Core principles of land law - Co-ownership and Trusts

Learning Outcomes

This article examines co-ownership and trusts of land in English law, including:

• The structure of legal and equitable ownership: the legal estate is always a joint tenancy; the equitable interest may be a joint tenancy or a tenancy in common
• The four unities and their significance; the conclusiveness of express declarations; presumptions and words of severance where no declaration is made
• The rule of survivorship and its loss on severance, including the impact of unlawful killing on survivorship
• Severance of an equitable joint tenancy: statutory written notice under s 36(2) LPA 1925 and service under s 196; common law methods (operating on one’s own share, mutual agreement, mutual conduct)
• Analysis and quantification of equitable shares under implied trusts, especially constructive trusts in family home cases, based on common intention and the whole course of dealing
• Trustee and beneficiary roles under a trust of land; overreaching requirements and exceptions; purchaser protections and the function of Form A restrictions
• Applying TOLATA 1996 to disputes: rights of occupation (ss 12–13), consultation duties (s 11), and s 14–15 factors for orders for sale or regulation of occupation; bankruptcy considerations
• Practical compliance points: correct appointment and number of trustees, and service rules for severance notices to structure clear, practical advice

SQE2 Syllabus

For SQE2, you are required to understand co-ownership and trusts of land in English property law, including the distinction between legal and beneficial ownership, severance of joint tenancies, implied trusts, and TOLATA dispute resolution, with a focus on the following syllabus points:

• the difference between joint tenancy and tenancy in common, both in law and equity
• how a trust of land arises in co-ownership and the separation of legal and beneficial title
• the four unities test and when a joint tenancy exists in equity
• how equitable joint tenancies are severed (statutory s 36(2) written notice and non-statutory methods), including service under s 196 LPA 1925
• when implied trusts arise, including resulting and constructive trusts, and how shares are quantified
• the factors the court applies under ss 14–15 TOLATA 1996 in co-ownership disputes, and the role of s 12–13 rights of occupation
• the role of trustees and beneficiaries in sale or occupation of land; overreaching requirements and exceptions (e.g., personal representatives)
• Form A restrictions in registered land, their function, and their practical consequences

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.

The maximum number of legal owners is four; if more than four names appear on the transfer/conveyance, the first four (who are of full age and capacity) hold the legal title as trustees. Minors cannot be legal owners/trustees of land. In practice, the trustees and beneficiaries are often the same individuals, but their roles differ: trustees deal administratively with the property (e.g., executing transfers), while beneficiaries enjoy the property’s value (e.g., occupation, proceeds of sale).

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. In registered land, a tenancy in common is typically signposted by a Form A restriction on the proprietorship register.

Key Term: Form A restriction
An entry on the proprietorship register stating: “No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.” It alerts purchasers that there is a trust of land and that capital money must be paid to at least two trustees (or a trust corporation) to overreach beneficial interests.

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).

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. In business or partnership acquisitions, equity commonly presumes a tenancy in common even where the four unities are present.

Express Declarations and Presumptions

An express declaration in the purchase deed—e.g., “as beneficial joint tenants” or “as tenants in common in equal shares”—is conclusive as to the type of equitable co-ownership, regardless of financial contributions. If there is no express declaration, the starting point is that equity follows the law: joint legal owners are presumed to hold the equitable interest as joint tenants unless words of severance or a contrary intention appear.

Words such as “in equal shares”, “to be divided between”, or “one half each” indicate a tenancy in common. In domestic joint purchases with no express declaration, modern case law looks at the parties’ intentions and whole course of dealing to determine shares, rather than relying solely on contributions. In commercial settings, unequal contributions or partnership contexts more readily support a tenancy in common.

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. Survivorship ends if the joint tenancy is severed in equity.

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. Service is governed by s 196 LPA 1925: it can be effected by post or by leaving at the last known place of abode or business of the recipient; actual receipt is not required if correctly served.

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

   • By operating on own share (e.g., sale, mortgage/charge of the beneficial share, bankruptcy)
   • By mutual agreement (express or implied)
   • By mutual conduct/course of dealing showing a common intention to treat interests as separate

On severance, the joint tenancy in equity becomes a tenancy in common. Shares are usually equal unless an express declaration or a constructive trust sets out different shares. Severance affects only the equitable interest; the legal estate remains a joint tenancy and cannot be severed.

