SQE1: PROPERTY PRACTICE
Topic 4. Co - Ownership
of Land
Law Training Centre (Kent)
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LAW TRAINING CENTRE (KENT) LTD Co-Ownership of Land
SQE 1: Property Practice
Version: 1
Learning Content
◗ Co-Ownership
◗ Forms of Lawful Tenancy
◗ Express Trusts
◗ Co-Ownership under Informal Trusts
1. Co-ownership
Wherever land is owned by more than one-person, ownership must be through a
trust of land. A trust of land separates the legal title of the land from the
equitable ownership rights. Legal title is held by the trustees and these are the
named paper owners of the land. The trustees hold the land on trust for the
beneficiaries i.e. those entitled to equitable ownership rights. The trustees and
beneficiaries are often the same people. Two forms of co-ownership are
recognised: these are joint tenancy and tenancy in common.
Legally, co-owners are described as having a concurrent interest in the land. This
means that each of the owners holds an interest at the same time as the others.
Concurrent interest
The owners all hold an interest in the land at the same time.
This can be contrasted with a successive interest in the land, which arises when
one owner’s interest in the land is followed by another owner’s interest in the
land. For example, one owner may be allowed to live in a property for the
duration of his or her life and the property will then pass to another owner: this is
not co-ownership, because both owners do not hold an interest in the property
at the same time.
Successive interest
One owner’s interest in the land is followed by another owner’s interest in the
land.
There are primarily two types of co-ownership:
• joint tenancy
• tenancy in common
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LAW TRAINING CENTRE (KENT) LTD Co-Ownership of Land
SQE 1: Property Practice
Version: 1
It is worth mentioning at this point that the word ‘tenant’ in this context does not
indicate a leasehold title. It is simply the term used to describe the nature of
ownership in a co-owned property.
2. Legal and equitable ownership
The other important distinction that you must remember is the separation
between legal and equitable ownership.
The only form of co-ownership now possible in terms of legal title is joint
tenancy.
Before 1925, however, it was possible to hold the legal title in land as either joint
tenants or tenants in common - and this caused several difficulties. Remember
that tenants in common can act on their own share of the land at any time. They
can sell it, or give it away, or leave it by will, for example. This caused serious
problems if the owners of the land wanted to sell it, because, in order to do so,
they had to obtain the consent of each one of the legal owners. Often, all the
legal owners could not be traced, or had themselves passed their title in the land
on to other people.
To avoid such difficulties, the Law of Property Act 1925 (LPA 1925) simplified the
position in respect of legal title in two ways. It established that at law, the co-
owners had to hold as joint tenants.
Many co-owners will want to hold the equitable title of their property as joint
tenants. The reason for this is that, when land is held in this way, the right of
survivorship (ius accrescendi) operates. This is probably the most important
difference between joint tenancy and tenancy in common. It means that, if one
of the joint tenants dies, the surviving tenant absorbs his or her interest in the
property.
This is quite a difficult concept to explain. As we have already seen, if all the joint
tenants own the whole of the land together, they do not have shares or
individual interests in the land as such. When one of them dies, he or she simply
disappears from the joint tenancy and the other joint tenants remain.
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LAW TRAINING CENTRE (KENT) LTD Co-Ownership of Land
SQE 1: Property Practice
Version: 1
Joint tenancy
Where there is a joint tenancy, all the co-owners own the whole of the property
collectively. It is not correct to mention shares when talking of a joint tenancy. In
order to amount to a joint tenancy, the four unities must be present:
1. Unity of possession - each party is entitled to occupy the whole of the land
and none can exclude the others from any part of it.
2. Unity of interest - each party must hold the same interest in the property.
3. Unity of title - each party must acquire their interest through the same
transaction.
