Law of Property: Advice to Parties Interest in Cottage - Case Study Example

Law of Property |Word Count: 3160 Advice to Parties’ Interest In Cottage Initially, when the cottage was bought Elijah, Mitchell, Anisah, Dirk,and Shabaz had interest of 20%, 20%, 25%, 25%, and 10% respectively. Moreover, they were registered as joint tenant and held the title in trust as joint partners. Elijah sold beneficial interest to Mitchell hence Mitchell interest ownership doubled to 40% since at the time of purchase she had 20% similar to that of Elijah. However, after Mitchell wanted to sell her share part of interest to Shabaz and Dirk. Shabaz was interested and replied that she and the boyfriend were to begin saving though the change in interest ownership was never effected. When Dirk began new life in Australia the interest rates between Mitchell, Anisah, Dirk, Shabaz were as follows: 40%, 25%, 25%, and 10% respectively. Dirk wanted his interest from the investment though death cut him shot and all his property was left to Anisah. The implication is that Anisah’s interest will likely double to 50%. Rationally if the individual decide to settle their predicament out of court then the ownership of the cottage will be Mitchell 40%, Anisah 50%, and Shabaz 10%. The law stipulates and describes joint tenancy as each individual owning the property to own it wholly1. In case one of the ownership dies, then the ownership is automatically goes to the other joint tenant members. Legally the automatic transfer of ownership to other joint members is referred to as survivorship right2. However, the limited number to joint tenancy is four. In addition, there are four unities that joint tenancy must constitute to be valid3. Title unity dictates that joint tenants have to hold the property in question in one document4. On the other hand, unity of time stipulates that tenancy start and end one similar date to all the joint tenancy members while the possession unity highlights that each of the joint tenants have equal rights of possession and the possession is in terms of whole property5. The final unity is unity of interest which vindicates that there is equal interest in the ownership of the whole property by the joint tenants. Suppose the tenancy was held in common, then all the mentioned unities hold. However, the unity of possession slightly changes. In this case, all the individuals involved have equal right to possession of the whole property6. However, each of them owns a particular portion. For instant, the tenancy in common allows Elijah, Mitchell, Anisah, Dirk, and Shabaz to own the property according to their interest in the investment. In common tenancy if an individual dies the interests are not automatically passed to the survivor. The individual who takes the interest is determined by the deceased in case of the presence of a written will. If the written will is not available, the interest is likely to be distributed through the incorporation of the intestacy law. It would have been advisable that the persons involved in the cottage ownership declare their interests at the outset of the transaction so that incase of disputes then there is clarity. This may also help in minimizing disputes that are likely to emerge. The purchase of property in joint names means that the parties have to hold the estate legally as joint tenants while the benefits that emanate from interest can either be by tenants in common or joint tenants as illuminated earlier. If parties intend to equally own the property or own it in terms of unequal shares, then they are obliged to make declarations using either Land registry through their (Land Registry) forms or trust instrument that is separate. This has the potential of preventing disputes that are likely to emanate from cases of death, breakdown in relationships, or property being sold. The expression of declaration of trust us usually conclusive as it incorporates interest of all parties in the property. Since the parties in this scenario had would have sold the cottage, then there are greater chances then the interest are likely to be equally distributed7. If the interests are to be share between individuals owning the cottage then the modality to employ will have to be incorporated. Suppose they opt for out of court settlement in the sharing of interest then they are likely to develop a rational approach where inputs of each person are incorporate. However, considerations have to be made on the developments that have taken place from the inception stage to the stage they are currently. Elijah sells his interests to Mitchell meaning without legal proceedings Mitchell should own her 20% interest and an addition of 20% interest that Elijah had injected into the cottage. This amounts to 40%. On the other hand, Anisah still holds 10% since despite Dirks proposing before his death of the intension to sell his interest, Shabaz did not comply. This indicates that at the time when Dirk died, his interest was still 25%. However, all his property is to be transferred to Anisah whose initial interest was 25%. Meaning Anisah’s interest will double to 50%. However, on legal proceedings, the above modality is likely to change. The law on joint tenancy as illuminated earlier points out that the parties in question (Elijah, Mitchell, Anisah, Dirk, and Shabaz) has equal ownership rights despite their level of contribution. Their interests are held in trust hence they are bound to be shared equally. Despite Elijah selling his interest to Mitchell, the interest sharing in this modality still remains equal. Furthermore, the death of Dirk dictates according to laws governing joint tenancy that survivors of death dictate that the property will be shared among the survivors who at this stage are Anisah, Mitchell and Shabaz. If the regulations embedded to joint tenancy prove to be tricky and each of the members who have stake in the cottage want to share the property according to their share interest or the interests accrued, then they can opted to change from joint tenants to tenants in common. In