Co-ownership And Severance In Mayfield House

Introduction

This current essay will address three principal issues arising out of the facts of the current case. Firstly, this essay will discuss the type of ownership in Mayfield House, whether it is joint ownership or tenancy in common. Secondly, it will discuss severance of shares in this property. Thirdly, it will explain resistance to sale of this property by Katie and Philip, the surviving co-owners after Max’s estate is put up for sale by Mayfield House.

Statutes and the common law govern the law of co-ownership. The Law of Property Act 1925 (LPA 1925) and the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996) are the applicable statutes in this case. The LPA 1925, s. 1(6) provides for joint tenancy co-ownership of legal title. Joint proprietors are those owners registered as proprietor of the land. TOLATA 1996, s1 provides about the principle of co-ownership. It provides that where multiple people concurrently own a land, it creates a trust of land. The land is held by them on trust. This separates the legal and equitable ownership in the land. The owners act as legal owners, who are act as the trustees. There also act as beneficial owners. This separation of rights of ownership impacts severance of beneficial interest in joint ownership where it allows beneficial interests to be held in tenancy in common and severed, but does not permit owners to hold legal estate in tenancy in common or sever the interest.

First Issue

Applying TOLATA 1996, the legal estate is held by the co-owners on trust for themselves as beneficiaries, which can either be joint tenants or tenants in common. Understanding concepts of joint tenants or tenants in common and distinction between them will help dealing with the first issue of the type of ownership in Mayfield House, whether it is joint ownership or tenancy in common. The distinction will also help determine whether the principle of ‘just acrescendi’, which is whether survivorship rule applies in the current case, or whether each of the tenants owns a definitive share in the property as tenants in common. Joint tenants, also called “beneficial joint tenants” possess equal rights to the property. Joint tenants must have the elements of title and interest, possession and time, which create joint tenancy ownership. LPA 1925, s1(6) allows the trustees to be joint tenants. Their assets of the property cannot be transferred in a will. Each of the owners cannot own separate percentage share in the legal estate. In tenants in common, co-owners own different percentage shares. They can transfer their assets of the property in a will. Thus, they have the rights of possession. They share interest in the land, and can derive title from the same document.

The distinction of how the owners hold the property as joint owners or as tenants in common will determine the way ownership in the property is treated after the death of one of the owners, and in turn determine the application of the rule of survivorship in case of joint tenants or severance in case of tenants in common. Thus, in joint tenants, the co-owners hold the interest in the property together, and the rule of survivorship applies. In case an owner expires, the legal estate in the entire property automatically and directly passes to the surviving owners. Thus, in case the title to a property is held in joint names, survivorship applies when one of the joint tenants dies. Thus, the share of the deceased does not devolve under intestacy or the will, except where one co-owner acting on his own share immediately and unequivocally severs the joint ownership, the ownership becomes tenants in common. The LPA 1925, s36(2) allows alienation of share by an unilateral act of the owner, and such act must be final and irrevocable.

This unequivocal act may be sale of interest to a third party; or gifting of equitable interest to another. This is one of the three methods of severance. This act must be an act by the owner ‘operating upon his own share.’ Second method is severance by agreement between the parties, which does not require to be in writing as per the Law of Property (Miscellaneous Provisions) Act 1989, s.2(1)). Third method is severance caused by a course of dealing sufficient to intimate that owners are tenants in common. But, this does not change the legal ownership in the property, but definitely changes equitable ownership. In tenants in common, the rule of survivorship does not apply. Thus, the title to the property passes to the other owners through a will. They could transfer to anyone else they please. In absence of the will, the distribution is according to the rules on intestacy.

TOLATA 1996, s1 provides that the beneficiaries of the trust hold the property as beneficial joint tenants or as beneficial tenants in common. The principle that “equity follows the law” presumes joint tenancy. This presumption is rebutted either by an express declaration of trust or by parties’ conduct that indicates an intent to divide the interest into shares. The lack of an express declaration at the time of purchasing the property with respect to their intention to hold the beneficial interest, implications arises as to the nature of the ownership. Parties’ intention at the time of buying the property is a key factor to determine the nature of the beneficial interest.

The case of Burgess v Rawnsley dealt with the issue of determining the nature of ownership in absence of any express declaration at the time of the purchase of property. In this case, Lord Denning observed that if there is an the intention of the parties that it must be tenants in common and not jointly, severance takes place despite non-existence of a firm agreement. Irrespective of the parties’ intentions at the time the property was purchase, if later parties’ course of dealings demonstrates their intention to be tenants in common that must be the nature of the ownership. In Adekunle v Ritchie, a mother and her son purchased a home in their joint names.

