Co-ownership - Differences between joint tenants and tenants...

Learning Outcomes

This article outlines the core principles of co-ownership in law and equity, focusing on joint tenancy and tenancy in common, including:

• The conceptual and practical differences between joint tenancy and tenancy in common in both law and equity, and how they affect exam scenarios
• The legal and practical implications of each form of co-ownership for devolution on death, sale, and dispute resolution
• The nature and consequences of the right of survivorship, contrasted with devolution of a tenant in common’s share
• The mechanisms, timing, and effect of severance of a beneficial joint tenancy, and the circumstances in which severance will not occur
• The service and content requirements for a valid written severance notice, with emphasis on immediacy and proper service under s 196 LPA 1925
• The operation of the statutory trust of land, trustees’ powers and beneficiaries’ rights under TOLATA 1996, and the mandatory joint nature of the legal estate
• The four elements test for a joint tenancy and its role in distinguishing equitable joint tenancies from tenancies in common
• The concept of overreaching, its role in purchaser protection, and its interaction with beneficial interests and actual occupation on both registered and unregistered dispositions
• The application of s 14/15 TOLATA factors to sale-or-no-sale problems and the SQE1 assessment relevance of co-ownership, survivorship, severance, and overreaching

SQE1 Syllabus

For SQE1, you are required to understand the differences between joint tenants and tenants in common in law and equity, including the ability to identify the characteristics of each form of co-ownership, the consequences of survivorship, the process and effect of severance, and the operation of overreaching, with a focus on the following syllabus points:

• the distinction between joint tenancy and tenancy in common in both law and equity
• the right of survivorship and its consequences
• the four elements required for a joint tenancy
• how and when severance can occur
• the statutory trust of land and the roles of trustees and beneficiaries
• the process and effect of overreaching on purchasers and beneficiaries
• the maximum number and capacity of legal owners (trustees) and the position of minors
• how to identify the beneficial ownership where there is an express declaration, words of severance, or presumptions in equity
• the service and content requirements for a valid written severance notice (including s 196 LPA 1925)
• the effect of bankruptcy and unlawful killing on a beneficial joint tenancy
• the section 14/15 TOLATA framework to resolve co-ownership disputes and the weight typically given to creditors versus family purposes
• the interaction between overreaching and overriding interests based on actual occupation

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following is NOT a required element for a joint tenancy?
   1. element of possession
   2. element of title
   3. element of interest
   4. element of inheritance
2. What is the effect of severing a joint tenancy in equity?
   1. The co-owners become tenants in common in equity
   2. The legal estate is also severed
   3. The right of survivorship continues
   4. The property must be sold immediately
3. Which statement best describes overreaching?
   1. It destroys the legal title of the trustees
   2. It transfers beneficial interests from the land to the sale proceeds
   3. It applies only to leasehold property
   4. It prevents severance of a joint tenancy

4. True or false? A tenant in common can leave their share of the property to anyone in their will.

Introduction

Co-ownership arises when two or more people hold interests in the same property at the same time. The two principal forms are joint tenancy and tenancy in common. For SQE1, you must be able to distinguish between these, understand their legal consequences, and explain how the law protects both co-owners and third parties.

The starting point in every co-ownership problem is to separate legal and equitable title. At law, there can be only one mode of holding: a joint tenancy. Equity is more flexible: the beneficial interest can be held either as a joint tenancy (with survivorship) or as a tenancy in common (in distinct shares). The equitable mode matters for who ultimately receives sale proceeds, on death or sale, and for whether individual shares can be dealt with.

The statutory trust of land

Whenever land is co-owned, a statutory trust of land arises. The legal estate is held by trustees (the legal owners), while the beneficial (equitable) interests are held by the beneficiaries. The Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) governs this arrangement. In practice this means:

• a maximum of four trustees can hold the legal title and they must be of full age and sound mind; where more than four are named, the first four of full age take the legal estate, and any others are beneficiaries only
• minors cannot be legal owners but may be beneficiaries
• trustees possess the powers of an absolute owner (s 6 TOLATA) but must exercise these consistently with their fiduciary obligations, consult beneficiaries so far as practicable (s 11), and in certain cases consider beneficiaries’ rights of occupation (ss 12–13)

Where disputes arise, any person interested in the trust (including a mortgagee) may apply to the court under s 14 TOLATA for directions or an order for sale. The court must consider the factors in s 15, including the intentions of the persons who created the trust, the purposes for which the property is held, the welfare of any minor in occupation, and the interests of secured creditors. Case law shows that the weight accorded to these factors is fact-sensitive: sometimes the original purpose (for example, protecting a sea view by keeping land undeveloped) still prevails; in other contexts, particularly where large mortgage arrears exist, secured creditors’ interests are decisive.

