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6.2.2 Severance Lecture

BACKGROUND

Holding a legal interest means to be responsible for the administrative responsibilities and duties inherent in the land. A trust of land is essential for the purpose of legal co-ownership (Williams & Glyn’s Bank Ltd v Boland [1981] A.C. 487; Trusts of Land and Appointment of Trustees Act 1996 s.1). Likewise, equitable ownership of the land requires a trust in land (Law of Property Act 1925, ss.34 and 36).

Of particular importance to joint tenancies are the doctrines of survivorship and the four unities. Survivorship is the process by which one joint tenant takes the interest of another joint tenant wholly upon the death of that other joint tenant. The opposing process is where a tenant (a tenant in common) is able to pass on their interest to another by means of a will. The four unities are the so-called unities of possession, interest, title, and time. Joint tenancies feature all of these unities, whilst tenancies in common are only required to have unity of possession.

Severance tends to be used for one of two purposes: excluding the future operation of survivorship, or ending the perpetuating existence of the so-called unities of interest and title.

Effect

The act of severance produces among the former joint tenants a share in the property that is equal to the shares of all other tenants in common - (Nielson-Jones v Fedden [1975] Ch 222. Unless there are only two joint tenants, the severance will affect only the severing tenant(s).

Limits on severance

Firstly, it cannot be effected by a will. It must be effected during the lifetime of the person intending to sever the interest. Second, it cannot be brought about for legal estates; it can only be effected for equitable shares in an estate (Law of Property Act 1925, s.36(2)). As to the latter limitation, it means that co-ownership will automatically and irreversibly take the form of joint tenancy. Alternatively, it can be ended upon disposal of the estate (Law of Property Act 1925, ss. 36(2)-(3)).

There is an exception to the rule that severance cannot be effected by will, namely an execution of mutual wills by joint tenants intending to bring about a severance. Such a position arises where the course of dealing between the parties gives rise to the inference that both parties mutually considered their interests as tenancies in common and were prepared to put that inference forward in writing (Williams v Hensman70 E.R). Such a mutual intention must be unambiguous.

SeeGreenfield v Greenfield(1979) 38 P & CR 570, ChD & Harris v Goddard [1983] 1 WLR 1203, CA.

HOW TO SEVER

Re Denny [1947] L.J.R. 1029 - Severance can be effected by one of several methods:

a)Severance by written notice (Law of Property Act 1925, s.36(2))

Under this method, a tenant gives a ‘notice in writing’ to the other tenants of their own ‘desire’ to sever the tenancy (Law of Property Act 1925, s.36(2)). There are several advantages and limitations

·No consent is required from the other joint tenants (Harris v Goddard [1983]). Further, it is not necessary for the notice to be signed and can even be undertaken via an application to the court for a declaration of the rights for each tenant (Re Draper’s Conveyance [1969] 1 Ch 486, ChD).

·However, for the written notice to be effective, it must be served on all existing tenants. It must express an intention to sever with immediate effect, and not at some time in the future (Harris v Goddard [1983]).

·Additionally, it might be argued that this method of notice does not apply where the names on the legal title are not identical to the beneficiaries behind the trust.

·Re Heys (deceased) [1914]

b)Severance by an act of a joint tenant ‘operating upon his own share’

There are three methods of severance dating back from the Law of Property Act 1925, s.36(2), that reflect the categories laid down by Page Wood V-C in Williams v Hensman. The first category of the three is any ‘act’ by a joint tenant ‘operating upon his own share.’ This method of severance is a unilateral act (Harris v Goddard [1983]) and when the joint tenant acting to sever their interest does so, they can effectively conceal that alienation from the other joint tenant(s) (Mortgage Corporation Ltd v Shaire [2001] Ch 743, ChD). The person so acting must have intended the act to be final and irrevocable, particularly as it prevents any claim for survivorship for themselves. There are different types of ‘acts’ which could apply:

·Transfer inter vivos – given that joint tenancies do not have shares, it is to be inferred that if a joint tenant wishes to act on their ‘share’, they must be presuming that they no longer wish to be regarded as a joint tenant. It must be performed by written disposition or via a constructive trust (Law of Property Act 1925, ss. 53(1)(c), 53(2)).

·Alienation by mortgage – If one joint tenant acts to charge or mortgage the jointly held entitlement, that charge attaches solely to the interest of that joint tenant as if there had been an outright transfer of that tenant’s “share” (First National Securities Ltd v Hegerty [1985] QB 850, CA). The severance takes effect in equity, whilst their legal interest remains unaffected by the severance.

·Involuntary alienation – There are various types of acts which have the effect of severing, even where the alienation is involuntary. E.g. bankruptcy (Re Pavlou (A Bankrupt) [1993] 1 WLR 1046, ChD). Imposing a charging order in respect of a money judgment against one of the joint tenants will also act to sever the interests (Charging Orders Act 1979 ss.2(1)-(2) and 3(4), Midland Bank Plc v Pike [1988] 2 All E.R. 434).

