In 2015 five friends, Ella , Fred , Gaby , Harry and Isla purchased The

In 2015 five friends, Ella (19), Fred (19), Gaby (17), Harry (18) and Isla (19) purchased The Laurels, to live in whilst at cookery college together. They each contributed £40,000 to the purchase price except for Gaby who contributed £20,000. The transfer contained a declaration that the five of them held as “beneficial joint tenants”.Two years later Ella ran up such huge credit card debts that she was declared bankrupt, although by June 2018 she was discharged from the bankruptcy.In 2019 Isla moved abroad and sold her share in The Laurels to Harry for £70,000. Six months Isla died. Her valid will left everything to her mother.In the summer of 2020, Harry decided that he wanted to move to a different city to start a new job as a head chef in a prestigious hotel. In September 2020 Harry left notes for his housemates in a prominent position in the kitchen saying, “I want the house sold now so I can take my separate share”.Sadly, in early October 2020 Harry died in a motorbike crash and, in his valid will, left his property to his sister Joanne.Last Christmas Fred and Gaby had a huge argument over Fred’s failure to help with any of the housework. Shortly afterwards the two of them started discussions over the possibility of Gaby buying Fred out of his share in The Laurels but, before a firm price had been agreed or any paperwork prepared, Fred was killed in a paragliding accident. His valid will left all his property to Ella.Gaby now feels that the house is unlucky. She would like it to be sold as quickly as possible.However, Ella says she wants to stay in the house.

Advise Ella, explaining the relevant legal issues:

(a)   as to the effect of the above events on the legal estate and equitable interests in The Laurels,  (b)   whether she can be forced to sell the property, and (c)  if the sale goes ahead, whether a buyer would be bound by any trust interests which may subsist in The Laurels.Answer – (a) -When land is co-owned this gives rise to a statutory trust governed by the Trusts of Land and Appointment of Trustees Act 1996 (“TLATA”).-The legal estate can only be held as joint tenants (s1(6) LPA 1925) -by a maximum of four trustees who are 18 or over (s34(1) LPA 1925).Gaby is only 17 and so cannot be a trustee and so the legal title will be held by Ella, Fred, Harry and Isla. 1 / 2

The equitable interest can be either joint tenants or tenants in common.-The “Four unities” must be present: these are title, time, interest and possession. Here they are all present so it can be either a joint tenancy or a tenancy in common.-Using the next test, they hold as equitable joint tenants because of the express statement in the transfer to them – (Goodman v Gallant- where the deed in favour of the co-owners contains an express declaration of how the co-owners should hold the equitable interest in the land, that declaration is conclusive). This statement overrides any implied tenancy in common from the fact that they contributed unequally.-Not applicable here, but the third test of severance is - does the deed transferring the land to the co-owners contain words of severance?-N/A here but, the fourth test is the equitable presumption of severance – found in partnership property, for lenders, where unequal amounts have been paid towards the purchase price. See TB pg 66 In case none of the four tests show a severance - ‘equity follows the law’, as the legal estate has to be held on a joint tenancy.Severance by alienation – For general reference

• Is done through ‘an act of a joint tenant operating on his own share’ Will apply when

the joint tenant sells, gives or mortgages their equitable interest to a third party .

• Must be signed in writing (s 53(1)(c) LPA)
• Bankruptcy of a co-owner results in an automatic severing of their equitable joint

tenancy and their trustee in bankruptcy becomes the new tenant in common. However, if they are then discharged from their bankruptcy, can again have an equitable interest (but remains as one in common)

• Cannot be done through a will

Severance by homicide – For reference -Severance that occurs when one co-owner kills another. The victim’s equitable interest in the land passes to the beneficiaries under their will and the murderer takes the legal estate in the land Effect of bankruptcy

• In 2017 Ella’s bankruptcy will not have had any effect on the legal title as it can’t be

severed (s 36(2) LPA 1925)

• but the bankruptcy will have caused severance of Ella’s equitable interest by alienation
• On severance of a joint tenancy the resulting ‘share’ is equal, regardless of initial

contributions ((Bedson v Bedson).so in 2017 Ella, Fred, Harry and Isla held on trust for Ella (1/5 as a tenant in common) and Fred, Gaby, Harry and Isla (4/5 which they continue to hold as joint tenants).Effect of Sale of interest

• 2019, when Isla sold her interest to Harry, this had no effect on the legal estate

(severance of the legal joint tenancy is prohibited by (s 36(2) LPA 1925) -but will have severed the equitable interest by alienation, assuming it was in writing – the formalities required are that it must be in signed writing (LPA 1925, s 53(1) (c)). If a sale was not drawn up complying with s 53, a contract to dispose of the equitable interest will also sever the joint tenancy in equity provided it

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