ABDULQADIR NAEEM – PROPERTY LAW

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COOWNERSHIP

Introduction
Co-ownership arises whenever two or more people are simultaneously entitled in possession to an interest in
the same land i.e. whenever two or more people jointly acquire a title in land then a coownership arises. In
England and Wales, pursuant to Sections 34 to 36 of the Law of Property Act, 1925 (the “LPA 1925”),
whenever two or more people jointly purchase title, a trust of land will be created by operation of law
whereby the legal owners will become the trustees of the land and hold the land in trust for the equitable
owners. The parties can either set out their arrangement in writing by executing a trust deed which is in
writing and witnessed (Section s.53(1)(b) LPA 1925) and set out the details of the equitable owners but if
there is no express trust deed then the legal owners themselves will become equitable owners. It is noted that:

(a) A trust deed if executed is conclusive (Goodman v. Gallant) but can only be challenged
on grounds of proprietary estoppel (Clarke v. Macadus) or if there are elements of fraud
or misrepresentation; and
(b) An optional form JO is given by the registry when two or more parties purchase the land, under
the form the parties can specify or set out their equitable shares.

Form of Coownership

Pursuant to Section 34 to 36 of the LPA 1925, if a land is co-owned behind a trust of land, the legal title can
only be held as a joint tenancy with a maximum of four legal owners. Thus, if a legal title is conveyed to
more than four co-owners or as a tenancy in common it will simply take effect as a legal joint tenancy limited
to no more than the first four legal owners named in the conveyance (s.34 LPA 1925). The equitable title can
either be a joint tenancy or a tenancy in common but that discretion has to be exercised under a trust deed (i.e.
the owners should execute an express trust deed and specify therein whether they want the equitable title to
be a joint tenancy or a tenancy in common. However, in the absence of a trust deed, the maxim “equity
follows the law” will apply and the equitable title will also by default be a joint tenancy (Stack v Dowden). It
is noted that:

(a) under a joint tenancy, the joint tenants collectively own 100% of the land jointly and there
are no distinct or divisible shares or individual interests. When one dies their interest dies
with them until, after the death of the penultimate joint tenant, the co-ownership comes to an
end and the survivor becomes the sole owner of the property. This is known as the right of
survivorship and it follows that a joint tenant has no interest that can be left to pass via a will
because, by the time the will comes into effect, they have no interest to bequeath as their
joint interest died with them. A joint tenancy can only arise when there are presence of the
four unities of time, title, interest and possession (refer to class discussions on this) whereas
a tenancy in common is where each coowner has distinct and divisible shares which they
can freely transfer, the right of survivorship does not apply i.e. if a tenant in common dies,
its rights can pass in his will and only the unity of possession has to be present the other
unties may or may not be there;

(b) Parties to the trust deed cannot raise resulting trust (RT) or constructive trust (CT) to modify their
shares but a third person not in trust deed can do so;

(c) If a trust deed does not specify the type of equitable ownership, then parties can raise RT or CT
(Stack v Dowden, affirmed in Jones v Kernott);
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(d) If a trust deed contains words of severance (refer to class discussions) then equitable title will be
TIC;

(e) Equity follows the law can be displaced by RT or CT or in the business context by proving that
right of survivorship will have an unjust result – Malayan Credit Ltd;

(f) The distinction of right of survivorship is the most important distinction in practice between a JT
and a TIC in equity – Dunbar v Plant;

(g) Therefore a co-owner who is not in occupation is generally not entitled to claim an occupation
rent from a co-owner in occupation although the matter is now governed by ss.12 and 13 TLATA
1996, which contain some exceptions to this general rule1
Severance
Severance is the process by which a joint tenancy in equity can be converted into a tenancy in common, to
avoid the operation of survivorship. As only a joint tenancy is permissible at law, one cannot sever the legal
title (s.36 LPA 1925). If there are more than two co-owners in equity, severance will operate to give a
tenancy in common only to the severing party; the others will remain joint tenants. Severance can be affected
by the following methods:

Statutory Severence

Pursuant to Section 36 of LPA 1925, severance can be effected by if a joint tenant “shall give to the other
joint tenants a notice in writing of such desire or do such other acts or things as would, in the case of
personal estate, have been effectual to sever the tenancy in equity, and thereupon the land shall be held in

1 Section 13 of TOTALA states as follows:

“13Exclusion and restriction of right to occupy.

