Экзамен зачет учебный год 2023 / Dixon, Principles of Land Law

Principles of Land Law

may share. This contrasts with the tenancy in common, which presupposes several individual titles.

4.4.1Before 1 January 1926

Before 1 January 1926, it was possible for a joint tenancy and a tenancy in common to exist in both the legal and equitable estate in the land. So, if land was conveyed ‘to A and B as tenants in common’, they would be tenants in common of the legal title. Likewise for a joint tenancy. Again, if land was conveyed ‘to X and Y on trust for A and B as tenants in common’, A and B would be tenants in common of the equitable title (in equity), with the legal title held by X and Y. So, if a purchaser wished to buy the legal title of land which was co-owned, he would either have to investigate one title (joint tenancy) or all the individual titles of the various co-owners (tenancy in common). While this caused no great hardship for a purchaser investigating the one title held by the joint tenant legal owners, if the land was co-owned under a tenancy in common, the complexity of the transaction increased as the number of tenants in common increased. To purchase from Aand B as tenants in common is only two titles to investigate, but to purchase from A, B, C and D is four, and so on.

4.4.2On or after 1 January 1926

We have noted above that one change made by the LPA 1925 was to limit the types of co-ownership to two: the joint tenancy and tenancy in common. However, the Act also placed restrictions on the manner in which these forms of co-ownership could come into existence (see ss 34 and 36 of the LPA 1925, as amended by the TOLATA 1996; see also ss 4 and 5 of the TOLATA 1996).

The first point is that it has been impossible, since 1 January 1926, to create a tenancy in common at law: a tenancy in common of the legal title to land cannot exist (s 1(6) of the LPA 1925). Only joint tenancies of the legal title are possible and this is true irrespective of the words used when the land is transferred to the co-owners or their own intentions. No longer is it possible to convey the legal title to land to A, B, C and D as tenants in common. This must, on or after 1 January 1926, operate as a conveyance of the legal title to A, B, C and D as joint tenants, even though the words are plain and the intentions clear. Note also, that this must mean that a joint tenancy of a legal title is ‘unseverable’ (s 36(2) of the LPA 1925), because it is impossible to turn it into a legal tenancy in common.

Secondly, however, this joint tenancy of the legal title is of a special kind, because the persons to whom the legal title to the land is conveyed (that is, the intended co-owners) are trustees of the legal title for the persons interested in the land under a statutorily imposed trust of land (ss 34 and 36 of the LPA 1925, as amended). Thus, in every case of co-ownership, legal title to the land

120

Co-ownership

is held by joint tenant trustees on trusts of land (ss 4 and 5 of the TOLATA 1996). These statutory trusts are defined in the LPA 1925 and the TOLATA 1996, but essentially impose on the trustees (the legal owners, the co-owners) a duty to hold the land for the benefit of the persons interested in the land (that is, the equitable owners) and for the purpose for which it was purchased, to which end they are given various powers of management, including the power of sale. So, given that, in the example above, the conveyance to A, B, C, and D operated as a conveyance to them as joint tenants (irrespective of the words used), they will hold this land as trustees on the statutorily imposed trust of land for the ‘real’ owners. In this case, the ‘real owners’ are, in fact, A, B, C and D themselves, also known as the equitable owners. The reasons for this apparently complicated machinery are discussed below, 4.8.

Thirdly, although the legal title to co-owned land must be held under a joint tenancy, the equitable title (the real and valuable interest) may be either a joint tenancy or a tenancy in common. Which form of co-ownership is most appropriate will depend on the words used to create the co-ownership, the intentions of the parties and the surrounding circumstances.Again, in our case, although A, B, C and D are in law joint tenant trustees of the land, in equity, they are equitable tenants in common because a tenancy in common was the intended form of co-ownership of the land. They could have been joint tenants in equity instead (that is, as well as legal joint tenants), if this had been established on the facts.

