Archive for the ‘co-ownership’ Category

Equitable severance by mutual agreement

December 18, 2010

An oral (unenforceable) agreement whereby joint tenants agree that one of them is to acquire the other’s interest is an equitable severance. It is a mutual agreement and may sometimes (depending on the facts) be a course of conduct. A mutual agreement need not be specifically enforceable. Mutual agreement and course of conduct are separate methods of severing a joint tenancy.

In Burgess v Rawnsley ([1975] Ch 429, CA (Eng)) H and Mrs R bought a property as beneficial joint tenants. Mrs R orally agreed to sell her interest in the house to H but then refused to proceed because she wanted a higher price than that originally agreed. The Court of Appeal held that the joint tenancy had been severed. The oral agreement was a mutual agreement to sever even though the agreement could not be enforced (because neither written nor recorded in writing). Lord Denning MR thought it possible that there had also been a severance by course of conduct but the other members of the Court of Appeal disagreed. Mutual agreement and course of conduct are separate methods of severing a joint tenancy.

Lord Denning MR doubted that Nielson-Jones v Fedden had been correctly decided but the other members of the Court of Appeal did not find it necessary to consider this point.

Severance of an equitable joint tenancy under section 36(2) of the Law of Property Act 1925

December 17, 2010

A divorce petition asking the court to make an order (with an effect to be decided on by the court) at some time in the future does not satisfy the requirements in section 36(2) of the UK’s Law of Property Act 1925 for an effective notice to sever an equitable joint tenancy.

In Harris v Goddard ([1983] 1 WLR 1203 CA (Eng)) Mrs H filed a petition to divorce her husband (H). It contained a paragraph asking the court to make an order concerning the ownership of the property.  H died three days before the hearing and the question was whether the petition severed the joint tenancy.

Lawton LJ stressed that this decision was based on the correct interpretation of s.36(2) of the Law of Property Act 1925 (at 1208). Section 36(2) of the English Law of Property Act 1925 requires a notice purporting to sever an equitable joint tenancy to:

(a) express an intention for the severance to occur immediately (not at some time in the future); and

(b) for the proceeds of sale to be ‘held upon the trusts which would have been requisite for giving effect to the beneficial interests if there had been an actual severance.’

It was held that the relevant paragraph in the petition was not drafted in such a way as to satisfy s.36(2). It was quite unlike the petition in In Re Draper’s Conveyance ([1969] 1 Ch 486).

The applicability of this decision in Hong Kong is unclear since it rests on an interpretation of the Law of Property Act 1925. On the other hand, Lawton LJ commented that s.36(2) is an extension of severance by mutual agreement as expressed in Williams v Hensman (at 1208).

An express declaration as to the nature of a co-ownership is conclusive

December 14, 2010

If a deed (such as a conveyance) contains an express declaration as to whether a co-ownership is a joint tenancy or a tenancy in common then this declaration is conclusive. The severance of a joint tenancy leads to each joint tenant having an equal share as tenant in common.

In Goodman v Gallant ([1986] 2 WLR 236, [1986] 1 All ER 311, CA (Eng)) Goodman and Gallant were co-habitees. Their home had been conveyed into their joint names and the conveyance expressly provided that they were to hold as beneficial joint tenants. The Court of Appeal, Slade LJ giving the leading judgment, held that the express declaration was conclusive and that (in the absence of express words to the contrary in the conveyance) when a joint tenancy is severed the result is that the joint tenants hold as tenants in common in equal shares. The judgment of Slade LJ shows that there had been considerable doubt as to the correct law on each of these fundamentally important issues.

One tenant in common cannot oblige another to contribute to the cost of repairs

December 14, 2010

One tenant in common cannot oblige another to contribute to the cost of repairs in the absence of agreement, request or obligation to a third party.

In Leigh v Dickeson ((1884 – 85) LR 15 QBD 60, CA (Eng)) one tenant in common paid for the cost of repairing the co-owned property and sought a contribution from the other. It was held that the other co-tenant was under no obligation to make this payment in the absence of agreement between them.

Brett MR  listed  situations in which one person could seek reimbursement from another and found that this case did not fall within them (at 64 – 65). It might be different if the repairs were carried out because of some obligation to a third party or on a partition (per Cotton LJ at 67)

When will an equitable tenancy in common be presumed?

December 13, 2010

The class of cases in which equity will presume a tenancy in common are not confined to cases falling within rigidly-prescribed parameters (such as partnership cases).

In Malayan Credit v Chia Mph (Jack) ([1986] AC 549, PC) (an appeal to the Privy Council from the Singapore Court of Appeal) two businesses agreed to take a joint lease of some office space. They held the lease as joint tenants at law. They had a detailed agreement as to how the office space was to be allocated between them and all outgoings (such as rent and service charge) were shared between them according to the percentage of the office space that they occupied. When the property was to be sold, the question arose as to how the sale proceeds should be shared between them. How were their respective beneficial entitlements to be calculated? Were they equitable joint tenants so that the severance would give rise to a tenancy in common in equal shares? Were they tenants in common and, if so, how was the beneficial entitlement shared between them?

