Core principles of land law - Co-ownership and Trusts

Learning Outcomes

After reading this article, you will understand the main types of co-ownership of land, including joint tenancy and tenancy in common, how to identify and sever co-ownership, when a trust of land will arise, and what principles the court applies under TOLATA 1996 to resolve disputes between co-owners or beneficiaries. You will also know the essential terms and distinctions for SQE2 exam standard.

SQE2 Syllabus

For SQE2, you are required to understand co-ownership and trusts of land from a practical standpoint. You must be able to apply these concepts to client scenarios, explain the rules of survivorship, identify the type of co-ownership and equitable interest, determine how severance works, and advise on the steps and remedies for resolving disputes.

As you work through this article, structure your revision around:

• the difference between joint tenancy and tenancy in common, both in law and equity
• how a trust of land arises in co-ownership
• the four unities test and when a joint tenancy exists in equity
• how equitable joint tenancies are severed (both statutory and non-statutory methods)
• when implied trusts arise, including resulting and constructive trusts
• the factors the court applies under ss 14–15 TOLATA 1996 in co-ownership disputes
• the role of trustees and beneficiaries in sale or occupation of land

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 feature always applies to the legal estate in co-owned property?
   1. joint tenancy
   2. tenancy in common
   3. express trust
   4. words of severance
2. What is the main effect of severing a joint tenancy in equity?
   1. all co-owners become joint tenants in law
   2. legal title passes to the youngest owner
   3. the right of survivorship is lost and co-owners hold as tenants in common
   4. all beneficiaries lose their interest
3. When can a court under s 14 TOLATA 1996 order a sale of trust land?
   1. only with the consent of all beneficiaries
   2. whenever the property is mortgaged
   3. when considering all statutory factors and resolving a co-ownership dispute
   4. only after all minors vacate the property
4. Which of the following is NOT a requirement for a joint tenancy in equity?
   1. shared possession
   2. shared title
   3. shared time
   4. existence of a trust deed

Introduction

When two or more people acquire land together, their rights are regulated by property law rules on co-ownership and trusts. Understanding the distinction between different forms of co-ownership, the operation of survivorship, severance of tenancies, and both express and implied trust arrangements is essential. Disputes frequently arise on occupation or sale of co-owned land, giving rise to court applications under TOLATA 1996.

Co-ownership: Types, Legal and Equitable Title

When land is co-owned, the Law of Property Act 1925 automatically imposes a trust of land. There are always two layers:

• The legal estate: always held by way of joint tenancy and up to four named trustees.
• The equitable (beneficial) interest: can be held as joint tenancy or tenancy in common.

Key Term: joint tenancy
A form of co-ownership where all owners (trustees and beneficiaries) are equally entitled to the whole. No fixed shares. Survivorship applies.

Key Term: tenancy in common
A type of co-ownership where each beneficiary owns a distinct (often equal but not necessarily) share. No survivorship.

The legal estate can never be held as a tenancy in common. The beneficial interest can be either.

The Four Unities

To have a joint tenancy in equity, the following must be present:

• shared possession (each owner has a right to possess the whole)
• shared interest (identical interests)
• shared title (acquired under the same instrument)
• shared time (acquired at the same time)

If any element (other than possession) is missing, a tenancy in common will be presumed in equity.

Express Declarations and Presumptions

An express trust in the purchase deed, stating "as beneficial joint tenants" (or similar), is conclusive, regardless of financial contributions. Without an express declaration, equity follows the legal title, but the presumption can be rebutted, especially for business, commercial property, or clearly unequal contributions in the context of investment property.

The Rule of Survivorship

In a legal or equitable joint tenancy, on death, a co-owner’s interest passes automatically to the surviving joint tenant(s). It cannot be left by Will or pass under intestacy. In a tenancy in common, a deceased’s share passes under Will or intestacy.

Severance of Joint Tenancy in Equity

Key Term: severance
The process of converting a joint tenancy in equity into a tenancy in common, thus ending survivorship for that share.

There are two main ways to sever:

1. Statutory written notice (Law of Property Act 1925, s 36(2)): An immediate written notice of intention to sever, given to all other joint tenants.

2. Common law non-statutory methods (Williams v Hensman)

   • By operating on own share (sale, mortgage, bankruptcy)
   • By mutual agreement
   • By mutual conduct/course of dealing showing intention to sever

On severance, the joint tenancy in equity becomes a tenancy in common. Share proportions are usually equal unless a constructive trust or express declaration indicates otherwise.

