In order to advise these parties effectively we need to look at the situation they have found themselves in. The first thing to consider when assessing this question is the nature of the ownership of the cottage as it stands when the purchasers bought the property. We are told that the cottage was purchased in the name of both Julian and Dick and they are the legal owners of the property as it is they who are named on the legal documents they.
Co- ownership is described as being the forms ownership in which two or more persons are simultaneously entitled in possession to an interest or interests in the same property. There are four types of co-ownership but the one which we are concerned with here is joint tenancy. Joint tenancy is said to be the form of co-ownership in which each ‘joint tenant’ is said to be wholly entitled to the whole of the interest or estate. It is an essential feature of joint tenancy that the ‘four unities’ must be present before a joint tenancy can be said to exist.
The four unities comprise of possession (each tenant is as much entitled to possession as another), interest, (each joint tenant is wholly entitled to the whole), title (each tenant must derive his title from the same document) and time (each tenant vests in the interest at the same time). As established by the Law of Property Act 1925 s1(6) the only type of co-ownership that exists at law (the others exist in equity) is a joint tenancy and in accordance with this Julian and Dick are therefore more properly termed the legal joint tenants of the property.
In this particular question we are told that all the cousins all contributed equally to the purchase price of the house and this deems that they all have an interest in the property, even though their names are not on the legal title. The only way this interest can be recognised is in equity through a trust. We are told here that during the conveyance, a trust of land was set up which expressly stated that Julian and Dick would hold the property on trust for themselves and the other three cousins as joint tenants.
This therefore means that no one joint tenant holds any distinct share in the co owned estate, but is, with the other joint tenants, invested in the total interest in the land, one collective entity. This is the situation as it stands at the date of purchase, all the joint tenants allowing their family member Great Aunt Edna to live in the house until she dies. The first problem we must look at which changes this situation is the sale of Georgina’s equitable interest to Dick.
Georgina wants to sell the land to another joint tenant, but for her to extract this value of her interest in the land she has to effectively sever her interest in the land as a joint tenant. This process is called severance and can occur in many different forms. In this instance the means of severance that Georgina acts upon is the common law method of severance by conduct. In this case the very action of Georgina accepting the money from Dick in return for her interest implies that she wishes to separate her interest in the property from the joint tenancy.
This effectively eradicates her interest in the property as if she was never there; she now holds no interest at all. The idea of severance by conduct is seen in Williams v Hensman1 a joint tenancy will be severed by “an act of any one of the persons interested operating upon his own share”, and although this seems to not adhere to the rule that joint tenants do not have individual shares it is probably better to say that the person acts as if they had an individual piece and was severing their part of the interest.
This situation with regards to Dick on the other hand, is that he increases his interest in the property and is now a tenant in common of a fifth share on top of his interest in the remaining four-fifths of the joint tenancy (at law). We then hear of the next important point is that Julian wishes to realise the value of his interest in the house and posts a letter to his cousins to this effect. A reminder here that Julian holds the legal joint tenancy with Dick and that under the Law of Property Act 1925 s.
36(2) “No severance of a joint tenancy of the legal estate so as to create a tenancy in common of land shall be permissible”. This means that the only way Julian can easily realise the money in his interest is not to try to sell his legal ownership/interest but to sell to one of the other cousins his equitable interest in the house. In order to sell his equitable interest he firstly needs to sever his interest, he can achieve this through written notice, see LPA 1925 s.
36(2). We are told in the problem that Julian writes a letter to his cousins, this may or may not be seen as written severance. A problem with this method of severance is that it has been argued that the statute only permits written severance where both the legal and equitable titles are identical and held by the same persons, so for example A and B have legal interests and equitable interest then could provide written notice for effective severance.
If we are to follow this then in this case they are not identical titles and this would mean that Julian’s severance was not effective. However in common law we find a solution, in Burgess v Rawnsley2 this theory has been discounted and severance by written notice is available to tenants of properties whose legal and equitable titles are not identical. Another problem would seem to be that even though there seems to be written notice more details would be required to understand for certain if the letter he wrote was effective under the LPA 1925.
We are told Julian posted the letter to “his cousins” does this mean specifically some of his cousins or all his cousins with whom he shares the joint tenancy perhaps even the letter is only referring to Anna and Dick with whom he later meets up together with. To be effective severance the notice must be given to all the other tenants. The letter does not appear in the question problem so we can only go on the basis of the wording and language that is used.
We are told Julian says he needed to “realise the value” to help purchase a house for “himself and his wife when they married”. Does this mean he wants to sever his interest now with immediate effect upon the interest, or when he gets married to obtain extra money? It is hard to tell but for there to be effective severance under this statute the letter must expressly state that he intends to sever the interest and that he intends the letter to be having immediate effect.
We see an example in common law where in Harris v Goddard3, which only mentioning an intention of severance does not mean severance necessarily took place. I feel however it is better to assume for the purpose of this question the Julian was able to sever his interest immediately upon the intention shown in the letter. This means the ownership of the property has again converted into another shape. Julian is still a legal joint tenant, but through severing his interest is no longer an equitable joint tenant of the whole, but a tenant in common of a fifth share.
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