Where one joint tenant unlawfully kills another, survivorship is disapplied by public policy; the killer’s equitable interest is treated as severed, and they do not benefit from the deceased’s share.

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.

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 of his beneficial interest to Carla severs his share, so Alice and Carla hold as tenants in common as to Ben’s former share allocation (typically Ben’s one-half), while Alice retains her remaining joint interest. In practice, after severance between Alice and Ben, Alice and Carla hold as tenants in common in equal shares unless an express declaration or constructive trust provides otherwise. Survivorship no longer applies to Ben’s severed share.

Worked Example 1.2

Scenario: Dina and Omar own as beneficial joint tenants. Dina posts a s 36(2) LPA severance notice to Omar by first-class post to his last known address. The letter is delivered but Omar does not open it before he unexpectedly dies the next day. Has the severance taken effect?

Answer:
Yes. A written notice under s 36(2) that is properly served under s 196 LPA is effective even if the recipient does not read it. Severance occurs on service, so survivorship is lost for Dina’s share; Dina and Omar’s beneficial interests became a tenancy in common prior to Omar’s death.

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 at acquisition (deposit, purchase monies). Share is typically proportionate to contribution. In family home disputes, resulting trusts are rare today.

Key Term: constructive trust
An implied trust arising from a common intention that both parties should have a beneficial interest and detrimental reliance. The intention can be express or inferred from conduct (e.g., mortgage payments, significant improvements, pooling finances). Shares are allocated according to what the court finds fair or intended, considering the whole course of dealing.

The modern approach in domestic settings prioritises constructive trust analysis over strict resulting trust proportionate contributions, focusing on common intention and fairness. Intention may be inferred where parties keep finances separate and contribute unequally, or expressed where they discuss ownership shares. Shares can be adjusted over time if the parties’ intentions change (an “ambulatory” trust).

Worked Example 1.3

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:
A constructive trust likely arises in Mark’s favour. His contributions and the common intention to share (which can be inferred from joint inputs and conduct) indicate he should have a beneficial interest. The court would quantify his share reflecting the whole course of dealing, which may be equal or unequal depending on their intentions and contributions.

Worked Example 1.4

Scenario: Nisha and Kamil jointly purchase their home but make no express declaration. They keep separate finances; Nisha pays 80% of the mortgage and household expenses, Kamil pays 20% and undertakes significant renovations funded by him. They later separate. How are their shares likely to be determined?

Answer:
Equity follows the law (a joint tenancy is presumed in equity for joint legal owners) unless rebutted. The court would examine their common intention and the whole course of dealing under constructive trust principles. Given the disparity in financial contributions and separate finances, it is likely that the presumption of equal shares is rebutted, and the court may award unequal shares that reflect fairness (e.g., 65/35 or similar), taking into account renovations and ongoing payments.

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 resolves 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, and can also declare equitable shares.

TOLATA sets out rights and duties which often inform the dispute:

• s 6: trustees have all the powers of an absolute owner, exercised with regard to beneficiaries’ rights.
• s 11: trustees must so far as practicable consult beneficiaries and give effect to their wishes.
• s 12: beneficiaries may have a right to occupy trust land if the trust’s purpose includes occupation or if the property is suitable for occupation.
• s 13: trustees can regulate or restrict occupation and can impose conditions (e.g., payment of outgoings).

Where bankruptcy intervenes, courts consider additional statutory factors (including the interests of creditors) and often prioritise realisation of the bankrupt’s share, subject to limited postponement where exceptional circumstances exist.

Worked Example 1.5

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 the original purpose could result in an order for sale, possibly with conditions regulating occupation or timing to minimise hardship.

Worked Example 1.6

Scenario: Priya and Jon are joint legal owners with no express declaration. Priya’s parents, who are beneficiaries under a trust arrangement recorded in a side letter, live with them. After a dispute, Jon excludes Priya’s parents from occupation. What are the trustees’ and beneficiaries’ rights under TOLATA?