(1)Where two or more beneficiaries are (or apart from this subsection would be) entitled under section 12 to occupy land, the
trustees of land may exclude or restrict the entitlement of any one or more (but not all) of them.
(2)Trustees may not under subsection (1)—
(a)unreasonably exclude any beneficiary’s entitlement to occupy land, or
(b)restrict any such entitlement to an unreasonable extent.
(3)The trustees of land may from time to time impose reasonable conditions on any beneficiary in relation to his occupation of
land by reason of his entitlement under section 12.
(4)The matters to which trustees are to have regard in exercising the powers conferred by this section include—
(a)the intentions of the person or persons (if any) who created the trust,
(b)the purposes for which the land is held, and
(c)the circumstances and wishes of each of the beneficiaries who is (or apart from any previous exercise by the trustees of those
powers would be) entitled to occupy the land under section 12.
(5)The conditions which may be imposed on a beneficiary under subsection (3) include, in particular, conditions requiring him—
(a)to pay any outgoings or expenses in respect of the land, or
(b)to assume any other obligation in relation to the land or to any activity which is or is proposed to be conducted there.
(6)Where the entitlement of any beneficiary to occupy land under section 12 has been excluded or restricted, the conditions
which may be imposed on any other beneficiary under subsection (3) include, in particular, conditions requiring him to—
(a)make payments by way of compensation to the beneficiary whose entitlement has been excluded or restricted, or
(b)forgo any payment or other benefit to which he would otherwise be entitled under the trust so as to benefit that beneficiary.
(7)The powers conferred on trustees by this section may not be exercised—
(a)so as prevent any person who is in occupation of land (whether or not by reason of an entitlement under section 12) from
continuing to occupy the land, or
(b)in a manner likely to result in any such person ceasing to occupy the land,
unless he consents or the court has given approval.
(8)The matters to which the court is to have regard in determining whether to give approval under subsection (7) include the
matters mentioned in subsection (4)(a) to (c).”
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trust on terms which would have been requisite for giving effect to the beneficial interests if there had been an
actual severance”. In simpler terms, severance can only occur if the joint tenant wanting to sever his or her
shares provides the other joint tenants: (a) a notice in writing; (b) with an immediate intention to sever; (c) the
notice is delivered in accordance with Section 196(2) or (3) of LPA 1925 either through physical delivery or
registered post; (d) severance is effected upon delivery of the notice to the place of abode of all the joint
tenants and there is no requirement to read or accept the notice (Kinch v Bullard) (it is however noted that if
the delivery is through registered post then the delivery is deemed done on the day the letter is supposed to be
delivered – it is also noted that severance cannot be through emails (EON plc case), SMS or other electronic
modes.

Common Law Severance

Common law severance can occur through the following methods set out in the case of Williams v
Hensman (please refer to class discussions on aspects of severance):

(a) Acting on ones own share (i.e. selling the equitable shares, mortgaging the share (First National
Bank v Hegharty), becoming bankrupt (Re Gorman) but leaving share under the one’s will does
not amount to severance (Re Caines);
(b) Mutual Conduct (Gore and Snell Carpenters);
(c) Mutual Agreement – please note that the mutual agreement has to be between all coowners. It
was held obiter in the case of Burges v Rawsley that if all joint tenants agree that one joint tenant
will buy out the share of the other joint tenant and a conclusive sales agreement is entered into
then severance will occur at the time of the agreement notwithstanding whether sale occurs or not
(please refer to class discussions in this regard);
(d) Homicide (Re Kay).

