Co-Ownership - Introduction and Creation

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Co-ownership is when two or more people have rights in when the same property in the same time. The different forms of co-ownership and their relevant principles are as follows:

  1. Joint tenancy - both of the parties hold everything together and nothing on their own. Features include:
    • The four unities - must have all of these for a joint-tenancy to exist.
      1. Unity of possession: Each co-owner is entitled to enjoy possession of the whole of the property, not exclusively to himself/herself, but to be enjoyed together with the other joint tenants.
      2. Unity of Interest: The interest of each joint tenant must be the same in nature, extent and duration.
      3. Unity of Title: All the joint tenants must derive their interest from the same document or the same act of adverse possession.
      4. Unity of Time: The interests of all joint tenants must vest at the same point in time.
    • The right of survivorship - a joint-tenant can't transfer his interest, it remains with the other join-tenants upon his death, the last survivor receiving the whole property.
    • Severance - a tenant can 'sever' his joint-interest during his lifetime, thus creating a tenancy in common (which he will be able to pass through a will etc).
  2. Tenancy in common - each of the parties holds their own separate interests in the whole property. Features include:
    • There is no right of survivorship. On the death of a tenant in common, his/her share passes to beneficiaries by will.
    • The size of each tenant’s share is fixed from the time of creation of the interest or by subsequent dealings.
    • Tenants in common hold ‘undivided shares’ of the property (ie, they each hold an identifiable fraction of the interest which has not yet been formally divided up between them).

When creating an co-ownership, the presumption is that a tenancy in common is created (unless there are words to the contrary): s 26 of the Conveyancing Act 1919 (NSW).

This article is a topic within the subject Property, Equity and Trusts 2.

Contents

Required Reading

Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008, pp. 627-642 [6.1-6.25].

Introduction

[1] Concurrent-ownership (co-ownership) is when more than one person have rights in the same property at the same time. All interests (fee simple, life estate, leasehold, mortgage etc) may be concurrently owned.

The common law allows two forms of concurrent ownership:

  1. Joint tenancy (most common for of concurrent ownership).
  2. Tenancy in common.

Joint Tenancy

[2] A joint tenancy is where two or more persons hold an equal interest in the same parcel of land or item of personality.

  • A joint tenant holds nothing on his own part, but the whole interest jointly.
  • It has two distinguishing features:
    • The right of survivorship.
    • The four unities.

The Right of Survivorship

The right of survivorship (uus accrescendi) means that when a joint tenant dies the whole estate remains with the other joint tenants (ie, the dead one simply ‘drops out’). The right of survivorship cannot be defeated in a will.

  • This prevents the deceased co-owner leaving his interest by will, as a joint tenant does not hold an identifiable share.
  • However, during their lifetime, a joint tenant can still transfer their share of the property through severance.
    • That is, they can sever the tenancy and become a tenant in common, where the right of survivorship will not apply.

There is a 'presumption of survivorship' in s 35 of the Conveyancing Act 1919 (NSW):

  • Where two or more person have died under circumstances rendering it uncertain which of them survived the other (eg, a car crash) the deaths affecting the title to the property shall be presumed to have taken place in order of seniority.
  • In other words, The younger is deemed to have survived the older.

The right of survivorship is a major difference between the two types of concurrent ownership.

The Four Unities

For a joint tenancy to exist, the following 'unities' must be present:

  1. Unity of possession: Each co-owner is entitled to enjoy possession of the whole of the property, not exclusively to himself/herself, but to be enjoyed together with the other joint tenants.
    • If one co-owner occupies the entire property, the other cannot sue in trespass in the absence of ouster.
    • No co-owner can exclude the other from occupation of the entire property.
  2. Unity of Interest: The interest of each joint tenant must be the same in nature, extent and duration.
  3. Unity of Title: All the joint tenants must derive their interest from the same document or the same act of adverse possession.
  4. Unity of Time: The interests of all joint tenants must vest at the same point in time.
    • If the time of vesting is different, a tenancy in common will arise.
    • Exceptions – conveyance executed to a trustee for beneficiaries, or any disposition in a will.

Tenancy in Common

[3] A tenancy in common requires only unity of possession.

  • There is no right of survivorship. On the death of a tenant in common, his/her share passes to beneficiaries by will.
  • The size of each tenant’s share is fixed from the time of creation of the interest or by subsequent dealings.
  • Tenants in common hold ‘undivided shares’ of the property (ie, they each hold an identifiable fraction of the interest which has not yet been formally divided up between them).

Creation Of Co-Ownership

Historical - Common Law

USG notes: this principle (the presumption) has been since superseded by legislation

[4] Under the old common law principles, if the four unities are present, it is presumed that an interest given to two or more persons is a joint tenancy, unless there are words of severance.[5]

  • So, a tenancy in common was created if there was an absence of the four unities, or the presence of some words of severance or an intention to create a tenancy in common.
  • Words of severance or an intention to create a tenancy in common has a broad application - anything which gives the slightest indication of such an intention would create a tenancy in common.[6]
    • Examples of such words include ‘in equal shares’, 'share and share alike’, ‘to be divided between , ‘equally’, ‘amongst or respectively’.