Answer:
Beneficiaries may have a right to occupy under s 12 if the trust’s purpose includes occupation and the property is suitable. Trustees can regulate occupation (s 13) and may impose conditions, including payment towards outgoings. If exclusion is contested, an application under s 14 can seek orders to regulate occupation (e.g., reinstating occupation or setting terms). The court will consider s 15 factors, including trust purpose and the welfare of any minors.

Trustees and Beneficiaries: Roles and Overreaching

Key Term: overreaching
The process by which a purchaser, paying money to at least two trustees (or a trust corporation), 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. To overreach beneficial interests on a disposition with capital money (e.g., sale), the purchaser must pay the purchase money to at least two trustees or a trust corporation. This is why the Form A restriction is routinely entered for tenancies in common or after severance; it flags the need for payment to two trustees.

If a buyer pays capital money to only one trustee, existing beneficial interests may bind the buyer unless the trust falls within an exception. One notable exception: a sole personal representative can give a valid receipt for capital monies, which overreaches beneficiaries’ interests.

The distinction between binding beneficial interests and overreaching is critical:

• If overreaching occurs (payment to two trustees/trust corporation), even someone in actual occupation with an equitable interest will not bind the purchaser; the interest shifts to the money.
• If overreaching does not occur (e.g., payment to one trustee and none of the exceptions applies), certain beneficial interests (including those coupled with actual occupation) may bind the purchaser.

Revision Tip

For problem questions, always check: (1) four unities and express declaration; (2) if severance has occurred and how; (3) the presence of a Form A restriction; (4) whether purchase money was paid to at least two trustees; (5) if TOLATA rights and duties (s 12–13) are engaged; and (6) evidence for constructive/resulting trust and quantification.

Worked Example 1.7

Scenario: Lara is the sole registered proprietor of a house but holds on trust for herself and Mia (each with a 50% beneficial interest). Lara sells the house and the buyer pays the price to Lara alone. Mia has been living at the property. Is Mia’s interest overreached?

Answer:
No. Payment to a single trustee does not overreach (unless an exception applies). Mia’s equitable interest coupled with actual occupation may bind the purchaser. Had the buyer paid capital money to two trustees (or a trust corporation), Mia’s interest would have transferred to the sale proceeds and would not bind the purchaser.

Worked Example 1.8

Scenario: Two joint legal owners, Noah and Ava, hold beneficially as tenants in common and wish to sell. The buyer cannot locate Ava before completion. Noah proposes completion with payment to him alone. Can the buyer safely proceed?

Answer:
No. Payment to one trustee will not overreach. The buyer should insist on either payment to two trustees (Noah plus another appointed trustee/trust corporation) or evidence that a sole personal representative exception applies. Alternatively, the buyer could seek a court order authorising registration in compliance with the restriction.

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. Also confirm whether a Form A restriction appears, how any severance was served (s 36(2), s 196 LPA), and whether capital money was paid to two trustees to overreach on sale.

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 and limited to four trustees.
• Four unities are required for a joint tenancy in equity; if any (except possession) is missing, equity presumes tenancy in common.
• Express declarations are conclusive as to beneficial ownership type; words of severance indicate a tenancy in common.
• Survivorship operates only in joint tenancy. Tenancy in common shares pass by Will/intestacy.
• Severance (statutory written notice or at common law) converts a joint tenancy in equity into a tenancy in common; the legal estate remains a joint tenancy.
• Statutory written notice to sever must be properly served (e.g., under s 196 LPA 1925); actual reading by the recipient is not required.
• Implied trusts (constructive/resulting) arise where express declarations are lacking. Constructive trusts dominate family home cases; shares are determined by common intention and fairness across the whole course of dealing.
• Trustees hold legal title; beneficiaries are entitled to occupation/income/proceeds. Purchasers take land free of beneficial interests if capital money is paid to at least two trustees (overreaching). A sole personal representative can give a valid receipt to overreach.
• Under TOLATA 1996, trustees’ powers mirror an absolute owner’s (s 6), subject to consultation duties (s 11) and beneficiaries’ occupation rights (s 12). Courts decide s 14 applications using s 15 factors and can regulate occupation or order sale.

Key Terms and Concepts

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