General cases for severance:

Nielson Jones v Feddon – A gave B power of attorney to sell the house. Power of attorney showed
allocation of power not segregation of shares, therefore, no severance.
Re Drapers Conveyance – Affidavit submitted in the court stating that the shares are to be equally
divided, proved severance.
Re Palmers – insolvency order was made after the death of the bankrupt coowner – however, the courts
treated the order with retrospective effect and was held valid on the date of death thereby severing the
joint tenancy.
Davis v. Smith - Husband and wife had agreed to sell the property and equally divide the proceeds
between them and this was stated in a solicitor’s correspondence on the matter to them. This amounted to
a severance of the joint tenancy as set down in Williams v Hensman (1861). The mutual agreement could
be inferred from the solicitor’s correspondence, but also from the fact that this had been expressly agreed
in a meeting between the parties.
Dispute of Sale
One of the biggest issues with coownership is that until all legal owners consent, the land cannot be sold,
mortgaged or any rights can be given or taken on that particular land. Therefore, if there is a dispute in
respect of sale of the land then the parliament and the courts created mechanisms where they can order or
prevent a sale from occurring through a court based procedure. The following are the different dispute
situations:
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Between Coowners
This can either be between the legal owners where one legal owner wants the land to be sold whereas the
other wants to retain it. The one wanting sale will have to go to court by making an application under
Section 14 of TOLATA but if there is a dispute where all legal owners want the land to be sold but the
equitable owners want the land to be retained then the equitable owners will have to apply to the court
under Section 14 TOLATA to prevent a sale from occurring. In both situations, after an application is
made to the court to prevent or order sale, the courts look at all the circumstances but particularly the non
exhaustive guidelines set out under Section 15 TOLATA which are: “(a) the intentions of the person or
persons (if any) who created the trust; (b)the purposes for which the property subject to the trust is held;
(c)the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to
the trust as his home, and (d)the interests of any secured creditor of any beneficiary”. It is noted that
previously the doctrine of conversion applied i.e. there was a presumption in the courts that coownership
are behind a “trust of sale” i.e. whenever two parties jointly buy land they do it to sell it one day and
therefore the courts leaned towards sale. However, TOLATA abolishes the doctrine of conversion and the
presumption today is that of “trust of land” i.e. whenever two or more people jointly buy land they do so
to live in it and therefore the courts now lean towards retention of land.
Case Law Examples
Chun Ho: Couple went to UK, female had to complete education, got an apartment on coownership,
relationship breakdown, dispute of sale arose as the purpose and intention of the trust was to complete
education which was not complete, Sale was postponed till education completed.
Bedson v Bedson: If land bought for business and business closes, sale should be ordered.
Dispute between a coowner and a secured creditor
Under the second circumstances, if a coowner mortgages his or her share in equity and procures a loan the
person from whom the loan is taken becomes a secured creditor and upon default has the right to sell the
equitable share. However, it is difficult to sell an equitable share of one person in a land where there are
other coowners so the equitable share may not be sold or be sold at a lessor value. Therefore, the secured
creditor may request the other coowners to jointly sell the entire land but if they disagree then there is a
dispute of sale between a coowner and a secured creditor. Since the secured creditor has an interest in
land through a mortgage, the secured creditor will apply under Section 14 TOLATA requesting the courts
to order sale and the courts will look at the guidelines under Section 15 TOLATA. The courts, due to
policy reasons, generally favor secured creditors as it is unfair to leave them to be out of their money
(Achampong case) (Pritchard case) (Fred Perry case). Although there is no automatic right that sale
will occur always since the courts held in Mortgage Corp v Shaire that since the doctrine of conversion
has been abolished, there can be circumstances where the courts may postpone sale even in the context of
a secured creditor. This was seen when there was an interplay between the rights of minors and secured
creditors, in Bank of Ireland v Bell sale was ordered as the minor was almost of age and the quantum of
mortgage was large whereas in Edwards TSB sale was postponed as the minor was young and the
quantum of mortgage was small.
Cases where creditors rights were given priority are as follows:
a) TSB v Marshall
b) Putnam Sons v Taylor
c) Fred Perry v Genis
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Dispute between coowner and secured creditor in a bankruptcy situation