There was no express declaration as to the beneficial interest in the property. The court held that rule of survivorship is not applicable as the principle of Stack v Dowden that presumes joint owners hold beneficial did not apply in the current case. The entire course of the parties’ conduct holds the key to determine their intention to be tenants in common and it rebuts the presumption of beneficial interest and presumes tenants in common.

There are other factors that could infer the type of ownership whether joint tenants or tenants in common. For instance, where the owners of the property are not married or are in a relationship, like that of a parent and child, the percentage of contribution to the purchase amount becomes significant in deciding their respective beneficial ownership. If the owners bought the property with each providing different levels of contribution, each of the owners is presumed to own an interest that corresponds to their respective contribution.

Different levels of contribution to the purchase amount create a presumption of tenants in common. In the case of Laskar v Laskar, a mother and her daughter purchased a house in their joint names where the daughter contributed only 4 percent to the purchase amount. The purchase was an investment and not a family home. It was held that the daughter was not entitled to a 50% share as the court ruled that the beneficial interests must be aligned with the shares in purchase contribution. Thus, unequal contribution to the purchase of the property can lead to the presumption of tenancy in common. Further, presuming a beneficial interest is rebutted and tenancy in common presumed if the entire course of parties’ conduct gives rise to their intention to be tenants in common.

In the case of Fowler v Barron, the parties were cohabitees and they bought a house as joint owners. The court considered their course of conduct for ascertaining their intentions. It applied the presumption of beneficial interest as joint owners even where there was parties’ contribution in different shares. However, if the parties intend to reflect the precise contributions respective to the beneficial interest, the ownership will be structured as tenants in common.

If there is an independent intention to treat a joint tenancy as being severed, this is not sufficient evidence to give effect to the severance. In tenants in common, the shares may be equal or unequal, which has to be determined by the contributions made or any deed as to the beneficial interest. Tenants in common is presumed when the contributions are unequal and beneficial interests are not expressly declared. It is also implied if one owner takes a mortgage on the interest in the property. Thus, despite a joint tenancy and an equitable beneficial ownership, severance of such joint tenancy occurs if a joint owner mortgages on the interest in the property to get a loan against it. This converts the ownership into tenancy at common.

It must be noted that the registry registers ownership of the legal estate, and not the underlying ownership (the ‘equitable’ or ‘beneficial' interests”) in the property. The legal owner and the beneficial owner may not always be the same person. The beneficial owner gets the benefit of the land. Upon their expiry, the beneficial interest in the property may not transfer like the legal ownership does. Thus, there is no guarantee to the proprietor to be the beneficial owner and that he owns the land for his benefit. Beneficial ownership can be of equal or unequal shares, which causes proportionate percentage of interest. However, property may be subjected to a trust despite the lack of express intention of the settler.

Such informal trusts may exist in the form of resulting trust. In the case of Westdeutsche Landesbank Girozentrale v Islington London Borough Council, Lord Browne-Wilkinson presented two circumstances that could give rise to resulting trust. Firstly, where A Party voluntarily pays to B Party or wholly or in part for buying a property, which is vested either in their joint names or B Party alone, this presumes that A Party does not intend to give a gift to B Party. The purchase price paid by A Party or the property is held on trust for A Party, in case A Party solely provides the purchase price, or in share proportionate to the contributions in case of their joint purchase. This presumption is rebutted when there is a counter presumption arising out of advancement or direct evidence by A Party’s intention to make a direct transfer.

Secondly, resulting trusts occurs when A Party passes the property to B Party in express trusts; however, the trusts cannot exhaust the whole of the beneficial interests in the property. Resulting trusts gives effect to a party’s implied intention. The transferee is not allowed to receive the property absolutely for their benefit. This trust ensures the transferor retains their interest in the property. In the present problem scenario, the property is in joint names, and Max, Katie and Philip contributed to the purchase amount. There is a mortgage of £200,000, where Max and Katie contributed £80,000 to the purchase price and Philip contributed £40,000. They bought the property with each providing different levels of contribution. They have unequal shares given the contributions in the mortgage by them, and as such they have proportionate percentage of beneficial interest. Further, Max took a loan on the security of his interest in Mayfield House. This shows his intention to treat his share of the property as separate and distinct from Katie and Philip. Max also had paid in part for purchase a property during the time when Katie was on maternity leave.

