Co-ownership

Cameron Stewart(thanks to Jim Helman and Shae

McCrystal – errors are mine)

(c) Cameron Stewart

Joint Tenancy

In a joint tenancy each of the joint tenants has an entitlement to the whole property. There is no distribution of any particular share of the property to any of the joint owners and no joint owner can say that any part of the property belongs to that joint owner.

The 2 features that characterise a joint tenancy and separate it from a tenancy in common are:

• The four unities • •The right of survivorship

(c) Cameron Stewart

Unity of title

• The interests of joint tenants must be created in the same instrument or dealing. It is not possible to create a joint tenancy between co-owners who acquire their interests by separate instruments or dealings. The creation of interests by separate instruments or dealings results in the creation of a tenancy in common.

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Unity of title

• The interests of joint tenants must be created in the same instrument or dealing. It is not possible to create a joint tenancy between co-owners who acquire their interests by separate instruments or dealings. The creation of interests by separate instruments or dealings results in the creation of a tenancy in common.

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Unity of possession

• This requires that the co-owners be entitled to possession of the whole property, to be enjoyed together with the other co-owners.

• There is no claim for any particular part of the land.

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Unity of time

• This requires that the interests of all joint tenants vest at the same time. This is usually satisfied if the interests are created at the same time.

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Right of survivorship • This is an essential feature of a joint tenancy. If there is no right of

survivorship then there cannot be a joint tenancy. If a joint tenant dies then the property remains in the ownership of the other joint tenants because they have always been entitled to the whole property.

• Rather than saying that a surviving joint tenant has acquired the interest of the joint tenant who died, it is perhaps more correct to say that the interest of the joint tenant who dies has been extinguished. The interest of a deceased joint tenant is no interest at all, and there is nothing that forms part of the estate of the deceased joint tenant.

• The right of survivorship in the surviving joint tenant cannot be defeated by the joint tenant who dies leaving his or her interest by will.

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Corporations?

• Section 25 of the Conveyancing Act provides that Corporations can hold interests as joint tenants. If the company is dissolved then the right of survivorship comes into effect.

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Who dies first?

• Section 35 Conveyancing Act provides that where it is impossible to tell, the older person dies first and the younger dies second.

• There are exceptions to the section. – Only applies to title to property. – Only raises a presumption, rebuttable by evidence

that the deaths occurred in a particular order, not according to seniority.

– Only applies where the death of the person is known to have occurred, and is not presumed.

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Who dies first?

• In Hickman v Peacey [1945] AC 304 a basement air raid shelter was blown up by a high explosive bomb. At the time of the explosion there were five persons in the shelter as follows:- (1) Mabel Price-Jones, 52, the occupier of the house; (2) her daughter; (3) Elizabeth Sarah Parke, 70, housekeeper for Randolph

Grosvenor; (4) Randolph Grosvenor, 73, the first testator; and (5) Edward Grosvenor, 66, the second testator

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Who dies first?• The difficulty in the case occurred because the Will of

(4) left property to (5) if he were “surviving at the date of my decease” and also to (3). The Will of (5) left property to (1), (2) and (3) if they survived him.

• The Court was asked to determine whether under the English Law of Property Act 1925 the deaths occurred “in order of seniority”. Cohen J at first instance held that there was no evidence that they died simultaneously and that they must be presumed to have died in order of seniority. The Court of Appeal reversed this decision, holding that their deaths were simultaneous

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Who dies first?• The matter was then heard by the House of Lords. The

House of Lords held: ... that in the absence of such evidence (that is, evidence to show

whether any of the deceased had survived the others) they had died in circumstances rendering it uncertain which of them survived the other or others within the meaning of s184 of the Law of Property Act 1925 and that accordingly in the administration of their estates by the executors of the respective Wills, the younger of the deceased should be deemed to have survived the elder.

An inference, drawn from the facts, that they died simultaneously would not make the section inapplicable and in any case would not be justified on the facts disclosed.