Key Term: statutory trust of land
A trust automatically imposed by law whenever land is co-owned, separating legal and beneficial ownership.

Joint tenancy

A joint tenancy is a form of co-ownership where all joint tenants are regarded as a single owner for legal purposes. Each joint tenant is entitled to the whole property, not a specific share. The most important feature is the right of survivorship: when one joint tenant dies, their interest passes automatically to the surviving joint tenant(s), regardless of any will. Survivorship operates instantly on death; testamentary gifts purporting to dispose of a joint tenant’s beneficial “share” are ineffective unless severance occurred during lifetime.

Key Term: joint tenancy
A form of co-ownership where co-owners are treated as a single entity, each entitled to the whole, with the right of survivorship.

The existence of a joint tenancy depends on the four elements:

Key Term: four elements
The four requirements for a joint tenancy: element of possession, element of interest, element of title, and element of time.

• Element of possession: Each co-owner is entitled to possess the whole property.
• Element of interest: Each co-owner has the same interest in the property (e.g., equal shares, same duration).
• Element of title: All co-owners acquire their interest from the same document or event.
• Element of time: All co-owners' interests vest at the same time.

If any element is missing, a joint tenancy cannot exist.

In practice, these “elements” are often called the four elements. Element of possession is required for any co-ownership; the other three elements are distinctive to joint tenancies in equity. Provided all four are present, equity can still produce either a joint tenancy or a tenancy in common: the outcome then turns on any express declaration, words of severance, or applicable presumptions.

Tenancy in common

A tenancy in common is a form of co-ownership where each co-owner holds a distinct share in the property, which may be equal or unequal. There is no right of survivorship: on death, a tenant in common's share passes under their will or intestacy.

Key Term: tenancy in common
A form of co-ownership where each co-owner has a separate, undivided share, with no right of survivorship.

Unlike joint tenants, tenants in common need only the element of possession.

Tenancies in common are common where co-owners want flexibility to control devolution on death (for example, to leave a share to children), or where contributions to purchase price are unequal and parties want the beneficial shares to reflect that. On a registered title, a tenancy in common is typically protected by a standard Form A restriction on the proprietorship register, alerting a purchaser that overreaching will be needed (i.e., payment to two trustees) for a disposition under which capital money arises to be registered.

Legal and equitable ownership

The legal estate in land can only be held as a joint tenancy (s 1(6) Law of Property Act 1925). The beneficial (equitable) interest can be held as either a joint tenancy or a tenancy in common. This means that, in practice, the legal owners may hold the legal estate as joint tenants, but the beneficial interests may be held as tenants in common. Only persons of full age (18+) and sound mind can be legal owners; minors can only take beneficially. If more than four co-owners are named in a transfer, the first four of full age automatically hold the legal estate on trust for all.

Key Term: legal estate
The formal title to the land, held by the trustees, who have the power to sell or mortgage the property.

Key Term: beneficial (equitable) interest
The right to enjoy the property or receive the proceeds of sale, held by the beneficiaries under the trust.

The right of survivorship

The right of survivorship (jus accrescendi) applies only to joint tenancies. When one joint tenant dies, their interest passes automatically to the surviving joint tenant(s). This does not apply to tenants in common. Where it is uncertain who died first, the statutory presumption (s 184 LPA 1925) treats deaths as occurring in order of seniority, with the eldest deemed to have died first; survivorship then operates accordingly.

Key Term: right of survivorship
The rule that, on the death of a joint tenant, their interest passes automatically to the surviving joint tenant(s).

Severance

Severance is the process by which a joint tenancy in equity is converted into a tenancy in common. Severance can occur by:

• Written notice (s 36(2) Law of Property Act 1925)
• An act operating on a joint tenant's own share (e.g., sale, mortgage)
• Mutual agreement
• Mutual conduct
• Bankruptcy or unlawful killing

Severance affects only the beneficial interest; the legal estate remains a joint tenancy.

