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Joint Ownership: Points to Note

25 September 2008

JOINT OWNERSHIP: POINTS TO NOTE

Whenever two or more people decide to purchase a property, it is important to bear in mind the legal ramifications of joint ownership.

1. Legal position

Co-ownership of land can only exist through the medium of a trust of land.  The law makes a distinction between what is known as legal ownership, i.e. the ownership evidenced by the name appearing on the title, and what is known as beneficial ownership, i.e. who actually receives the sale proceeds.  Where two or more people hold the legal estate, they are automatically trustees and are known as joint tenants.

2. Beneficial interest

When it comes to beneficial interests, there is a choice between holding as joint tenants or as tenants in common.  The capacity of the buyers ought to be (but very often is not) expressly stated in the purchase deed or in a separate trust deed.  A recent case concluded that there was so strong a presumption that joint legal owners intend that their beneficial interest shall be the same as their legal interest, that cases in which the court reaches a different conclusion "would be very unusual". 

3. Joint tenancy

Where co-owners hold the beneficial interest as joint tenants, none of the co-owners will be entitled to a distinct proportion of that interest: each one owns all of it.  The main distinguishing feature of the joint tenancy is the right of survivorship. Thus, an interest in a joint tenancy cannot be left by will, the deceased’s share passing automatically to the surviving joint tenant. 

4. Tenancy in common

4.1 Where a tenancy in common exists, each owner holds a quantified proportion of the beneficial interest which is capable of being disposed of by gift or by will. 

4.2 By far the best course of action for any joint owners is to enter into a declaration of trust at the same time as acquiring the property which will set out the specific percentages that each co-owner owns in the property.  The deed can also deal with appointment of new trustees.  It can deal with what happens if one person wishes to sell their interest.

5. Sole legal ownership

5.1 Problems arise where property is acquired in the sole name of one party but another party believes that they have contributed in some way towards the purchase price and deserve a share in the property.  Here, the burden of proof rests on the claimant to show that there is some agreement (whether expressed or inferred) that the beneficial ownership of the property was to be shared.

5.2 One of the best ways to prove entitlement to a share is if the party claiming has actually made contributions to the purchase price, whether initially or by payment of mortgage instalments. In the absence of a direct contribution, the whole course of the parties' conduct in relation to the property may justify the inference of a share. The most obvious case is where contributions by one party free up the resources of the other in order to facilitate payment of the mortgage.

6. Avoiding litigation

Whenever two or more people acquire property, they should sit down with their advisors at the outset and carefully document on what basis it is going to be held.

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