This does not mean that Max intended to make a gift to Katie, and therefore a resulting trust may not arise. Instead, a constructive trust may arise if there was an expressed common intention to a beneficial interest, and the claimant acts on reliance of such expression to their detriment. However, this is not so in the current case and therefore, there is no constructive or resulting trust. In the current case, the act of Max mortgaging on his interest in Mayfield House to secure a bank loan severs joint tenancy, if there was, and converts the ownership into tenancy at common. In the current case, there was no express declaration of beneficial interest, and given the entire course of dealings between them and the unequal contribution, the parties are tenants in common.

Second issue

The second issue is regarding severance of shares in this property that will determine their individual shares in the property. Tenants in common have different shares of the property. They can transfer their assets of the property in a will. In case an owner desires to transfer his part of the property, they could transfer to anyone else they please. In case one of the owners expires, the title to the property does not automatically go to the other owners. If an owner dies, the distribution of his or her share will be as set out in the will. The rule of survivorship is not applicable. In absence of the will, the distribution is according to the rules on intestacy. Total intestacy happens where a person does not make effective disposition of their property over which they had the capacity to dispose of through a will. In the current case, Max had every right to dispose his share in the property. However, before he could do so he died. As such, his share of the property will get distributed either through a will or by interstate. In the current case, there is no will as could be determined from the facts of the case. So, the distribution will be by interstate. Max did not make any effective disposition of his share of the property when he had the capacity to dispose of his share through a will.

Third issue

The third and final issue is regarding resistance by Katie and Philip to sale of Mayfield House put up by Max’s estate. Applying LPA 1925, s15 to this case, it provides for the court to consider the purpose of the trust; intentions of parties who created this trust; and welfare of associated minors. In the current case, Max and Katie have two children, and the court must consider their interest. Reference could be drawn the Re Buchanan-Wollaston’s Conveyance, where the court disallowed sale by a joint owner and observed that the intention behind the conveyance of a promenade in joint names to four individuals would ensure non-erosion of the value of the adjacent properties. However, TOLATA 1996, s14 allows sale of a property if the purpose with which the property was purchase ends, but the purpose of the trust at the time when the sale is being made must be considered and not at an earlier time. In this case, the property was purchased as a matrimonial home but eventually the marriage ended and therefore, the court allowed the sale. TOLATA 1996, s15 (1) (c) provides that if the interest of minors is associated with the property, the court may disallow the sale of property even when the purpose for which the trust was created comes to an end. In Williams v Williams, the court disallowed sale of a property after partied ended their marriage as they had four minor children living in the property with their mother. Under TOLATA 1996, s15 (1) (c), when child closes to majority, court will give lesser weight while determining the sale of the property.

Conclusion

In conclusion, the ownership of the property is tenants in common. Katie, Max and Philip are co-owners with different shares of the property.

Advice to Katie:

Death of Philip leads to total intestacy and as such Katie, being his wife is entitled to Max’s share in the property. For this to occur, Katie must survive him by 28 days. The death of Max passes his interests in the property to Katie through the rule of interstate. So, Katie can claim his share of interest in the property being his wife.

Determination of the quantum of interest between Katie and Philip would involve considering the beneficial interest of the parties and their respective shares in the interest. If the exact extent of shares as intended could not be deduced, the court will consider what is reasonable and just. As such, the extent of beneficial interest of Max and Katie would be two thirds of the purchase amount that the contributed.

The court gives considerable weight to welfare of the children. Under TOLATA 1996, s15 (1) (c), when child closes to majority, court will give lesser weight while determining the sale of the property. The two minor children of Max and Katie live on the property with Katie, and therefore Katie could present this factor to the court to consider while resisting the sale of the property and present that the sale of the property would impact their welfare.

Katie can also show Max and her reconciled their differences and that Max later intended, during her stay with him in Canada, of not selling the house. This will also go in her favour while resisting the sale.

Advice for Philip:

Max and Katie contributed to two-third towards the purchase amount of the property, and Philip contributed one-third and so the contribution will be done accordingly. As per determination of the quantum of interest stated above, the remaining 1/3 of the interest would go towards Philip.

Severance needs agreement of all the parties. Philip did not any have chance of giving his consent to Max’s intention of selling his share in the property as he did not receive the letter from Max.

Bibliography

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