Worked Example 1.1

Scenario: Alice and Ben purchase a house expressed as beneficial joint tenants. Ben later sells his beneficial share to Carla. What is the position?

Answer:
The sale operates as severance. Alice, Ben, and Carla were initially joint tenants. Ben's transfer means he now holds his share as a tenant in common. Alice and Carla continue as joint tenants in equity of the remaining share unless or until further severance occurs. The right of survivorship ends for Ben’s severed share.

Implied Trusts

Where no express declaration is made or there is evidence of an intention not reflected in the legal title, an implied trust may arise—either resulting or constructive.

Key Term: resulting trust
An implied trust where a non-owner directly contributes to the purchase price. Share is proportionate to contribution.

Key Term: constructive trust
An implied trust arising from a non-owner’s non-direct contribution (e.g., mortgage payments, substantial work) and a common intention. Shares allocated according to what the court finds is fair or intended, considering the whole course of dealing.

A resulting trust is rare in family home disputes. The modern approach is to use constructive trust principles, focusing on the intentions and actions of the parties, not simply financial inputs.

Worked Example 1.2

Scenario: Mark and Julia buy a property in Julia’s name alone. Mark pays half the deposit and contributes to mortgage payments but no declaration is made. What interest does Mark hold?

Answer:
There is a strong case for a constructive trust in Mark’s favour, as his conduct and shared intentions show a common understanding that he should have a beneficial interest. A court would determine the fair share, likely reflecting his contributions.

Trusts of Land and Appointment of Trustees Act 1996 (TOLATA): Disputes

When co-owners, beneficiaries, or a trustee disagree about sale or use of land, any of them may apply to court under section 14 TOLATA for an appropriate order. The court will resolve disputes by reference to section 15 TOLATA, considering:

• the intentions of those creating the trust
• the purposes for which the property is held
• the welfare of any minor in occupation
• the interests of secured creditors (e.g., mortgage lender)
• the wishes of adult beneficiaries in possession (by value)

The court may refuse sale (e.g., if the property’s family-home purpose is ongoing), order sale, or regulate occupation.

Worked Example 1.3

Scenario: Emma, Raj, and Steve own a home as tenants in common. Raj wants to sell, Emma and Steve want to stay. There are minor children living in the house. Raj applies under s 14 TOLATA.

Answer:
The court will weigh all s 15 factors. Where the house’s purpose (e.g., family home) is ongoing and children’s welfare is involved, the sale may be postponed. However, creditor interests or a breakdown in purpose could result in an order for sale.

Trustees and Beneficiaries: Roles and Overreaching

Key Term: trustee
The person(s) who hold the legal title to land, empowered to deal with the property.

Key Term: beneficiary
The person(s) entitled to the benefits of the land (occupation, income, proceeds of sale).

Key Term: overreaching
The process by which a purchaser, paying money to at least two trustees, takes land free of beneficial interests; those interests transfer to the purchase money.

A trust of land automatically arises in co-ownership. All legal owners are trustees. There must be at least two trustees (for overreaching to apply). If a buyer pays purchase money to only one trustee, existing beneficial interests may bind the buyer.

Exam Warning

The legal estate in co-ownership can only be held as a joint tenancy; it can never be severed into a tenancy in common at law. Severance can only ever affect equitable interests.

Revision Tip

For exams, always check for: (1) four unities, (2) express declaration, (3) words of severance, and (4) evidence for constructive or resulting trust. Clearly state which is present in your answer.

Key Point Checklist

This article has covered the following key knowledge points:

• Joint tenancy and tenancy in common can arise in equity; legal estate is always joint tenancy.
• Four unities are required for a joint tenancy in equity; if any missing, equity presumes tenancy in common.
• Survivorship operates only in joint tenancy. Tenancy in common shares pass by Will/intestacy.
• Severance (statutory or at common law) converts a joint tenancy in equity into a tenancy in common.
• Express declarations override presumptions about type of co-ownership.
• Implied trusts (constructive/resulting) can arise where express trust lacking, based on parties' intentions or contributions.
• Co-owners may apply to court under TOLATA 1996 s 14; court applies s 15 factors to resolve disputes.
• Trustees hold legal title; beneficiaries are entitled to proceeds and income. Purchasers take land free of beneficial interests if money paid to at least two trustees (overreaching).

Key Terms and Concepts

• joint tenancy
• tenancy in common
• severance
• resulting trust
• constructive trust
• trustee
• beneficiary
• overreaching