Historical - Equity

USG notes: this principle (the presumption) has been since superseded by legislation

Under equity, there is a joint tenancy presumption unless the situation is one of the following four situations (in which there will be a tenancy in common):

  1. Where joint tenants are business partners.[7]
    • The rationale is that is unfair to impose the right of survivorship on investment property.
  2. Where two or more persons advance money for a mortgage, irrespective of whether the advance was in equal or unequal shares between the person.[8]
  3. Where two or more persons acquire an interest in land having made unequal contributions to the purchase price, they are presumed tenants in common in proportion to their respective contributions.[9].
  4. Any other circumstances where equity may infer that the beneficial interest is intended to be held as a tenancy in common.

The last situation was the subject of Malayan Credit v Jack Chia:

  • Equity may infer that a tenancy in common was intended by looking to the circumstances.
  • Circumstances which indicate such an intention include:
    • Where the interest serves separate commercial interests.
    • Where service costs and rent are made in unequal shares.
    • Where there are unequal contributions to the deposit.

Modern Applicable Law

[10] The above presumptions and principles have been superseded by legislation. There is now a presumption of tenancy in common in s 26 of the Conveyancing Act 1919 (NSW).

  • It means that if land was conveyed to more than one person, it is presumed that they are to become tenants in common, and not as joint tenants (unless there are words to the contrary).
  • This presumption does not apply where the instrument affects executors, administrators, mortgagees, trustees.[11]

This was discussed in Mitchell v Arblaster:[12]

  • Facts: a man left two people as his beneficiaries and executors of his will. However, one of them died before him. The question is whether there was a joint-tenancy (because of the exception in s 26 (2)) and thus the other beneficiary receives everything through survivorship.
  • Held: where a will leaves an interest to beneficiaries who also act as executors, they are treated as primarily beneficiaries and the exception does not apply. Thus, there is still a presumption for tenancy in common.

Legal and Equitable Interest

[13] The presumption in s 26 (1) applies to both legal and equitable interests, so that any conveyance to two people would amount to a tenancy in common at law and in equity.

  • This was held to apply even in the case of constructive trusts of equal contributions, overruling the presumption in equity that constructive trusts are held on trust for the contributors as joint tenants.[14]

Application to Torrens Land

[15] s 100 (1) of the Real Property Act 1900 (NSW) provides that if people are registered as joint proprietors, they have the same rights as joint tenants in common law.

  • This sparked off a debate of whether this section was put in place to reverse the presumption of tenancy in common back to the presumption of joint tenancy which existed in common law.

This was discussed in Hircock v Windsor Homes (Development No 3) Pty Ltd:[16]

  • Facts: the Hircocks (husband and wife) were given a 10 lease by the defendant which they were entitled to automatically renew until the last of one of them died (the survivor). The wife died, and the husband wanted to renew the lease. The question was whether he had a joint-tenancy, which makes him the survivor and thus entitles him to do it on his own, or whether it was a tenancy in common, which requires the consent of his wife's estate.
  • Held: if s 100 (1) was held to reverse the presumption, it would mean that before registration there would be a presumption of tenancy in common (because of s 26) and then after registration, a presumption of a joint tenancy (because of s 100). This doesn't make sense, and therefore, s 100 is not held as reversing the presumption. It is merely there to say that people who are registered as joint proprietors have the same rights as joint tenants in common law.
    • In this particular case, whilst there was a presumption for a tenancy in common, it was rebutted by the circumstances and there was a joint tenancy instead. Mr Hircock was entitled to renew on his own.

Note that even if parties are registered as joint-proprietors, the tenants may still establish that between themselves (ie, doesn't apply to third-party cases) they are tenants in common.[17]

End

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References

Textbook refers to Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008.

  1. Textbook, pp. 627-8 .
  2. Textbook, pp. 628-31 [6.2-6.5]; NSWLRC, Unilateral Severance of a Joint Tenancy Report No 73 (1994) in Textbook, pp. 628-30 [6.2].
  3. Mendes Da Costa, 'Co-Ownership Under Victorian Land Law', (1961) 3 MULR 137, in Textbook, pp. 631-2.
  4. Textbook, pp. 632-4 [6.8-6.12].
  5. Morley v Bird(1798) 3 Ves Jun 629.
  6. Roberston v Fraser (1871) 6 Ch Appl 696.
  7. Lake v Craddock (1732) 3 P Wms 158.
  8. Re Jackson (1887) 34 Ch D 732.
  9. Robinson v Preston (1858) 4 K & J 505.
  10. Textbook, pp. 638-40.
  11. Conveyancing Act 1919 (NSW), s 26 (2).
  12. (1964-65) NSWR 119.
  13. Textbook, p. 640 [6.21].
  14. Delahunt v Carmody (1986) 161 CLR 464.
  15. Textbook, pp. 640-2 [6.22-6.25].
  16. [1979] 1 NSWLR 501.
  17. Calverley v Green (1984) 155 CLR 242.
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