To sum up, all co-ownership operates behind a mechanism whereby the formal, legal title is held by joint tenant trustees on the statutorily imposed trust of land. The real, equitable interest takes effect behind this trust and may be either a joint tenancy or a tenancy in common. Furthermore, in many cases, the ‘trustees’ will be the same people as those who share in the equitable co-ownership. So, if land is conveyed to husband (H) and wife (W), this will operate as a conveyance to them as joint tenant trustees of the legal title as trustees of land, holding on trust for themselves as either joint tenants or tenants in common in equity, depending on the circumstances in which the property was purchased. This is so even if the conveyance says ‘to H and W as tenants in common’: they will still be joint tenants of the legal title (s 1(6) of the LPA 1925), albeit tenants in common of the equitable interest. The same mechanism operates irrespective of the number of intended co-owners, save that, by statute, the number of legal joint tenant trustees is limited to four (ss 34 and 36 of the LPA 1925). The number of co-owners in equity is not limited, be they joint tenants or tenants in common. If the land is, in fact, conveyed to more than four people, it is the first four named in the conveyance who become the joint tenant trustees of the land, with all five, six, etc, owning in equity as either joint tenants or tenants in common.

The use of the trust is, therefore, a device to ensure that all legal title to coowned land is held under a joint tenancy, while also ensuring that, in equity (where the real interest lies), the co-owners can be either joint tenants or tenants in common as before. Indeed, given that, in many cases—particularly of

121

Principles of Land Law

residential property—the trustees will be the same people as the beneficiaries (equitable owners), there is no real change to the rights of the co-owners to use and enjoy the land.

4.5The distinction between joint tenancy and tenancy in common in practice: the equitable interest

It follows from the fact that legal title to co-owned land must be held under the special joint tenancy trusteeship, that the important issue is to determine the nature of the co-ownership in equity for herein lies the substantive interest. Generally, the principles here are much the same as they were before 1926, although, as ever, there are no immutable rules and each case must be decided on its own facts. The following are offered as guidelines only and their influence will vary from case to case. Remember at all times that we are now talking of the equitable interest: legal title must be held on a nonseverable joint tenancy:

(a)if the unities of interest, title or time are absent, a joint tenancy in equity cannot exist. It must be a tenancy in common. If the interest of one co-owner arises later than the other—as where a husband makes a successful claim to a share in his wife’s property by way of constructive or resulting trust (see below, 4.10)—the equitable interest will be a tenancy in common;

(b)if the original conveyance to the co-owners stipulates that they are ‘joint tenants’ or ‘tenants in common’ of the beneficial or equitable interest, this is normally conclusive as to the nature of their co-ownership in equity. So, if land is conveyed to ‘Minnie and Mickey as tenants in common beneficially’, they will be tenants in common as (in the absence of fraud, misrepresentation or some other vitiating factor) the conveyance is conclusive as to the nature of the equitable ownership, irrespective of later events (as in Goodman v Gallant (1986); Hembury v Peachey (1996)). In Roy v Roy (1996), a conveyance to P and D jointly was held conclusive between them as to the existence of a joint tenancy, despite the fact that D had contributed significantly more to the purchase and upkeep of the property over the years, and that P had lived in the property for only a few months just after it was purchased. Note, however, that a conveyance is conclusive only for the parties to it. So, in the Roy case, if an imaginary third party (W) had made a claim to an interest in the property, she would not have been bound by the conveyance to accept a joint tenancy;

(c)if words of severance are used, then a tenancy in common will exist in equity. Thus, a description of the share of each owner, or the creation of unequal interests in different co-owners will mean that a tenancy in common exists. Aconveyance to ‘Aand B, two thirds toA’, will necessarily create a tenancy in common in equity. The same is true of a conveyance

122

Co-ownership

to ‘A and B, half each’, as this specifies a share. If land is given ‘equally’ (as in ‘to Aand B equally’) this can mean either a joint tenancy or a tenancy in common, depending on whether this means ‘half each’ or ‘jointly’, although in such cases the next presumption will usually operate;