If a co-owner becomes bankrupt, then he moves out of the ownership and a trustee in bankruptcy steps in
his shoes, the TIB applies under Section 14 of TOLATA for sale and the courts look at the guidelines of
Section 335A of the Insolvency Act which is wider than Section 15 and are as follows: (a) the interests of
the bankrupt’s creditors; (b) where the application is made in respect of land which includes a dwelling
house which is or has been the home of the bankrupt or the bankrupt’s spouse or former spouse – (i) the
conduct of the spouse or former spouse, so far as contributing to the bankruptcy, (ii) the needs and
financial resources of the spouse or former spouse, and (iii)the needs of any children; and (c) all the
circumstances of the case other than the needs of the bankrupt.
However, as a general rule sale can only be postponed for one year beyond which proof of exceptional
circumstances is required which have not been defined by the courts but it was held in Re Citro that not
having shelter and food is not an exceptional circumstance also ;osing family home was not considered as
an exceptional circumstance – Begum v Cockerton. Such circumstance was seen in Re Mott where the
co-owner was so old, she would have died if shifted, sale was postponed till death. It is noted that the
rights of the bankrupt are not considered.
The following situations were held sufficient to justify delaying a sale of the property:
a) where the debt owed was very small and constituted only a fraction of the total market value of
the house at issue (Re Holliday [1981]);
b) where the bankrupt’s spouse was terminally ill and had special housing needs (Claughton v
Charalambous [1999]);
c) where the property had been adapted specially to accommodate an occupant’s special housing
needs (Re Gorman [1990]);
d) where the bankrupt’s spouse has been diagnosed as being a paranoid schizophrenic (Nicholls v
Lan [2006]).
e) In the case of Everitt v Budham, the spouse had a mental condition and this was held to be an
exceptional circumstance.

It was held in Harrington v Bennett [2000] that the requirements of s.335A of the Insolvency Act 1986
are fivefold:
a. where the application is made more than one year after the vesting of the bankrupt’s property in
the trustee, the interests of creditors are paramount;
b. the court can only ignore the creditors’ interests in exceptional circumstances;
c. the categories of exceptional circumstances are not closed, with the result that it is open to the
judge to decide what may constitute exceptional circumstances in future cases;
d. the term ‘exceptional circumstances’ indicates circumstances ‘outside the usual melancholy
consequences of debt or improvidence’; and
e. the sale proceeds may be used entirely to discharge the expenses of the trustee in bankruptcy is
not an exceptional circumstance which may still benefit the creditors.

