TLATA 1996, Concurrent Co-ownership of Property - Essay Example

LAND LAW TRUST OF LAND This question mainly pertains to the rights of the beneficial co-owners under the trust of land and any protection afforded to them under law, where the trustees or the third parties apply to the Hon’able Court to obtain an order to sell the property which is the subject matter of the trust. In order to best describe the protection afforded to the beneficial co-owners will be necessary first to describe what is co-ownership and its relation to trust of land and then the statutory protection afforded to the beneficial co-owners of land under TLATA 1996 and whether rights of the co-owners are adequately protected. The law of co-ownership operates whenever two or more people enjoy the rights of ownership of property at the same time, either freehold or leasehold. The law of co-ownership is to be found in the 1925 legislation (LPA 1925), common law, and TLATA 1996. The law of co-ownership can be broken down into various components, first being the nature of co-ownership and types of co-ownership, Secondly, there is the statutory machinery that regulates the use and enjoyment of co-owned land, thirdly, there are those statutory and common law rules governing the creation of co-ownership, fourthly, there is the impact of co-ownership on third parties, fifthly, there are matters relating to the termination of co-ownership. 1 The concurrent co-ownership of property describes the simultaneous enjoyment of land by two or more persons i.e. enjoyment of the rights of ownership by two or more persons at the same time. Co-ownership since 1 January 1926 will either be by way of a “joint tenancy” or a “tenancy in common”.2 In a joint tenancy, each co-owner is treated as being entitled to the whole of that land. There are no distinct “shares”, and no single co-owner can claim any greater right over any part of the land than other. As far as the rest of the world is concerned, the land is treated as if it is owned by one person only and all the joint tenants share in that one ownership. In practical terms, this means that, when land is subject to a joint tenancy, there is only one formal title to it, and that title is owned jointly by all the joint tenants. Moreover, if the land is registered, there will be but one title registered at HM Land Registry, with each co-owner registered as proprietor of that title in the proprietorship section of the register. If the land is unregistered, there will be but one set of title deeds, specifying the four owners.3 It is pertinent to mention here that prior to 1st January 1926, any person wishing to purchase co-owned land would have to investigate the title of ever single tenant in common. Not only was this time consuming, but the objection of just one tenant in common might prevent the land from being sold. 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 so that a purchaser need only concern himself with obtaining the consent of these people. Further if there are two or more trustees of land and the purchaser obtains the consent of all to a sale, the purchaser may safely ignore all the equitable owners. This is the magic of statutory overreaching.4 An immediate difficulty of utilising the trust is that there may well be disputes between the trustees as to whether the property should be sold or retained for occupation. This problem becomes more acute if the consent of the equitable owners is also required before a sale can take place. 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. Should the co-owners’ relationship break down, or one of the co-owners go bankrupt, the other co-owner may wish to sell the property to realise its capital value or may be forced to do so to satisfy creditors.5 To deal with such disputes, S.14 provides that any trustees of land, or any equitable owner, or anyone who have interest in the property may apply for an order concerning the property i.e mortgagee or a trustee in bankruptcy. Further Section 15 of TLATA provides for protection of the co-owners when a trustee or third party applies to court for sale under Section 15 of TLATA.Section 15 provides “The matters to which the court is to have regard in determining an application for an order under section 14 include (a) the intention of the person or persons (if any) who created the Trust, (b) the purpose for which the property subject to the trust is held, (c) the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home and (d) the interest of any secured creditor of any beneficiary”. The following are examples of cases considered by the Hon’able Courts under the scheme of protection afforded to the beneficial co-owners of the property subject matter of a trust, which fall under Section 15 of TLATA. The said section 15 subsection (a) and (b) emphasize the importance underlying the purpose of the express creation of trust by taking in to account the intention of parties when the trust was created. Furthermore Section 15 (c) deals with the welfare of any minor’s/ children, who may get affected if the trust property is sold. Moreover section 15 (d) takes in to account the rights of creditors if any, in order to ensure that their interest in the property is also taken in to account when the decision is made.6 In the case of Jones v. Challenger7, where a husband and wife had jointly acquired leasehold premises as a matrimonial home, after divorce the wife sought an order for sale of the co-owned property. The Courts granted the order because the purpose for which the property was bought had ended on divorce, however it is pertinent to mention here that the outcome would have been different if there were children and the house was still needed to provide for one partner and the children. It was indicated in the case of Rawlings v. Rawlings that in such cases order for sale should be delayed until the children are grown up, similar decisions were reached in the case of Chun v, Ho8 where the property was required to provide accommodation for the lives of the co-owners, or that of the survivor and in the case of Williams v. Williams9 where the property was needed for the provision of family home for the children of the broken down relationship. Furthermore the interest of beneficiaries is also protected, where the person seeking a sale may be estopped from obtaining an order for sale by their conduct, this having been relied upon to detriment by other co-owners e.g. Re Buchanan – Wollaston’s Conveyance10 and Chun v. Ho and where there has been any misconduct by the person applying for sale, or his legal advisers, as in Halifax Mortgage Services v. Muirhead11, where sale was refused because the claimant’s solicitor had wrongly altered relevant documents. It is pertinent to mention here that the general desire not to keep a creditor out of its