Key Term: severance
The process by which a joint tenancy in equity is converted into a tenancy in common, ending the right of survivorship.

Severance by written notice requires two things:

• An immediate, unconditional intention to sever (for example, a notice “I hereby sever with immediate effect” is sufficient; conversely, a request that the property be sold at some future date is not immediate).
• Proper service on the other joint tenant(s). Service may be effected by leaving the notice at the last-known place of abode or business in the UK (s 196(3) LPA 1925), or by sending it by registered post (now commonly recorded delivery) to that address (s 196(4)). If sent by registered post and not returned undelivered, service is deemed effective even if not read.

Once a valid notice is served, severance is irrevocable. It is not necessary for the recipient to read the notice. If the notice lacks the necessary immediacy, it will not sever.

Severance by an act operating on one’s own share arises where a joint tenant deals with their beneficial interest—by an enforceable contract to sell, an assignment, or an equitable mortgage over their share. A court will also treat an enforceable contract for sale as severing (equity regards as done that which ought to be done). Bankruptcy severs automatically: the bankrupt’s beneficial share vests in the trustee in bankruptcy as a tenancy in common. Unlawful killing prevents a joint tenant taking by survivorship; the courts treat this as severance on public policy grounds.

Severance by mutual agreement or by a sufficient course of dealing depends on evidence that all joint tenants treated themselves as having separate shares. A concluded agreement is not essential if the parties’ conduct shows a common understanding to hold in shares, but vague or inconclusive negotiations will not suffice without more.

Where there are more than two joint tenants, only the severing party becomes a tenant in common as to their “share” (which, absent contrary agreement, is equal to 1/n). The remaining co-owners continue to hold the rest as joint tenants between themselves.

Overreaching

Overreaching is a mechanism to protect purchasers. When land is sold by two or more trustees, the beneficial interests of the beneficiaries are transferred from the land to the sale proceeds. The purchaser takes the land free of those interests. Overreaching applies to dispositions under which capital money arises (such as a sale or mortgage) where purchase money is paid to at least two trustees or a trust corporation. It operates in both registered and unregistered land.

Key Term: overreaching
The process by which beneficial interests are removed from the land and attached to the sale proceeds when purchase money is paid to at least two trustees.

The practical significance is that even a beneficiary in actual occupation (whose interest might otherwise override a registered disposition) will not bind a purchaser if overreaching has occurred. If payment is made to a sole trustee, overreaching fails; a purchaser may then be bound by a beneficiary’s equitable interest (especially in registered land where the beneficiary is in actual occupation). Standard conveyancing practice on registered titles is to require a Form A restriction to be entered where the owners hold as tenants in common; this alerts a purchaser to ensure that purchase money is paid to two trustees (or to appoint a second trustee prior to completion) so that overreaching is effective.

Trustees and beneficiaries

Key Term: trustee
The legal owner(s) of the land, responsible for managing the property and holding it on trust for the beneficiaries.

Key Term: beneficiary
The person(s) entitled to the benefit of the property (e.g., occupation or sale proceeds) under the trust.

Trustees may sell, mortgage, or otherwise deal with the land (s 6 TOLATA), consult beneficiaries where practicable (s 11), and regulate occupation (ss 12–13). Beneficiaries with an interest in possession may have a statutory right to occupy if the purposes of the trust or the land’s nature accommodate occupation. Disagreements are resolved by application under s 14 TOLATA; the court will weigh the statutory factors in s 15. Where secured debts are substantial and long-overdue, courts frequently order sale, but each case turns on its facts and the original trust purposes may still carry real weight.

Worked Example 1.1

Question: Anna and Ben purchase a house as joint tenants in law and equity. Anna dies, leaving a will giving all her property to her sister. Who now owns the house?

Answer:
Ben becomes the sole owner by survivorship. Anna's interest does not pass under her will.

Worked Example 1.2

Question: Chloe and David own a property as joint tenants in law and equity. David sells his beneficial interest to Emma. What is the effect?

Answer:
The joint tenancy in equity is severed as to David's share. Chloe and Emma now hold as tenants in common in equity; the legal estate remains a joint tenancy.