tenants in common, they will share their interests depending on the changes that have taken place8. How the proceeds of sale will be divided if the cottage was sold Suppose Anisah, Shabaz and Mitchell decide to sale the cottage, the division of sale will have to incorporate the interests accrued. The challenge they are likely to encounter is the connotations or the details behind joint tenants. As mentioned above, the individuals are bind by the joint property which in this case can opt for either judicial settlement or legal proceedings in the division of sales in reference to their interests at the time and point of sale. Suppose the modality for the division of sale considered by the survivor is outside court setting (judicial review), then Mitchell will have 40 percent stake. The 40% is the summation of interest accrued from her initial capital injection and those from Elijah who had sold his interests to her. On the other hand, Shabaz interest of 10% had not changed from the initial contribution. She would have change that with the help of the boyfriend but by the time Dirk had an accident, it had not materialized. In fact, Dirk wanted his interest back before his death. As for Anisah, her initial injection into the cottage joint ownership was 25%. Dirk had relinquished all his property to her hence on a rational basis she is entitled to Dirk’s 25% interest share. Therefore at the time of purchase her interest summation will be fifty percent. This will be the ideal rational way to divide the sale among the three survivors. If they opt to follow the legal process, then they will be compelled to abide by the regulations embedded in joint tenancy. The share of interest in joint tenancy dictates that the cottage is owned equally by all the joint members9. This shows that Anisah, Mitchell, and Shabaz will equally get a third from the sales of the property. Moreover, in cases where one of the joint dies as the case of Dirk then the survivors share equally the interest of the departed. Despite Dirk leaving his property to Anisah, Anisah will not benefit as Dirks interest will have to be equally shared by the other survivors as well during the division of sales. To incorporate the interests that has been accrued due to the happening, the survivors (Shabaz, Anisah and Mitchell) can change the ownership form joint tenancy to common tenancy. In common tenancy, there is the leverage for the involved parties to share their interests according to their agreements. In addition, the directives of the dead are incorporated if the deceased had a will. The changing from joint tenancy to tenancy in common will mean that Mitchell will get 40% of the sales, Anisah 50%, and Shabaz 10%. The advantage of joint tenancy is the automatic transfer of property ownership10. It does not factor or incorporate probate estate of the individual who has died as this usually tend to present challenges such as helping in the avoidance of taxes and expenses that may be incurred in the probate. It is prudent to know that joint tenancy does not avoid certain taxes that are likely to be imposed by the state. The sales of a joint property in joint tenancy depend on all the joint members mutually agreeing to sell the property. If any of the tenants refuses to comply for the sale of the property, then the sale will not be conducted11. Factors that have to be incorporated if the property was conveyed into their joint names if no reference to any trust was made in the conveyance. At the point of purchase, Elijah, Mitchell, Anisah, Dirk, and Shabaz held title of the cottage in trust for themselves as joint tenants. This further reinforces that their ownership of the cottage was on equal basis. The legal system or implications means that trust is a situation where one hold a property in order to benefit another person12. Graham (2005) describes trust as obligations or duties that have been bestowed upon an individual by a trustee. These obligations are in terms of property held by the trustee or under the trustee’s control. The court ensures that persons holding property in trust are compelled to administer the trust in a manner that commensurate with the trust instrument in question13. However, there are some scenarios that there are no specific or particular provisions in either written or oral. Besides, it may be invalid or lack as per the principles of equitability14. The repercussion is that the administration can be in such a way that the benefits or advantages accrued may not go to the trustee but to the beneficiary. This illustrates that a trustee can be a beneficiary and in some instances may not be necessarily be a beneficiary. In some scenarios trust emanate from an individual declaration or conscious act where no single or particular name is incorporated into application. The other scenario encompasses situations where there is neither declaration nor conscious act creating the trust. In such a case, the existence of the trust is dependent on the legal regulations. Certain situations that are defined usually enforce trusts on persons due to property they own or control. There is a legal provision that allows a trust to have several founders as well as beneficiaries. Trustee too can be several but is pegged on legal rules or considerations where in most cases limits the number of trustees to be not more than four15. It is imperative to comprehend that property trust is any kind of interest or estate that are recognized but the laws governing property. In such case the laws of UK recognizes cottage within the facets of property laws. In practical purposes, trust property has legal title and its proprietorship interest is usually deemed equitable. The resultant benefits for the beneficiaries may be in kind. In addition, there is no leverage that illustrates that the beneficial entitlements are fixed in advance or they are to be received simultaneously in case there are several beneficiaries16. Trustee(s) may be given the obligation to allocate or disseminate the benefits. However, the trust instrument may have