The Necessity Of Tenancies In Common

Section 1(6) of the Law of Property Act 1925 (LPA 1925) provides that “a legal estate is not capable of subsisting or being created in an undivided share in land.” This essay critically discusses whether the enactment of this principle under LPA 1925 ought to have operated so that tenancies in common should have ended to exist in relation to co-owned land from that point onwards. This essay argues that tenancy in common ought not to have been abolished and that its continuity serves a useful purpose which has to be seen in the light of the nature of land as property with often competing interests where not just legal but equitable interests are to be protected by the law.

At the outset it may be mentioned that legal tenancy in common is abolished by the LPA 1925. However, the law saves equitable tenancy in common. Thus, the equitable title of the property may be held by the co-owners either as a joint tenancy or tenancy in common which would dependent on the words used to create co-ownership. After the passage of the LPA 1925, trustees can only hold the legal estate as joint tenants under the operation of Section 1 (6) as a legal estate is not capable of subsisting or being created in an undivided share in land. While Section 1 (6) bars legal estate in tenants in common, beneficial interests can still be held by co owners as tenants in common. Sections 34 and 36 of the LPA 1925 reiterates the bar on creation of tenancy in common at law. Prior to LPA 1925, individuals could hold legal estate in undivided land as tenants in common or as joint tenants. Therefore, the change under the LPA 1925 was a major one in that the legal estate cannot be vested in tenants in common. Does that however mean that tenancy in common should have been abolished?

Tenancy in common serves an important purpose in safeguarding the interests of those who may have contributed to the purchase of the land but do not own the legal title to the land. The tenant in common holds an equitable interest in the land as opposed to the legal interest. This does not go against the intent and purposes of the LPA 1925. The purpose behind barring the holding of legal estate as tenants in common was to end the complexities that were involved in the transfer of land that was co-owned by individuals in separate shares over the same parcel of the land. Due to these complexities, the purchaser of the land would have to purchase land from separate individuals who held separate interests in the land. The change brought in by the LPA 1925 sought to restrict the manner in which joint tenancy and tenancy in common forms of co ownership could come into existence so that legal estate could only vest in joint tenants where tenancy was inseverable in nature, whereas equitable interests could be held by any number of tenants in common. This allowed the courts to protect the interests of individuals who contribute to the purchase of the property and wish to hold the property in separate shares.

The coexistence of tenancy in common has not led to any confusion or complexity in the law as the principles of joint tenancy and tenancy in common are sufficiently clear; therefore, there is no sufficient justification for arguing that tenancy in common ought to have been abolished with the enactment of LPA 1925, Section 1 (6). There is a presumption of joint tenancy as equity follows the law and since legal estate cannot be vested in tenants in common, the law presumes joint tenancy. At the same time, the presumption of beneficial joint tenancy can be rebutted and tenancy in common created through an express declaration of trust or by conduct and or words that indicate the intention to divide the interest into shares. Where there is no such express declaration, equity can be used to presume tenancy in common when parties contribute in different proportions to the purchase price or they are business partners. Therefore, it is clear that there are no obvious complexities associated with the retention of the equitable tenancy in common while there are certain advantages of retaining tenancy in common. Even with respect to joint tenancy where legal estate can be vested as joint tenants, the nature of the interest is arising out of a trust so that the legal title is held by the joint tenants as trustees under the operation of the LPA 1925 read with Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996). This indicates that the purpose of the LPA 1925, Section 1 (6) was not to eliminate co-ownership of land but merely to restrict the way co-ownership is created so as to eliminate confusion and complexity in the law. TOLATA 1996, Section 1 (1) provides that trust is created over land when there are more than 1 owner of the land and the owners hold the land as trustees. This indicates a desire to protect the interests of different parties in the land.

Tenancy in common becomes a useful construct when dealing with cases where there are multiple equitable interests in the same property; such cases are common because often parties may contribute to the purchase of the property with legal estate vesting in only one or some of them. The practical necessity of tenancy in common in such situations is also supported by judicial approach that has at times favoured even the rebuttal of joint tenancy presumption, especially in cases where parties contribute in unequal shares on the ground that equity prefers a tenancy in common for crediting the parties with the share they had contributed; this view was propounded by Lord Neuberger in Stack v Dowden. Tenancy in common is also useful construct in cases involving family homes where the parties may have contributed to the purchase and the upkeep of the property in different ways and the imputing of the tenancy in common allows the shares to be distributed equitably. For instance, in Jones v Kernott, the house was purchased in joint names but the deposit was paid from the proceeds of sale of Miss Jones property and the household expenses were shared; the Supreme Court allocated 90% interest to Miss Jones and 10% to Mr Kernott. Similar principle of unequal share distribution was followed in another case earlier.

If tenancy in common were to be abolished then the practical purposes served by the principle would not be served by joint tenancy. For instance, if in the case of breakdown of relations, one owner wants to leave their share of the property to someone else, joint tenancy would not allow this to happen because of the rule of jus accrescendi as per which the interest will vest in the survivor. Moreover, as joint ownership is based on the four unities, one joint owners cannot make a will to transfer his share of interest as any severance of interest can only be done inter vivos. Tenancies in common are also useful in modern sense where it is common for people to own homes in condominiums where the common areas are subject to tenancy in common.

Thus, the changes made in the LPA 1925 have had the impact of reducing the complexities of purchase from several tenants while also retaining the equitable tenancy in common for the purpose of protecting the interests of equitable owners of the property. This allows the courts to secure the interests of equitable owners at the time of the sale or transfer of the property and gives to such equitable owners, certain proprietary remedies in the event of default by the trustees under the effect of the TOLATA 1996. Such equitable ownership may arise because of different people contributing to the purchase of the property or property bought by business partners. In the event of abolition of the equitable tenancy in common, such benefits to equitable owners would be difficult to establish by the courts. Tenancy in common therefore serves practical and useful purposes which distinguishes it from joint tenancy. For that reason it becomes useful to retain the concept of tenancy in common as an equitable right.

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