4. Unity of time - interests must have been acquired at the same time.
Where there is a joint tenancy, survivorship operates. This means that if one joint
tenant dies, the remaining joint tenants benefit from his entitlement in that they
still all remain entitled to the whole of the property. This means a joint tenant
cannot leave his interest in the property to another in their will. Neither will their
interest in the land thereafter form any part of their estate should they die
intestate. It will simply pass to the other joint tenants. If there is only one other
joint tenant, they become solely entitled to the land and can leave it in a will
should they wish. Where both joint tenants die together in circumstances where
it is impossible to determine which one died first, it is presumed the eldest died
first and thus the property will form the estate of the youngest under s.184 Law
of Property Act 1925. Where the co-ownership relates to equitable ownership, it
is possible too for a joint tenant to separate their interest from the others
through severance. This will allow them to leave their interest to another in their
will, however, this will also mean that they cannot benefit from survivorship
should any of the other joint tenants die.
Tenancy in common
Where there is a tenancy in common, each co-owner will own a share of the
property e.g. 50% or 80%. The share is undivided, meaning that they are entitled
to occupy the whole of the property even if their share is small. There is still unity
of possession and no physical division of the land. The relevance of the
shareholding is evident on sale, death, or distribution of income from the
property. Survivorship does not operate between tenants in common. Each
tenant can nominate who to leave their share to in their will or if they die
intestate their share will form part of their estate.
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LAW TRAINING CENTRE (KENT) LTD Co-Ownership of Land
SQE 1: Property Practice
Version: 1
Co-ownership of legal title
Where land is conveyed into the names of more than one person, co-ownership
of legal title will arise. Co-ownership of legal title can only be through a joint
tenancy (s. 1(6) Law of Property Act 1925). This joint tenancy of a legal estate
cannot be severed (s.36(2) Law of Property Act 1925). The number of joint
tenants that can hold legal title is limited to four. Where a conveyance seeks to
give legal title to more than four persons, the first four named are taken to be the
legal owners (S.34 Trustee Act 1925).
The joint tenants of the legal title are the trustees and hold the property on trust
for the beneficial owners. The beneficial owners are often the same people as the
legal owners.
Co-ownership in equity
Co-ownership in equity can be as a joint tenancy or tenancy in common. It is
important to determine how ownership is held and if it is a tenancy in common,
the proportion of the shareholding held by each tenant. Where the trust is an
express trust, the parties are free to determine the extent of their entitlement in
the declaration of trust. This will override any implication that could be made
from the facts such as the proportion of contributions. Difficulties arise where a
trust is created informally.
3. Express trusts
An express trust can be created through a conveyance of land or through a
declaration of trust. Where there is a declaration of trust, this must be evidenced
in writing:
S.53(1)(b) Law of Property Act 1925
The extent of shareholding set out in the declaration of trust is conclusive:
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LAW TRAINING CENTRE (KENT) LTD Co-Ownership of Land
SQE 1: Property Practice
Version: 1
Case example: Pankhania v Chandegra [2012] EWCA Civ 1438 Court of Appeal
In July 1987, the claimant's uncle had wished to purchase a property but was not
eligible for a mortgage. The claimant, aged 19, agreed to help purchase the house
on behalf of his uncle. The uncle paid the deposit, and the house was conveyed to
the claimant and defendant who was the uncle's sister. The remainder of the
purchase price was provided by mortgage taken out by the claimant and
defendant. There was an express declaration of trust to the effect that the
claimant and defendant held the beneficial interest in equal shares as tenants in
common.
The intentions of parties were that the uncle would eventually live in the
property and they would sell their shares to him. The defendant married and
lived in the property and paid the mortgage, but this was not intended to be a
long-term arrangement. However, she later changed the locks and refused entry
to the claimant and refused to sell to the uncle. She claimed that it was always
her intention to use the house as her matrimonial home. The uncle died in 2003
and the claimant then started making payments on the mortgage. The claimant
then sought an order for the sale of the property and division of the net proceeds
of sale in equal shares. The trial judge found for the defendant and refused to
order sale. The claimant appealed as the judge had made no mention of the
express declaration of trust.
Decision: Held
The order for sale was granted and the division of the proceeds in equal shares
was ordered.
