Co-ownership - Rule of survivorship

Introduction

Co-ownership in land law refers to the situation where two or more individuals hold concurrent rights in a piece of property. The Rule of Survivorship is a key concept within this framework, particularly concerning joint tenancies. Under this rule, when one joint tenant dies, their interest in the property automatically passes to the surviving joint tenants. Understanding this rule is important for interpreting property rights, estate succession, and legal obligations among co-owners. This article explores the legal principles behind the Rule of Survivorship, the distinctions between joint tenancy and tenancy in common, and the methods by which a joint tenancy can be severed.

Basics of Co-ownership

Co-ownership arises when multiple individuals hold rights to the same property simultaneously. This arrangement is a basic element in property law and appears primarily in two forms: joint tenancy and tenancy in common.

Joint Tenancy

Joint tenancy is characterized by the "four key elements":

1. Possession: Each joint tenant is entitled to possess the whole property.
2. Interest: All joint tenants have identical interests in the property, both in nature and duration.
3. Title: The interests of the joint tenants arise from the same document or act.
4. Time: The interests of the joint tenants commence at the same time.

A defining feature of joint tenancy is the Rule of Survivorship (jus accrescendi). This means that upon the death of a joint tenant, their interest automatically passes to the surviving joint tenants, outside of any will or intestacy rules.

To clarify, consider four friends owning a boat together as joint tenants. If one friend passes away, the remaining three friends continue to own the entire boat equally, without the need for probate or inheritance proceedings for the deceased's share. This seamless transition highlights the practical importance of the Rule of Survivorship.

Tenancy in Common

In contrast, tenancy in common allows co-owners to have distinct shares in the property, which may be unequal. The key features are:

• Separate Shares: Each tenant in common owns a specific proportion of the property, which can be equal or unequal.
• No Right of Survivorship: Upon the death of a tenant in common, their share passes according to their will or the laws of intestacy.
• Possession: Despite having separate shares, each tenant in common has the right to possess the whole property.

Think of tenancy in common like slices of a pie where each person knows exactly how big their slice is, and they can pass on their slice to someone else in their will. This structure provides flexibility in ownership but lacks the automatic transfer feature of joint tenancy.

Both forms of co-ownership have significant implications for how property rights and obligations are managed among co-owners. Recognizing these differences is necessary before further examining the Rule of Survivorship.

The Rule of Survivorship in Joint Tenancy

The Rule of Survivorship is central to the operation of joint tenancy. When a joint tenant dies, their interest does not form part of their estate but passes automatically to the surviving joint tenants. This mechanism has significant legal implications:

• Bypassing Probate: The deceased's interest transfers without the need for probate, simplifying the succession process.
• Estate Planning Considerations: Joint tenancy can be used to ensure property passes directly to the other co-owners, which is often used among family members or spouses.
• Impact on Inheritance Tax: Since the deceased's interest does not pass through their estate, there may be inheritance tax implications to consider.

Think of the Rule of Survivorship as a relay race baton passing smoothly to the next runner without any hiccups. It's an automatic and immediate process that keeps the property ownership intact among the remaining co-owners.

Case Illustration: Hickman v Peacey [1945] AC 304

In this case, two joint tenants died in circumstances where it was impossible to determine who died first. The House of Lords held that the younger was presumed to have survived the elder, resulting in the Rule of Survivorship applying in favor of the younger's estate. This case highlights the importance of the Rule of Survivorship in determining the devolution of property interests upon death.

Severance of Joint Tenancy

But what happens when a joint tenant wants to go their separate way? This is where severance comes into play.

Severance is the process by which a joint tenancy is converted into a tenancy in common, effectively "breaking" the joint tenancy. Severance can occur in several ways:

1. Unilateral Act: A joint tenant decides to act upon their own share independently. For example, selling or mortgaging their interest without the others' consent.
2. Mutual Agreement or Consent: All joint tenants agree to sever the joint tenancy.
3. Course of Dealing: The behavior of the co-owners indicates that they regard themselves as tenants in common. Maybe they've treated their shares as separate in financial dealings.
4. Written Notice of Severance: Under Section 36(2) of the Law of Property Act 1925, serving a written notice expressing the intention to sever upon the other joint tenants.