(d)in the absence of an express declaration of the type of ownership or words of severance, and if all the four unities are present, there is a presumption that ‘equity follows the law’. Consequently, because the legal title must be a joint tenancy, in the absence of all other evidence, the equitable title ‘follows the law’ and is deemed to be a joint tenancy also. So, a conveyance ‘to A and B’ will be taken to be a conveyance to A and B in law as joint tenants (as it must be), and in equity also. There are, possibly, some exceptions to this, such as situations where the presumption that ‘equity follows the law’ can be displaced by a counter-presumption, arising from special facts, that a tenancy in common must have been intended. These are cases where it is recognised that the existence of a joint tenancy may cause hardship to the co-owners, being cases where the right of survivorship is inappropriate. In such cases, there will be a tenancy in common in equity behind the trust of land: viz, business partners and in related business arrangements (Malayan Credit Ltd v Jack Chia-MPH (1986)); for the interests of co-mortgagees, so that the death of one mortgagee will not deprive their estate of the security for the loan made (Re Jackson (1887)); where the purchasers have provided the purchase money in unequal shares, which, in the absence of other evidence (for example, that one co-owner was making a gift to another) establishes lack of a unity of interest (Lake v Craddock (1732)).

4.6The statutory machinery and the operation of co-ownership

At first glance, the changes made by the LPA 1925, and then by the TOLATA 1996, seem complicated and unwieldy. In fact, as we shall see, the statutory framework for co-ownership established by these statutes is designed to ensure that dealings with co-owned land (particularly sale and mortgage) can be accomplishedwithmoreeasethanwasthecasepreviously.Althoughcomplicated as a legal mechanism, the law of co-ownership is now much simpler in practice. To summarise the situation:

(a)it is impossible for a tenancy in common of a legal estate to exist. All legal co-ownership must be by way of joint tenancy;

(b)however, the joint tenants are trustees of the legal estate for the equitable owners, holding the property as trustees of land within the LPA 1925 and the TOLATA 1996. They hold the property on trust for the equitable owners;

123

Principles of Land Law

(c)the equitable owners are often the same people as the legal owners (the trustees), but there is no necessary reason why this should be so. In equity, the co-owners may be either joint tenants or tenants in common;

(d)the number of equitable owners is not limited, although the number of legal joint tenant trustees is limited to four, usually the first four co-owners named in the transfer to them. The non-legal co-owners remain entitled in equity.

4.7The nature of the unseverable legal joint tenancy: the trust of land

It has already been indicated that the owners of the legal title hold the property as joint tenant trustees of land, with powers specified in the LPA 1925 and the TOLATA 1996. This trust is effectively defined in ss 34 and 36 of the LPA 1925 and Pt I of the TOLATA 1996 (s 35 of the LPA 1925 is repealed). The trustees will hold the land for the persons interested in it and, subject to any express terms of the trust and statute, with the powers of an absolute owner. They may delegate any of their functions to the beneficiaries, save that only the trustees may give a valid receipt to a purchaser if the land is sold. In fact, it is unlikely that the provisions of the Acts relating to trustees’ powers and the ability to delegate will be useful in most cases of domestic co-ownership, certainly if the trustees and equitable owners are the same people. They will be more relevant in cases concerning successive interests in land (Chapter 5) or where the trust of land is used as an investment vehicle rather than as a statutorily imposed device for jointly owning a home.

Perhaps the most important point to grasp when considering the nature of the trust of land is that the trustees are under no duty to sell the land, as was the case prior to the TOLATA 1996 when the LPA 1925 imposed a trust on the land known as a ‘trust for sale’. This important change means that the legal mechanism of co-ownership (the trust of land) now more accurately mirrors how most co-owned land is used in practice—not as land to be sold, but as land to be occupied. As we shall see, if the trustees (or equitable owners, if such power has been delegated to them) cannot agree whether to sell the land at an appropriate time (for example, on divorce or separation of the coowners or on bankruptcy), any interested person may apply to the court under s 14 of the TOLATA 1996 (replacing s 30 of the LPA 1925) for an order for sale or other order concerning the land. However, there is now no duty to sell the land and the trustees have every right to hold the land for the purpose for which it was acquired, or indeed any other lawful purpose which benefits the equitable owners.