Mummery LJ :
‘In the absence of a vitiating factor, such as fraud or mistake, as a ground for
setting aside the express trust or as a ground for rectification of it, the court must
give legal effect to the express trust declared in the transfer. In the absence of
such claims the court cannot go behind that trust. The understanding that the
property was to be the defendant's matrimonial home, the fact that the claimant
never actually lived there, and the fact that he had no involvement in the property
other than lending his name to the purchase of the property for the purpose of
obtaining a loan on mortgage from the Market Harborough Building Society in
1987 have never been coupled with any counterclaim by the defendant to set
aside or to rectify the express trust.’
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LAW TRAINING CENTRE (KENT) LTD Co-Ownership of Land
SQE 1: Property Practice
Version: 1
If the declaration or conveyance states that the beneficiaries are to enjoy the
land jointly, this will create a joint tenancy. If the declaration mentions shares,
this will create a tenancy in common.
Where there is no express trust
Where there is no express trust, for example where the trust was created by a
constructive or resulting trust or the parties simply failed to state the extent of
their ownership on conveyance, the law will imply or presume beneficial
entitlement from their conduct.
Where the land was conveyed into the names of more than one person and no
express declaration as to how ownership is divided, the law raises a presumption
of joint tenancy:
Case example: Stack v Dowden [2007] 2 AC 432 House of Lords
Ms Dowden and Mr Stack were co-habitees. They purchased a house in their joint
names but made no declaration as to entitlement of the beneficial interest in the
property. The purchase price of £190,00 came from £129,000 of MS Dowden’s
savings and sale of her previous property. The remainder came from an interest
only mortgage and two separate endowment policies. Mr Stack paid the
mortgage instalments totalling £27,000, Ms Dowden paid £38,000. Ms Dowden
paid most of the utility bills. They had separate bank accounts and made separate
investments. The parties then separated, and Mr Stack brought an action for sale
of the property and distribution of the proceeds in equal shares.
Decision: Held
The starting point for determining beneficial interests where the legal title was
held jointly is that beneficial interest will also be held jointly. This presumption
may be displaced where there is evidence that this was not their intention.
Baroness Hale:
‘In the cohabitation context, mercenary considerations may be more to the fore
than they would be in marriage, but it should not be assumed that they always
take pride of place over natural love and affection. At the end of the day, having
taken all this into account, cases in which the joint legal owners are to be taken to
have intended that their beneficial interests should be different from their legal
interests will be very unusual.’
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LAW TRAINING CENTRE (KENT) LTD Co-Ownership of Land
SQE 1: Property Practice
Version: 1
‘This is, therefore, a very unusual case. There cannot be many unmarried couples
who have lived together for as long as this, who have had four children together,
and whose affairs have been kept as rigidly separate as this couple's affairs were
kept. This is all strongly indicative that they did not intend their shares, even in
the property which was put into both their names, to be equal (still less that they
intended a beneficial joint tenancy with the right of survivorship should one of
them die before it was severed.) Before the Court of Appeal, Ms Dowden
contended for a 65% share and in my view, she has made good her case for that.’
The presumption may be displaced where there are circumstances indicating that
a tenancy in common would be more appropriate:
• Where the parties intend to operate separate businesses from the premises.
• Where the parties are commercial partners.
• Where there are unequal contributions to the purchase price.
• Where the parties have agreed to occupy separate areas of the property.
4. Co-ownership under informal trusts
Resulting trusts
Resulting trusts arise through a direct contribution to the purchase price and the
beneficial interest which arises is in exact proportion to the amount contributed.
i.e. if a person contributes 10% of the purchase price, they will hold 10% of the
beneficial interest. As this is a 10% share of the beneficial interest this can only
ever be held as a tenant in common.
Constructive trusts
Constructive trusts are based on a common intention rather than a mathematical
formula as to proportion of contribution. The courts role is to seek to give effect
to the common intention when considering how beneficial ownership is held:
Case example: Midland Bank v Cooke [1995] 2 FLR 995 Court of Appeal
The matrimonial home was conveyed into the sole name of Mr Cooke. The
purchase price of £8,500 was funded by a mortgage of £6,450 taken out in the
name of Mr Cooke (Mrs Cooke was a student at the time and had no income).