Acts which are ‘insufficient’ for the purposes of severance

Usually, a testamentary disposition is not in itself sufficient where the testator is still alive. Furthermore, where there is a declaration of an intention to sever, that intention is ineffective if there is no written notice (Corin v Patton(1990) 169 CLR 540 (HC of Australia).

c)Severance by mutual agreement

In Williams v Hensman, Page severance might not just be effected unilaterally, but could also come about by way of mutual agreement. This would require the agreement of all the existing joint tenants that the interests should thereafter be severed. Unlike with unilateral severance, there is no requirement for an enforceable contract, and there may not even need to be anything put in writing (Law of Property (Miscellaneous Provisions) Act 1989, s.2(1)). If in the course of discussions the parties only reach an ‘agreement in principle’ to the idea, then without further evidence of the parties actively consenting to the severance, such agreement in principle would be taken to mean the parties have reserved their right to the joint tenancy, and therefore there is no severance (Gore and Snell v Carpenter(1990)).

Exclusion of survivorship

For severance by mutual agreement to be valid, the parties must have contemplated that they would thereafter be dealing with the property as tenants in common, no longer as joint tenants (Burgess v Rawnsley [1975] Ch 429, CA). Alternatively, an agreement that the proceeds of sale of the given property are to be divided between the tenants in specified proportions will give rise to an act of severance by mutual agreement (Crooke v De Vandes(1805) 11 Ves 330). However, in such a situation, the shares between the parties will actually, by operation of law, be in equal shares rather than in whatever portions the parties had agreed (Hunter v Babbage [1994] 2 FLR 806, ChD).

d)Severance by mutual conduct

Consists of ‘any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common’ (Williams v Hensman 70 E.R.). The key phrases in that passage are:

i)Sufficient to intimate

ii)Interests of all

iii)Mutually treated

iv)Constituting a tenancy in common.

‘Sufficient to intimate’ suggests that there is some threshold to satisfy. The word ‘intimate’ means that the circumstances effectively imply a tenancy in common. Second, the ‘interests of all’ demonstrates that all of the tenants must have their interests affected by the severance. Third, ‘mutually treated’ means all the tenants treat both their own interests and all the other interests as severed; no joint tenancy remains. Finally, all of these together point to a ‘tenancy in common.’

The conduct must be such that the pattern of dealing between all of the parties is, though not quite unambiguous and explicit enough to constitute a mutual agreement to sever, nevertheless evince a clear common intention to sever the joint tenancy. As with above, it must be clear that the parties to preclude the further operation of survivorship (the key component of joint tenancies. Ultimately, there must be a consensus between all the joint tenants, as disclosed by a pattern of dealings with the co-owned property, which would in effect exclude the future operation of the right of survivorship (Quigley v Masterson [2011] EWHC 2529 (Ch)).

With all that said, mutual conduct is not evidenced by the following:

·Physical conversion of jointly-owned premises into separate and self-contained units (Greenfield v Greenfield (1979)).

·Negotiations between the parties to divide the interest in the property into shares that are inconclusive (Harris v Goddard [1983]).

·Where one party ‘offers to buy out the other for X and the other makes a counter-offer for Y’ (Burgess v Rawnsley [1975] per Sir John Pennycuick).

·Finally, it is not enough that each joint tenant had independently treated the joint tenancy as severed; there has to be a mutual understanding.

e)Severance in consequence of unlawful killing

A joint tenant, criminally implicated in the death of another joint tenant, should not be able to benefit via survivorship from receiving the interest of the deceased (Re K, decd [1985] Ch 85, Ch D).

In cases other than those involving murder, the court has a statutory discretion, though it is limited (Forfeiture Act 1982, s.2(2)) to modify the operation of the forfeiture rule.

f)Severance by merger of interests

·This is a rare scenario, but not impossible. It applies where the four unities inherent in joint tenancies are abolished by a so-called “merger” of interests.

g)Old forms of ownership

Prior to 1 January 1926 there was a form of co-ownership in England known as tenancy by entireties. This type of co-ownership was a type of joint tenancy between husband and wife that could not be severed. In 1926 all such tenancies were rendered by operation of law as joint tenancies (Law of Property Act 1925, Schedule 1, Part VI).

FAMILY BREAKDOWN

Firstly, a legal joint tenancy of the periodic lease can be problematic because it requires unanimous action by joint tenants. One of the joint tenants can effectively frustrate the process and bring the lease of the family-owned home to an end by simply refusing to enter into a further term (Hammersmith and Fulham LBC v Monk [1992] 1 A.C. 478).

Following this case of Monk, further cases under the Human Rights Act 1998 sought to challenge that problem, because it meant service of a notice to quit by a joint tenant of the periodic lease would bring the lease to an end without any judicial review of the merits of the argument that this refusal disproportionately infringed on loss of property and occupation rights (Articles 1 and 8 of the European Human Rights Convention 1956, as argued in Qazi v Harrow LBC [2003] UKHL 43).

Manchester City Council v Pinnock [2010] UKSC 45 considerations.

For co-habitation etc. the starting point is that equity follows the law and the equitable interests would mirror the joint legal interests.

The cases brought about an idea of equal division – meaning each husband/wife/civil partner held a share of 50% of the land. This equal division was then subject to a process of factual scrutiny by which the court would determine whether the parties, by express agreement or by course of dealing, had established that their shares were unequal.


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