As noted above, the TOLATA 1996, with its amendments to the 1925 scheme of co-ownership, came into force on 1 January 1997. Many of its provisions are retrospective—in that they apply to co-ownership trusts

124

Co-ownership

already in existence—but it will be some time before the full import of the changes are worked out in practice through judicial interpretation. Some commentators believe that the TOLATA 1996 leaves much of the pre-1997 law intact and doubt whether much of the legislation was really necessary. Although perhaps an over-simplification, there is merit in this argument, not least because many of the 1996 Act’s changes simply brought the legal structure of co-ownership into line with the way in which the courts had interpreted the 1925 legislation. For example, prior to 1 January 1997, the equitable owner, in theory, did not have an interest in the land itself, but an interest in the proceeds of sale of that land— because of the trustees’ duty to sell under the old ‘trust for sale’. In fact, for nearly all practical purposes, such equitable owners were treated as having interests in land (for example, Williams and Glyn’s Bank v Boland (1981)), and now this has been recognised by s 3 of the TOLATA 1996. With these considerations in mind, the following are the specific attributes of the unseverable legal joint tenancy under the new trust of land established by the TOLATA 1996:

(a)the trustees (legal owners) are under a duty to hold the land for the persons interested in it (often themselves). The TOLATA 1996 gives these trustees the powers of an absolute owner in relation to the land (s 6) subject to any listing on the register of title, although they must have regard to the wishes of the equitable owner. However, the trustees may delegate ‘any of their functions’ to a beneficiary of full age (s 9) and the court may intervene by way of an order under s 14. The trustees’ powers may be restricted by the instrument (document) creating the trust, except in the case of charitable trusts (s 8). Note here, however, that not everything done by a trustee will be a ‘function relating to’ the trust. So in Brackley v Notting Hill Housing Trust (2001), the giving of notice by one joint tenant trustee of a lease (thereby terminating the lease) was not such a function, at least in the case of a periodic tenancy;

(b)if the trustees do sell the land (voluntarily or otherwise), the trustees hold the proceeds of sale on trust for the equitable owners in the same way that they held the land itself.As discussed in Chapters 2 and 3, the equitable owners’ interests are overreached and take effect in the purchase money, if any. Often, the money is distributed;

(c)as mentioned above, prior to the 1996 Act, the trust of land was actually a trust for sale and this had the unfortunate consequence that, for some purposes, the interests of the equitable owners were treated as interests in the proceeds of the sale, not as interests in the land itself, even if the land had not actually been sold (see, for example, Perry v Phoenix Assurance (1988) and the ‘doctrine of conversion’). As a statutory creation, there is no reason why the new trust of land should be subject to this rule, but, in any event, s 3 of the TOLATA 1996 abolishes the doctrine of conversion for all new trusts of land and most old ones.

125

Principles of Land Law

Now, it is certain that the interests of the equitable owners behind the statutorily imposed trust of land are interests in that land (that is, proprietary rights) for all purposes;

(d)although the trustees of land now have no duty to sell, they do have a power to do so (which may be delegated to the equitable owners). Trustees are the legal owners of the property: it is their names on the title deeds or entered on the title register at the Land Registry. All legal owners (trustees) must formally join in a conveyance if the land is sold and, therefore, there must be a mechanism for dealing with disputes between trustees, particularly where some wish to sell and others do not. This mechanism is found in s 14 of the TOLATA 1996 (replacing s 30 of the LPA 1925) and involves an application to the court. It is considered more fully below;

(e)a catalogue of the trustees’ functions and powers are found in the TOLATA 1996 itself. As stated above, most will not be relevant in a ‘normal’ co-ownership situation where the co-owners (often a romantically linked couple) are trustees of land holding for themselves in equity. Similarly, many of these powers will be redundant when there is but one trustee of land (no overreaching, see below, 4.9.7) holding for himself and for others in equity. However, in those relatively rare cases of residential co-ownership where there is not complete identity between the two or more trustees of land and the beneficiaries (as in City of London Building Society v Flegg (1988), where man and wife held on trust for themselves and one set of parents), the powers and functions of the trustees under the TOLATA 1996 may become important if the trustees and equitable owners cannot agree on the future use of the land. The powers and functions of the trustees remain central when the land is non-residential, as where it is held by trustees as an investment for the equitable co-owners;