money is still subsisting as in the case of Bank of Ireland v. Bell12, as will be seen from the discussion of cases below.13 In the case of Mortgage Corporation V. Shaire14, where Mrs. Shaire and her unmarried partner where the legal co-owners of the property and were entitled to 75% and 25% of the shares respectively. It transpired after the death of Mrs. Shaire’s partner that he had mortgaged the property with a bank by creating legal mortgage with forged signatures and upon arrears after his death the mortgagee bank sought to enforce the security by filing an application under Section 14 TLATA for the sale of the property. It was held that the bank was not entitled to the 75% interest of Mrs. Shaire however it was held that bank was entitled to 25% of the share in the property and dealing with whether to order sale of the property Justice Neuberger was of the view that the law on the point has changed and it was no longer necessary to apply strict approach to cases under section 15 TLATA as one would apply in the case of trustee in bankruptcy and it was further said that the interest of the creditors was one of the four factors to be taken in to consideration while deciding the case under section 14 and 15 TLATA, however it should be noted even after favouring views regarding protection of co-owners under the new law the decision in the said case was against the co-owner Mrs. Shaire as it was held that interest of the charge holder out weight Mrs. Shaire wish to remain in the property and that even when Mrs. Shaire would be left with a handsome amount to re-locate herself in the case the property is sold, however Mrs. Shaire was given an option to convert the 25% into a loan on which she would pay interest.15 Further it is pertinent to mention here the doctrine of continuing purpose which could be best described through illustration of the case Re Buchanan- Wollaston’s Conveyance, where a group of neighbours had purchased a property adjoining to their houses with the intention of keeping the same as an open space and thereby preventing further building in the vicinity. After lapse of sometime one of the neighbours who paid for the purchase price of that piece of land left as open space sold his house and tried to encash his investment in the said piece of land seeking an order for sale of the said land, the same was rejected by the court on the ground that the land had been bought for a particular purpose and that purpose still subsists. Further in the case of Bedson v. Bedson16, where the property was required to continue a business for which the land was purchased the sale was postponed. Further from the discussion above it could deduce that before the 1996 Act, the co-owned land was subject to a trust for sale, with a duty to sell. Thus, in any dispute as to sale, the default position was that a sale must take place. So in Banker’s Trust v. Namdar17, a sale was ordered under S.30 LPA. In TSB v. Marshall18, the county judge used pre – TLATA principles to assess an application under S.14, 15. For example, a court is still likely to order a sale when only the co-owners are in dispute and there are no extrinsic factors e.g. no children, as this supports the alienability of the co-owned land. Conversely, no sale is likely if there are children living in the property and the co-owner wanting a sale is not in desperate financial straits and a sale is only likely if the land was purchased as an investment, rather than a home, or if it would be inequitable to deny a co-owner their share of the capital value of the land Further it is should also be noted that the list of factors in S.15 TLATA do not apply when an application is made by the trustee in bankruptcy of a person interested in co-owned land. In that case, S.335A Insolvency Act 1986 provides the list of relevant factors. S.335A is inserted by Sched 3 TLATA and if one of the person interested in the co-owned land is made bankrupt whether they are legal or equitable owner, his assets vest in a “trustee in bankruptcy”. This is simply the name given to the person who administers the bankrupt’s assets with a view to paying off the creditors. In a co-ownership, therefore, a trustee in bankruptcy will step into the shoes of a legal or equitable owner and will want to sell the co-owned property to realise some of the bankrupt’s assets. If a sale is opposed, the trustee in bankruptcy will apply to the court for an order for sale under S.14.19 On hearing an application for sale by a trustee in bankruptcy, the court must consider a number of factors, such as the interests of the bankrupt’s creditors, the needs of the spouse and all other circumstances. However, if the application is made more than a year after the bankruptcy, the court is extremely likely to order a sale of the property in order to satisfy the creditors, but, up to then, the matter could go either way. So, in Harrington v. Bennet20, an application for sale by the trustee in bankruptcy more than one year after the bankruptcy was granted.21 It is open to a mortgagee who cannot get a sale themselves under S.14 to make a co-owner bankrupt. This will mean becoming an “ordinary” creditor losing its priority over the property – but it is likely to generate a sale under the more powerful bankruptcy rules. It is not an abuse of the process and will not be prevented by the court, as made clear in Alliance & Leicester v. Slayford22. In conclusion it could be said that even though after the enactment of the TLATA 1996 the rules for sale of the property have been relaxed as from the above discussion it could be deduced that if not 100% relief is granted to the innocent co-owner of the land for which sale is being sought, a temporarily relief is granted to the co-owners where it could be established that the subject matter of the trust i.e the property is required for the children, survivors who would not be able to afford another home however on the other hand an absolute relief is granted where the purpose is still being subsisted for which the property was purchased and until that purpose subsists the property cannot be sold. Furthermore even if it could be said that some protection is being offered to the co-owners under Section 15 TLATA, the same is of no use in cases where the co-owner has mortgaged the property with a bank, as it is up to the mortgagee bank to use the provision of section14 TLATA or to use the provision under insolvency act, which put the mortgagee in favourable position as in that case the stricter approach towards realising the security is used. References Cooke, Elizabeth. Land Law. Oxford: Oxford University Press, 2006 (1st edition). Print Dixon, Martin. Modern Land Law. Abingdon, Oxon: Routledge, 2010 (5th edition). Print. Duddington, John. Land Law. New York: Pearson Longman, 2010 (3rd edition). Print Read More