Worked Example 1.3

Question: Four friends buy a house as joint tenants in law and equity. One friend wishes to leave their share to their child. What must they do?

Answer:
They must sever the joint tenancy in equity (e.g., by written notice) to become a tenant in common. Otherwise, their share will pass by survivorship, not by will.

Worked Example 1.4

Question: Faye and Giles are beneficial joint tenants. Faye posts a letter by recorded delivery to Giles at his last-known home address stating: “I hereby sever my joint tenancy with immediate effect.” Giles does not open the letter before he dies. Has the joint tenancy been severed?

Answer:
Yes. The notice showed an immediate intention to sever and was validly served under s 196(4) LPA 1925. Severance is effective on service; it is irrelevant that Giles did not read the notice.

Worked Example 1.5

Question: Hannah, Isaac and Jamal are beneficial joint tenants. Hannah assigns her beneficial interest to Nora. What is the resulting pattern of ownership?

Answer:
Hannah’s assignment severs as to her one-third. Hannah/Nora hold a one‑third share as a tenant in common. Isaac and Jamal continue to hold the remaining two‑thirds as beneficial joint tenants between themselves.

Worked Example 1.6

Question: Olivia and Priya own registered land as trustees for themselves as tenants in common in equity. Quinn buys the house and pays the purchase money to both Olivia and Priya. Rohan, a beneficiary in actual occupation, claims to remain in possession against Quinn. Is Rohan’s interest binding?

Answer:
No. Payment to two trustees overreaches Rohan’s beneficial interest, which attaches to the proceeds. Quinn takes free, even if Rohan was in actual occupation.

Worked Example 1.7

Question: Sam and Tori co‑own their home with their two minor children. After separation, Sam applies for an order for sale under s 14 TOLATA to satisfy his unsecured debts; there are no mortgage arrears. How will the court approach the application?

Answer:
The court must consider s 15 factors: the original purpose (family home), the children’s welfare, and creditors’ interests. Absent pressing secured debt or other compelling factors, the court may refuse or postpone sale to allow the family purpose to continue.

Exam Warning

In SQE1, always distinguish between the legal estate (which must be a joint tenancy) and the beneficial interest (which may be a joint tenancy or tenancy in common). Severance affects only the beneficial interest.

Revision Tip

Remember: only the right of survivorship distinguishes a joint tenancy from a tenancy in common in equity. Always check for the four elements and any express declaration.

Summary

Key Point Checklist

This article has covered the following key knowledge points:

• The legal estate in co-owned land must be held as a joint tenancy; the beneficial interest can be a joint tenancy or tenancy in common.
• The four elements (possession, interest, title, time) are required for a joint tenancy.
• The right of survivorship applies only to joint tenancies, not tenancies in common.
• Severance converts a joint tenancy in equity into a tenancy in common, ending survivorship.
• Written severance requires an immediate intention and valid service (s 36(2) and s 196 LPA 1925); once served, it cannot be revoked.
• Severance can also occur by an act operating on a joint tenant’s own share, by mutual agreement or sufficient course of dealing, or on bankruptcy or unlawful killing.
• Where there are more than two joint tenants, severance affects only the severing party’s share; the others remain joint tenants as to the balance.
• Overreaching protects purchasers by transferring beneficial interests from the land to the sale proceeds when money is paid to two trustees or a trust corporation.
• A beneficiary in actual occupation does not bind a purchaser if overreaching occurs; if payment is made to a sole trustee, the purchaser risks being bound.
• Trustees hold the legal estate and manage the property; beneficiaries hold the equitable interest and are entitled to the proceeds of sale or occupation rights subject to TOLATA.
• Tenants in common can leave their share by will; joint tenants cannot unless they first sever the joint tenancy in equity.
• A statutory trust of land arises on co-ownership; the court can resolve disputes under s 14 TOLATA by reference to s 15 factors, including secured creditors and minors’ welfare.
• A maximum of four individuals can hold the legal estate as trustees; minors cannot be legal owners but may be beneficiaries.

Key Terms and Concepts

• statutory trust of land
• joint tenancy
• four elements
• tenancy in common
• legal estate
• beneficial (equitable) interest
• right of survivorship
• severance
• overreaching
• trustee
• beneficiary