of a joint purchase by A and B in shares proportionate to their contributions.” With regard to the current scenario, it is evident that all three contributed unequal amounts to the purchase price and therefore they will hold the Property as tenants in common in shares commensurate with their contribution to the purchase price. However, as highlighted above the only legal model for co-ownership under the LPA 1925 is the joint tenancy. Accordingly, the Property will be owned as an equitable tenancy in common with each party owning their respective shares of the Property. Moreover, in the absence of an express declaration of trust. the Trust of Land and Appointment of Trustees Act 1996 (TLA) imposes a trust of land, which substitutes the previous system of trusts for sale. Under the TLA provisions, all parties will prior to Brenda’s death have held the legal estate as joint tenants on trust for themselves and tenants in common in equity. As trustees prior to Brenda’s death, Ann, Brenda and Claire would have absolute power in the Property, which means that they could effectively sell, lease or mortgage the Property. However, under the general law of trusts, any such action must be in the best interests of the trust and have regard to the rights of the beneficiaries12. With regard to Joe and Tina’s potential interest in the Property, as the Property was an equitable tenancy in common, on Brenda’s death, Joe and Tina will hold the Property with Anne and Claire as tenants in common due to the inapplicability of the rules of survivorship in relation to tenancies in common. However, as it is also a trust of land under the TLA, both Anne and Claire could theoretically sell the property and overreach Joe and Tina’s interest under section 2(2) of the LPA 1925. If Joe and Tina’s interest in the Property was overreached or bought out then Anne and Claire would still hold the Property as tenants in common under the trust of land. However, 79% belonged to the bank under the mortgage and it is therefore necessary to consider the various rights conferred on a mortgagee by virtue of granting the mortgage. Under section 101 of the Law of Property Act 1925 (LPA), the Bank as mortgagee will have rights in the Property.. As legal co-owners of the land, Joe and Tina can also both make an application for an order of sale of the Property under section 14 of the TLA, which provides that “any person who is a trustee of land or has an interest in property subject to a trust of land may make an application to the court for an order under this section”. Moreover, section 15(1) of the TLA provides wide discretion to the courts. Therefore the Bank’s interests are one of many factors to be considered and will not automatically preclude an order for sale if an application is made by Joe and Tina. It is also important to note that as Anne’s niece who is 8 years old, is living in the Property, this will be a relevant factor in determining any application for sale of the Property. Moreover, in Bank of Ireland v Bell13 it was commented obiter, that there should be a flexible interpretation of section 15. ii) The classic case of Williams v Hensman14 establishes a starting point for determining severance of a joint tenancy: “A joint tenancy may be severed in three ways: 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.15” An act operating on a joint tenant’s share is the common law form of severance and if any of the four unities cease to exist, then the joint tenancy must terminate16. Leaving the property will not in itself be sufficient to shatter unity of possession as possession is also required for a tenancy in common. Unity of possession is only shattered if the co-owners vest parts of the land in the co-owners by virtue of partition17. However, writing to require compensation for a share in the property can constitute severance through course of dealings, which is determined as a question of fact. This third limb of severance has created controversy with the interpretation of common intention to sever the tenancy18 however the general principle applicable is Walton J’s approach in Nielson-Jones v Fedden19, where it was held that course of dealing should be considered as a basis for implying a common intention to sever. The case of Gore & Snell v Carpenter 20further asserted that the test was stated to have been satisfied where “over the years the parties have dealt with their interests in the property on the footing that they are interests in common”. 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 price21. This was held to be a relevant consideration in the case of Westdeutche Landesbank Girozentrale v Islington LBC22, where Lord Browne-Wilkinson asserted that “where A makes a voluntary payment to B or pays for the purchase price which is vested in…….. the joint names of A and B, there is a presumption that ……….the property is held on trust in the case of a joint purchase by A and B in shares proportionate to their contributions.” Furthermore, the case of Drake v Whipp23 also highlights that consideration is given to post-acquisition contributions to the property and whole course of conduct in determining the measure of each tenant’s share in the property. PART B In undertaking this piece of work I utilised a combination of statute, articles, books and online sources. Moreover, in considering a coherent and measured approach to the problem question, which covered a broad range of complex legal issues and sources relating to the topic, it was vital to adopt and implement a structured and multiple stage strategy, which was utilised to produce the information needed to apply to the question in a logical manner. The first stage was to undertake the preliminary background research, utilising the following primary sources: 1) References cited in the Bibliography; 2) Relevant Legislative provisions such as the Law of Property Act 1925; and 3) Reference to relevant case law (cited in the bibliography) to ascertain the practical approach of the law to legal problems in a contextual manner with reference to the current factual scenario provided. A significant source for me was Megarry and Wade’s “Law of Real Property”. Not only is the book a legal sourcebook, I found the approach to contemporary property law multi-layered with an approach to legal issues in a practical context with numerous examples. This helped me consider the legal principles laterally and consider the wider issues raised by the factual scenario of the problem question. Secondly, I found the Law of Property Act 1925, The Trusts of Land and Appointment of Trustees Act and Blackstone’s commentary in “Blackstone’s Statutes on Property Law” vital in providing the definitive legal principles applicable to co-ownership structures for property. It further enabled me to plan and structure my assignment in considering the focus points of discussion in context of practical application to ensure that my assignment was contextual and logical as opposed to being a mere restatement of the salient legal principles.. Moreover, RJ Smith’s “Property Law cases and Materials” was important to my research in considering the practical perspective impacting joint ownership, tenancies in common in both law and equity and the rules of survivorship. From reading the relevant case law reports cited in the bibliography, I was further able to consider the practical application of the law outside of the parameters of legal principles. The differing approaches to severance in particular highlighted the inherent conflict of legal certainty and the need to address changing realities in contemporary land law issues at the heart of case law precedent, which further aided me consider the salient issues from a practical perspective. BIBLIOGRAPHY Blackstone’s Statutes on Property Law., (2007-2008). 15th Edition Oxford University Press. M. Dixon (2005) “Principles of Land Law”, 5th Edition. Routledge –Cavendish Publishing Hanbury & Martin (2005). Modern Equity, 17th Edition 2005. Megarry and Wade., (2007) The Law of Real Property. 7th Edition Sweet & Maxwell J MacKenzie& M Phillips (2005). Land Law. 10th Edition Oxford University Press. R J Smith , “Property Law” (2003) 4th Edition, Longman R J Smith, “Property Law Cases and Materials”,(2003) 2nd edition Longman Todd and Wilsons (2007). Textbook on Trusts 8th Edition. Oxford University Press All legislation at www.opsi.gov.uk and the UK Statute Law Database at www.statutelaw.gov.uk Law of Property Act 1925 Case Law Bank of Ireland v Bell [2001] 2 All ER 920 Drake v Whipp [1996] 1 FLR 826 Goodman v Goodman [1986] Fam 106. Gore & Snell v Carpenter (1990) 60 P & CR 456 Nielson-Jones v Fedden [1975] Ch 222. Robertson v Fraser (1871) LR Ch App 699 Stack v Dowdden [2007] UKHL 2 WLR 831. Westdeutche Landesbank Girozentrale v Islington LBC [1996] AC 669, Williams v Hensman (1861) 1 J & H 456. Read More