£1,000 of the purchase price came from a wedding gift from Mr Cooke's parents
to both of them and the remainder was provided out of Mr Cooke's savings.
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LAW TRAINING CENTRE (KENT) LTD Co-Ownership of Land
SQE 1: Property Practice
Version: 1
Mrs Cooke later worked as a teacher but did not directly contribute to the
mortgage payments. She did discharge many of the household bills. She also had
undertaken substantial improvements, alterations, and decoration of the house.
Mr Cooke later re-mortgaged the house to secure his business debts. The bank
asked Mrs Cooke to sign a consent form postponing any interest that she held to
the bank. Mr Cooke failed to keep up with the payments and the bank sought
possession of the property. Mrs Cooke claimed to be entitled to a beneficial
interest in the property and claimed that she had signed the consent form under
undue influence. The trial judge held that Mrs Cooke had a beneficial interest in
the property amounting to 6.47% and the consent form had been obtained by
undue influence. Mrs Cooke appealed contending that the trial judge had been
wrong on the quantification of her interest.
Decision: Held
Mrs Cooke was entitled to 50% of the beneficial interest.
Lord Justice Waite:
‘I would therefore hold that positive evidence that the parties neither discussed
nor intended any agreement as to the proportions of their beneficial interest does
not preclude the court, on general equitable principles, from inferring one.
The general principle to be derived from Gissing v Gissing and Grant v Edwards
can in my judgment be summarised in this way. When the court is proceeding, in
cases like the present where the partner without legal title has successfully
asserted an equitable interest through direct contribution, to determine (in the
absence of express evidence of intention) what proportions the parties must be
assumed to have intended for their beneficial ownership, the duty of the judge is
to undertake a survey of the whole course of dealing between the parties relevant
to their ownership and occupation of the property and their sharing of its burdens
and advantages. That scrutiny will not confine itself to the limited range of acts of
direct contribution of the sort that are needed to found a beneficial interest in the
first place. It will take into consideration all conduct which throws light on the
question what shares were intended. Only if that search proves inconclusive does
the court fall back on the maxim that ‘equality is equity.’
Stack v Dowden [2007] 2 AC 432
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LAW TRAINING CENTRE (KENT) LTD Co-Ownership of Land
SQE 1: Property Practice
Version: 1
Summary
1) Co-ownership of land brings with it a unique set of legal implications.
2) Co-owners can hold the land in equity either as joint tenants or as tenants
in common.
3) The key characteristic of joint tenancy is that all the owners own the
whole of the land: it is not divided into quantifiable shares. On death, the
principle of survivorship operates, whereby the interest of the deceased
joint tenant is automatically absorbed by the remaining joint tenant(s).
4) Tenants in common, however, own a quantifiable share of the land.
5) Co-owners must decide how they wish to hold the land. For a joint
tenancy to exist, however, the four unities must be present. These are the
unities of possession, time, interest, and title. For a tenancy in common,
only the unity of possession must be present.
6) Joint tenancies in equity can be severed to become tenancies in common.
7) Severance can occur in several ways: by notice (under LPA 1925, s. 36(2));
by mutual agreement; by a course of dealing; by a joint tenant operating
on his or her own share (Williams v Hensman).
8) Severance can also occur by forfeiture or bankruptcy.
9) Severance can never be effected by will, because, by then, survivorship
has been triggered.
10) Co-ownership can also cause problems for unsuspecting purchasers of
land.
11) If the co-owners are tenants in common, the Land Registrar will enter a
restriction in the land register. This should also be entered if a joint
tenancy is severed.
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SQE 1: Property Practice
Version: 1
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LAW TRAINING CENTRE (KENT) LTD Co-Ownership of Land
SQE 1: Property Practice
Version: 1
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