The high court in the case of Barca v Mears raised a concern that grant of automatic priority to creditors
after 1 year unless exceptional circumstances may infringe Article 8 ECHR now incorporated under HRA
1998. However, this argument failed in the Nicholls case and Alexander v Ford where the courts held
that the law regarding bankruptcy does not infringe Article 8.
The power of the trustee to sell the land can be limited by an express restriction in the trust deed which
stipulates that consent of equitable owner will be required for sale and this restriction will only be binding
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if it is entered as a restriction under the PRI category of the registered land, in unregistered land doctrine
of notice needs to be proven (refer to notes of registered and unregistered land in this regard with class
lecture).
If a coowner defaults and a secured creditor cannot procure sale under Section 14 and 15 of TOLATA,
then he has another option of requesting the coowner to declare bankruptcy whereupon the secured
creditor can go through the bankruptcy route to procure sale under Section 335A of the insolvency act.
However, the secured creditor will loose his secured status and be treated as a general creditor – no
priority.
Overreaching concepts
When two or more trustees mortgage property and procure a loan then rights of equitable owners will
overreach on to the mortgage money – Flegg case.
In the case of Bank of India v Sood, a bank gave an overdraft facility to the trustees of the land upon
mortgage, rights of equitable owner overreached on to the overdraft facilities even though no money was
involved.
If no sales proceed involved or sale is not genuine then no overreaching – HSBC v Dyche.
A secured creditor before going to the court under s.14 Trust of Land of Appointment and Trustees
Act 1998 (TOLATA) can plead implied or express consent of the owner whereupon his rights will
extinguish and the mortgagee can sell the land by virtue of its paramount powers. Consent can be express
or implied by conduct but mere knowledge will not suffice – Skipton case.
Overreaching automatically occurs when the courts order a sale under s.14.
Past Paper Questions
Q) In 2008 five solicitors, Sam, Tarquin, Ursula, Venus and Zachary bought Tumbledown House as a
place to stay in London during the week as they worked too many hours each day at Fat Chance, a
solicitors firm, to commute from their homes in the country. Sam and Tarquin each paid 40% of the
purchase price and Ursula 20%, whilst Venus and Zachary paid nothing. The house was conveyed to the
five of them as beneficial joint tenants. In 2011 Sam went to work abroad. He sent a letter to Ursula,
Tarquin, Venus and Zachary saying that he wanted Tumbledown House to be sold immediately so that he
could ‘take his 40%’. The note was sent by standard post to Tumbledown House and was opened by
Ursula who immediately threw it away without showing it to the others. On emptying the bin Venus
discovered the note and sent an email, which she mistakenly sent to everyone at Fat Chance, telling them
that she was hurt not to have been consulted and had consequently decided to sell her share of
Tumbledown House with immediate effect. However, a few days later she discovered she was pregnant
and decided not to go through with her plans to leave. In 2012 Ursula died in a car crash on the way to the
christening of Venus’s daughter. Her will left all of her property to Tarquin. You are consulted by Sam,
who has returned to the UK and wants to resume living in Tumbledown House. However, Tarquin and
Zachary have told him that, since being made redundant, they have agreed to sell Tumbledown House,
although Venus is currently refusing to move out. Advise Sam: a) as to the effect of the above events on
the legal estate and equitable interests in Tumbledown House; and b) whether Tarquin and Zachary are
entitled to exclude him and Venus from living there and whether there is anything he can do to prevent a
sale. (2016 Zone A)
Q) In January 2014 Anna, Barry, and Barry’s mother, Carol, bought a house together for them all to live
in. They contributed unequal amounts to the purchase price of the property and the property was
conveyed to all three of them as legal and beneficial joint tenants. In October, Barry told Anna and Carol
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that he was having an affair with Donna and that he wanted to sell his interest in the house so that he and
Donna could buy a new home together. The three of them discussed the possibility of Carol buying
Barry’s interest in the house. Barry and Carol settled on a price. The next day Carol told the others she
was unable to go ahead with the purchase because her financial adviser had said she had insufficient
funds. A week later Anna sent Barry and Carol an email telling them she was ‘severing her beneficial
interest in the house with immediate effect’. However, a problem with her internet connection resulted in
the message being held in a queue for 48 hours before being delivered. In the meantime, Anna heard that
Barry had been rushed into hospital. She immediately left a note for Barry and Carol on the hall table
telling them to ignore her email because she had changed her mind. Barry died the following day. In his
will Barry left all his property to Donna. In January 2015 Carol was diagnosed with a rare medical
condition. She mortgaged her interest in the house to the East Bank to pay for a private therapy room to
be built in the garden. By May 2015, Carol had defaulted on the mortgage repayments as she was forced
to give up her job because of her illness. Anna and Carol want to stay in the house, but East Bank want it
to be sold. a) Advise East Bank whether the property is likely to be sold, and if so, who is entitled to the
proceeds of sale and in what shares. b) How, if at all, would your answer differ if Carol had been
declared bankrupt? (2015 Zone B)