conditions that need to be satisfied for the accrued interests to be allocated17. Ownership through trust may be manipulated in different aspects. One of these aspects is that ownership of property in form of nominal can be distinguished from the advantages and the control rights18. The benefits can be shared between the beneficiaries who may have the rights to shares in reference to the founder of the trust in question. In situations where the property (in trust) generates some income, the entitlement on the income may be disjoint allocated in comparison to that of the capital19. The other manipulation strategy is that the founder may opt to put suspense in the allocation or dissemination of the accrued advantages or benefits inclusive of the trustees. The management and control aspects (not all) embedded in the trust property may be holistically removed from the beneficial entitlement and preserved for the founder. Moreover, when the trust property is subjected to sale, for instant the cottage in discussion is sold, the trust still subject of the new property that has been acquired. The final manipulation technique is that if the number of persons to benefit from the trust is large to an extent that it allows them to have co-ownership title that is legal20. The above factors will have to be deliberated by the parties involved in the cottage interest (Anisah, Mitchell, and Shabaz) in order to make appropriate decisions. In other words they have to be filtered in the screen of reality in the determination of accrued interest. If Mitchell was adjudged bankrupt Mitchell being declared bankrupt has the implication of affecting the other partners who has stake in the cottage property. When a bankrupt person is in joint ownership or tenancy for a particular property a claim can be labeled by the trustee in bankrupts in the property in question. Joint tenancy or ownership usually holds property in equal proportion or fraction depending on their number. In this case the shares of each individual (Anisah, Mitchell, and Shabaz) are equal irrespective of the circumstances that have prevail. The circumstance referred to are: Elijah selling the shares and Mitchell beneficial of Dirks property. In joint ownership the shares are equal hence those circumstances rarely count. Since there is equity in the share of the property, the trustee (Mitchell) in bankruptcy will be compelled to pass the property21. The ideal solution is that the other un-bankrupt owner of the cottage can put into consideration some techniques that are likely to reduce the percentage share of the Mitchell who has been adjudged bankrupt. They will have to consider whether the exoneration principles are applicable in Mitchell’s situation. Suppose a declaration trust was made at the time of the purchase of the cottage property and there is specification of each individuals share then the other joint parties are likely not to be inconvenienced22. However, this is only possible in case of tenancy in common and unfortunately Mitchell, Anisah, and Shabaz were in joint tenancy of property ownership with trust in the titled labeled to themselves. The other avenue that can be employed in this situation is that which supposes that there was no trust declaration23. Moreover, the contributions to the property in question differed in price at the time of purchase. Then when the property is ceased, the other parties can claim the difference of the prices that emanate from the out of equity principle. The exoneration principle may be weighed if its application is possible. It seeks to protect other owners especially in cases where one wants to take advantage of the concept or principle of equity ownership24. The bankruptcy trustee may impel Mitchell to sell the property in order to obtain or acquire her share of interest. If there is no exemption and Mitchell does not want the property to be sold she may have the leverage of convincing the trustee involved for having cashed on property equity and irrespective of the equity in question, it belongs to other partners who are Anisah and Shabaz. Reference List: UK. Government (2015). Joint Property Ownership. Retrieved on 9th April 2015 from: https://www.gov.uk/joint-property-ownership/change-from-joint-tenants-to-tenants-in-common  Graham, M. (2005). Trusts Law: Text and Materials. New York: Cambridge University Press. Smith, L. D. (2012). Re-imagining the trust: Trusts in civil law. Cambridge: Cambridge University Press. Sánchez, A. R., & Moralejo, I. N. I. (2011). Property and trust law in Spain. Alphen aan den Rijn: Kluwer Law International. Penner, J. E. (2012). The law of trusts. Oxford: Oxford University Press. Clarke, S., & Greer, S. (2012). Land law directions. Oxford: Oxford University Press. Socrates Media. (2006). Bankruptcy: An action plan for renewal. Chicago, Ill: Socrates Media. Protecting the jointly owned home from a Trustee in Bankruptcy Kirstin, G. (2009). Protecting the jointly owned home from a Trustee in Bankruptcy. Retrieved on 9th April 2015 from: http://www.crippslink.com/index.php?option=com_content&view=article&id=691:protecting-jointly-owned-home-trustee-bankruptcy&catid=77:insolvency-corporate-recovery&Itemid=537 Steve, S. (2015). Holding Property in Joint Tenancy Creates more Problems than it Solves.Retrieved on 9th 2015 from: http://www.stevesamsonlaw.com/lawarticle.php?aid=5 Law Society (2013). Joint Ownership. Retrieved on 9th April 2015 from: https://www.lawsociety.org.uk/support-services/advice/practice-notes/joint-ownership/ Bohan, B., & McCarthy, F. (2014). Capital acquisitions tax. Haywards Heath : Bloomsbury Professional Sims, S. (2011). Understanding and Paying Less Property Tax For Dummies, UK Edition. Hoboken: Wiley. Booth, T. (2003). The buy to let guide: How to invest for profit in residential property and manage the letting yourself. Oxford: How To Books. Finney, M. (2008). Wealth management planning: The UK tax principles. West Sussex, England: John Wiley & Sons. Kenny, Garrett. (2015). Buying & Owning Property in Central Florida. Authorhouse. Read More