Here's an example to clarify.

Example Scenario

Consider siblings, Alex, Jamie, and Sam, who own a house as joint tenants. Alex decides to sever his interest by selling his share to Taylor. By doing so, Alex's action converts his share into a tenancy in common, and Taylor now owns that share as a tenant in common with Jamie and Sam, who remain joint tenants between themselves.

Case Spotlight: Re Draper's Conveyance [1969] 1 Ch 486

In this case, serving a summons for the sale of a property was held to be sufficient written notice to sever a joint tenancy. It showed immediate intention to terminate the joint tenancy, highlighting the importance of formal actions in changing co-ownership status.

Legal Framework Governing Co-ownership

To fully understand how co-ownership operates, it's necessary to examine the laws that set the rules of the game. Let's take a closer look at the key statutes.

Law of Property Act 1925

The Law of Property Act 1925 (LPA 1925) modernized property law and remains a key element of co-ownership regulation. Key provisions include:

• Section 1(6): Legal estates cannot be held by tenants in common; co-owners can only hold the legal estate as joint tenants.
• Section 34: Limits the number of legal owners to four.
• Section 36(2): Allows for the severance of equitable joint tenancy by written notice.

These provisions establish the fundamental principles of co-ownership and provide mechanisms for altering the nature of ownership interests.

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

TOLATA governs the rights and duties of trustees and beneficiaries in co-ownership situations. Important aspects include:

• Section 6: Trustees have all the powers of an absolute owner.
• Section 11: Trustees have a duty to consult beneficiaries when exercising their functions.
• Section 14: Allows interested parties to apply to the court for an order relating to the exercise of the trustees' functions.

TOLATA provides a framework for resolving disputes and managing co-owned property, ensuring that the interests of all parties are considered.

Practical Implications and Exam Relevance

For those gearing up for the SQE1 FLK2 exam, co-ownership isn't just theory—it's game day material. Knowing the details can make all the difference.

• Exam Focus: Questions may involve scenarios requiring analysis of co-ownership structures, methods of severance, and the application of statutory provisions and case law.
• Legal Practice: Understanding these concepts is essential for advising clients on property transactions, estate planning, and dispute resolution.

Hypothetical Exam Question

"Adam, Bella, and Charlie purchase a property as joint tenants. Adam serves a written notice of severance on Bella and Charlie. Subsequently, Adam dies intestate. Discuss the interests of Bella and Charlie in the property."

In answering, you need to apply Section 36(2) LPA 1925, recognize that Adam's severance converts his share into a tenancy in common, and determine that his one-third share passes according to intestacy rules, while Bella and Charlie remain joint tenants of the remaining two-thirds.

Managing Co-ownership Disputes

Co-owning property isn't always smooth sailing. Disagreements can pop up over whether to sell, how to manage the property, or even who gets to live there. So, what can co-owners do when conflicts arise?

• Talk It Out: Often, the first step is for co-owners to have an honest discussion to try to reach a mutual agreement.
• Seek Mediation: If talking doesn't resolve the issues, a neutral third party can help facilitate an agreement.
• Legal Action under TOLATA 1996: When all else fails, a co-owner can apply to the court under the Trusts of Land and Appointment of Trustees Act 1996 for an order to resolve the dispute.

Real-Life Example

Consider three friends who own a country cottage together. One wants to sell to free up cash, while the others want to keep it as a holiday home. If they can't agree, the friend wanting to sell might apply to the court under Section 14 of TOLATA. The court would then consider various factors to decide whether to order a sale.

Conclusion

The Rule of Survivorship plays a major role in co-ownership, particularly within joint tenancies. It determines how property interests transfer upon the death of a co-owner, bypassing the usual inheritance mechanisms. Understanding the distinctions between joint tenancy and tenancy in common, the methods of severance, and the statutory framework under the LPA 1925 and TOLATA 1996 is necessary. Key cases like Hickman v Peacey and Re Draper's Conveyance provide judicial interpretations that clarify these concepts. By examining how these elements interact, students can develop a comprehensive understanding of co-ownership's legal complexities, which is fundamental for both exam success and legal practice.