(f)it is intrinsic in everything we have said so far that the ability to deal with the land lies with the legal owners—the trustees. If, as is often the case in a domestic context, these are the same people as the legal owners, few practical problems arise. However, if the trustees are completely unconnected with the equitable interest (as in an investment situation) or if there are more than four co-owners, or if the legal title was conveyed only to certain of the co-owners, or if some of the co-owners acquired their interests at a later date, there will not be this identity between legal and equitable owners, and problems can occur. We will examine these more closely below, but, for now, three factors need be noted:

•a sale by all the trustees, providing they are two or more in number, will overreach the interests of the equitable owners (ss 2(1)(ii) and 27 of the LPA 1925). The equitable owners’ interests will take effect in the proceeds of sale, and only a very astute equitable owner may be able to stop this happening (see below, 4.9);

126

Co-ownership

•if there is only one trustee of the land (as where the co-ownership has not beencreatedexpressly,seebelow,4.10.2),theinterestsof the equitable owners cannot be overreached. Consequently, whether the equitable interests can bind a purchaser will depend on the law of registered or unregistered conveyancing (as the case may be);

•if the trust is created by ‘a disposition’ (which probably means a trust created expressly in writing, and not one arising informally), the exercise of the trustee’s power of sale (among others) can be made subject to an express requirement that the consent of the beneficiaries be obtained. This is an attempt to ensure that a sale does not take place contrary to their wishes (s 10 of the TOLATA 1996), or at least forcing a reference to the court under s 14 of the TOLATA 1996. Although it is unclear, it may have been possible to restrict the powers of the trustees in a similar way prior to the entry into force of the TOLATA1996 (see, for example, Re Herkelot’s Will Trusts (1964)).

4.8The advantages of the 1925 and 1996 legislative reforms

In discussing the property legislation of 1925–96 in general, and the law of coownership in particular, it is always important to remember that the wholesale reshaping of English property law was prompted by two fundamental objectives:

(a)to ensure that the value of land as an economic asset was utilised to the full and, to that end, to promote the free alienability of land. This would entail both simplifying the conveyancing procedure and providing for the protection of purchasers of land from the myriad rights and interests which might encumber their use of the land;

(b)to ensure, as far as was compatible with this first objective, that no owner or occupier of land and no person with any interest in land was unreasonably prejudiced by the procedural and substantive changes that were to be made. It was recognised, however, that some people would find that their rights over the land itself had diminished, albeit that such rights could now take effect in its exchange product, that is, money.

These two goals remain, but changes in the way land was used, and the explosion of ‘private’ ownership meant that the 1925 machinery was out of date. For example, land is no longer owned by the few, nor is it used only for investment purposes. The ‘property owning democracy’ is a clichéd but accurate description for the much more widespread land ownership of our time and the more diffuse purposes property ownership serves. It was almost ludicrous that normal domestic co-ownership should have been forced to operate under a statutory mechanism (the old trust for sale) that was designed to promote the sale of land rather than its retention for use by the owners. Hence, the reforms of 1925 were rightly amended by the 1996 Act in order to

127

Principles of Land Law

reflect the reality of property use and ownership in 1997 and beyond. This should be remembered in the following discussion about the advantages of the 1925 and 1996 legislative reforms.

Prior to 1 January 1926, any person wishing to purchase co-owned land would have to investigate the title of every single tenant in common (if that was the mode by which the land was held). Obviously, not only was this time consuming, but the objection of just one tenant in common might prevent the land from being sold, even if this would have been for the benefit of every other tenant. By abolishing tenancies in common at law, the LPA 1925 has ensured that there is but one title to investigate: the legal joint tenancy. Moreover, the number of legal joint tenants is limited to a maximum of four (irrespective of the number of equitable owners), so that a purchaser need only concern himself with obtaining the consent of these people.