Lord Bingham held that there was no closed list of circumstances (such as partnership) in which an equitable tenancy in common was to be presumed. Where two separate businesses had agreed to share office space (each for its own purposes) and had agreed on an allocation of space and outgoings then it was clear that they intended a beneficial tenancy in common rather than a joint tenancy.

One tenant in common can create a non-exclusive licence to occupy the co-owned property

December 11, 2010

A tenant in common can grant a non-exclusive licence to occupy the property.

Chin Lan Hong v Cheung Poh Choo ([2005] HKLRD 811, CA) concerned a non-exclusive licence to occupy property originally made in favour of D1 by her father and later by D2 and D3, the administrators of the estate of one of the father’s sons by his concubine. As administrators, D2 and D3 were tenants in common of the legal title to the property (with a one-fifth share). D2 and D3 allowed D1 to remain in the property. The Court of Appeal held that any tenant in common can grant a licence and that the other tenants in common cannot terminate it. This is because each tenant in common has his own share (and right to share possession) with which he can deal as he sees fit.

On partition tenants in common have to contribute to the cost of improvements

December 10, 2010

Where one tenant in common has paid for improvements to the property that are still reflected in the value of the property at the date of partition then the other tenant(s) in common must compensate the one who paid for the improvements out of the proceeds of sale. This rule was applied in Re North ([1893] 2 Ch 461) where the other tenant in common had been consulted about the expenditure and agreed to it but the application of the rule does not seem to depend on the agreement of the other tenant in common.

The nature of a release by one joint tenant to another

December 9, 2010

A release by one joint tenant of a leasehold interest to another is, in effect, an assignment and is subject to any restriction on assignment either contained in the lease or imposed by statute.

In Burton v Camden LBC ([2000] 2 AC 399, HL) Miss B and Miss H were joint tenants of a home owned by the local authority. There was a statutory restriction on assigning the lease. When Miss H left the property she executed a deed releasing her entire legal and beneficial interest in the property to Miss B. The House of Lords considered whether:

(1) the release was a breach of the prohibition on assignment; and

(2) the release relieved Miss H of her obligations (including the obligation to pay rent) contained in the lease.

On the first question, the majority of the House of Lords agreed with Lord Nicholls of Birkenhead that the release was, in substance, an assignment. As a result, the release was in breach of the prohibition on assignmnent. Lord Millett, however, dissented. He argued that in the context of the relationship between joint tenants the difference between a release and an assignment was a difference of substance. A joint tenant, he reasoned, could not assign anything to another joint tenant because each is entitled to the whole. Miss H had no interest to assign to Miss B. On Lord Millett’s view, the release did not contravene the prohibition on assignment.

Lord Steyn addressed the second question (whether Miss H remained liable to pay rent after the release). He thought so on straightforward contractual grounds. Lord Millett did not offer a concluded view but thought it likely that Miss H remained liable but with the benefit of a right to recover from Miss B.

Any joint periodic tenant can give an effective notice to terminate the periodic tenancy

December 8, 2010

Any joint tenant of a periodic tenancy can give a valid notice to terminate the periodic tenancy notwithstanding the opposition of the other joint tenant or joint tenants.

In Hammersmith and Fulham LBC v Monk ([1992] 1 AC 478, HL) a co-habiting couple held their flat as joint tenants of a periodic tenancy. They fell out and one of the couple gave notice to terminate the periodic tenancy. The House of Lords held that this notice was valid. Any joint periodic tenant could give an effective notice to quit even against the will of the other joint tenant or joint tenants. Lord Bridge of Harwich pointed out that this was consistent with principle and a long line of authority. The principle is that it would be wrong to insist that one party to a contract should be held to it, potentially for the rest of their lives, against their will. Very clear words would be needed to demonstrate that this was the will of the parties. Lord Browne-Wilkinson concurred though, as he pointed out, the effect was to allow one party to destroy the property rights of another. As he pointed out, there was a tension between the result suggested by a contractual approach to the problem and that suggested by a property-based approach. The House of Lords’ analysis makes it clear that the determination of a periodic tenancy is quite different from the exercise of a break clause in a fixed-term lease. Here the consent of all joint tenants to the exercise of a break right would be needed.

Each tenant in common is entitled to possession

December 8, 2010

Each tenant in common is entitled to possession of the co-owned property and a tenant in common cannot be turned out by the other or others. This is true of equitable tenants in common as well as legal tenants in common.

In Bull v Bull ([1955] 1 QB 234 CA (Eng)) a mother and son were equitable tenants in common of a house (the legal title was in the son’s name). The mother fell out with her son’s wife and the son wanted to evict his mother. He could not do so. Each tenant in common is entitled to the possession and use of the land. Neither tenant in common could turn the other out. This is true of equitable tenants in common as well as legal tenants in common.