If there are two or more trustees of land (that is, two or more legal owners), and the purchaser obtains the consent of all to a sale, the purchaser may safely ignore all the equitable owners, subject only to any entries on the register of title restricting the trustees’ powers such as a requirement to obtain the equitable owners’ consent (see below, 4.9.5). This is the magic of statutory overreaching whereby the interests of the equitable owners behind a trust of land (be they joint tenants or tenants in common) are transferred from the land to the money paid by the purchaser on a sale or mortgage. Indeed, such is the power of overreaching that it will operate even if no money is actually paid over in one large sum (State Bank of India v Sood (1997): legal owners could draw money from a bank by way of overdraft facility).

Although a tenancy in common cannot exist at law, the co-ownership in equity may take this form (or a joint tenancy). Indeed, in the normal case, the equitable owners are theoretically secure in the knowledge that their interests, however held, will take effect in any money received for the property should itbesoldormortgaged. Moreover,theexistenceof atrustmeansthattheequitable ownershavepowerfulproprietaryremediesintheeventofdefaultbythetrustees. For example, the beneficiaries may secure ownership of any assets purchased by the trustees with the proceeds of sale or, failing that, may sue the trustees personally if they have spent the money on untraceable assets.

The existence of a power to sell under the trust of land prevents coowned land becoming inalienable should there be a dispute between the coowners (or other interested persons: for example, a mortgagee). Although all trustees must agree if the power of sale is to be exercised voluntarily, if the trustees do disagree about how the land should be used, application can be made to the court under s 14 of the TOLATA 1996 for an order for sale (or other order) and, if granted, the equitable interests will take effect in the purchase money. Consequently, co-owned land will not stagnate through inability to secure the agreement of all interested parties. This is entirely consistent with the general aim of the 1925 reforms which was to ensure the free alienability of co-owned land through simplifying the conveyancing process and offering protection for the purchaser against any adverse

128

Co-ownership

equitable interests (the overreaching machinery). The 1996 statute, which has now modified co-ownership trusts, reflects the fact that much co-owned land is not held in order to sell, but in order to be occupied. Its replacement of the old trust for sale with the trust for land as the statutory machinery for regulating co-owned land, comprising a power (but not a duty) to sell the land, puts this into practice. The 1996 statute holds more evenly the balance between the needs of the purchaser and the needs of the equitable owners. Although the express and deliberate creation of a trust for sale is still possible, such trusts will be subject to the strictures of the TOLATA 1996 and now carry very few advantages. A synopsis of the effect of the 1996 Act is given below, 4.9.12.

4.9The disadvantages of the trust of land as a device for regulating co-ownership

Given what we have just learnt about purchaser protection through the overreaching machinery, it is not surprising that many of the disadvantages of the current mechanism, even after the 1996 amendments, focus on the other half of the equation: the equitable co-owner, particularly that equitable owner who is not also a trustee of the legal estate. However, as we shall see, not even the legal owners of the co-owned land always benefit from the imposition of a trust of land.

4.9.1Disputes as to sale

An immediate difficulty of utilising the trust as a mechanism for co-ownership is that there may well be disputes between the trustees as to whether the property should be sold or retained for occupation by the equitable owners. This problem becomes more acute if the consent of the equitable owners is also required before a sale can take place. Admittedly, the difficulty is not as pressing as it was prior to the 1996 Act—there is now no duty to sell, only a power—but the potential remains for dispute and litigation. In the normal course of events for residential property, the legal owners and the equitable owners will be the same people and the property will have been acquired for a purpose (domestic occupation) and both will be happy to retain the property. Yet, should the co-owners’ relationship break down, or one of the co-owners go bankrupt, the other co-owner or co-owners (of a legal or equitable interest) may wish to sell the property to realise its capital value or may be forced to do so to satisfy creditors.

To deal with such disputes, s 14 of the TOLATA 1996 (replacing s 30 of the LPA 1925) provides that any trustee of land, or any person having an interest in land subject to such a trust (for example, equitable owner, mortgagee, trustee in bankruptcy) may apply for an order concerning the

129