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Presumed dead?• Halbert v Mynar [1981] 2NSWLR 659 • Charaus was made on presumption of death only. The

Grant stated “Deceased presumed to have died: On or after 7th June 1972.”. It was necessary to apply to the Court for leave to distribute the Estate and for directions as to those parts of the Will that should be complied with in those directions.

• John Charaus was married once only to Emily Charaus in about 1939 there being one child of the marriage, Blanka Olga, born on 2 June 1945. Blanka married Mirek Mynar on 3 April 1971.

• On 7 June 1972, John Charaus and Blanka disappeared and have not been seen or heard since.

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Presumed dead?• Waddel L J found that s.35 did not apply where one of the

deaths is presumed under the Common Law. He said: • It is unlikely that the legislature intended the Section to

determine arbitrarily the order of death of persons whose deaths may have been separated by many years.

• As John Charaus and Blanka disappeared in June 1972 and Emily Charaus (John’s wife) died in October 1973, it is difficult to see how the Court could have come to a conclusion that he was presumed to have died between June 1972 and October 1973 when there was no evidence before the Court that he had died at all and the Grant of Probate of his Will was made on the presumption of death after a period of 7 years from June 1972 elapsed.

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Tenancy in common

• In contrast to a joint tenancy, a tenancy in common has the co-owners owning interests in the land in proportion to their interest. If co-owners are tenants in common in equal shares then they each own a one half interest in the property.

• If they own unequal shares then they own the property in the proportions they are stated as holding in the property. Eg: three quarters/one quarter.

• The share of a tenant in common is said to be an “undivided” share. It is a separate share but not a physically divided share.

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Creation of Co-ownership

• Before the Conveyancing Act 1919 the common law presumed that a conveyance to two or more persons created a joint tenancy. This presumption could be displaced by specific words such as “a one half interest to each of A & B” , “to be divided equally” “to my five sons equally”

• Rentoul v Rentoul [1944] VLR 205

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Creation of Co-ownership

• Equity preferred tenancy in common– Unequal contribution to purchase price– Unequal contribution to mortgage liability – Unequal contribution to business assets – the

right of survivourship has no place amongst merchants

• Resulting Trusts• Equity follows the law on a 50:50 input

(c) Cameron Stewart

Creation

• Section 26(1) of the Conveyancing Act provides that:

• In the construction of any instrument coming into operation after the commencement of this Act a disposition of the beneficial interest in any property whether with or without the legal estate to or for two or more persons together beneficially shall be deemed to be made to or for them as tenants in common, and not as joint tenants.

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Delehunt v Carmody

• In Delehunt v Carmody (1986) 161 CLR 464 Francis Carmody and Ethel Delehunt contributed equally to the purchase price of a property that was registered only in the man’s name. They agreed that the land would be owned in equal shares and that at some time in the future it would be put in both names. The matter came before the Court after Francis Carmody died intestate and letters of administration were granted to Heather Carmody, his estranged wife.

(c) Cameron Stewart

Delehunt v Carmody

• At first instance Wooton J held that there was a trust and that Francis Carmody held the property upon trust for himself and Ethel Delehunt as joint tenants in equity. On appeal, the Court of Appeal disagreed and found that there was a trust but that it was a trust for the parties in equal shares as tenants in common.

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Delehunt v Carmody

• The matter then came before the High Court to consider the question “that the Court of Appeal erred in holding that s.26 of the Conveyancing Act 1919, as amended (NSW) displaced the equitable presumption that where two persons advance equally the purchase monies for a property they hold as equitable joint tenants”.

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Delehunt v Carmody

• Gibbs CJ:

• It would be indeed surprising if the rules of equity required the courts to follow a rule of the common law that no longer existed and in doing so to reach a result which equity generally tried to avoid. However the doctrines of equity are not so inflexible. If equity follows the law, it will follow the rules of law in their current state.

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Real Property Act 1900

100 Registered co-tenants(1) Two or more persons who may be registered as

joint proprietors of an estate or interest in land under the provisions of this Act, shall be deemed to be entitled to the same as joint tenants

Inconsistency?“registered” as joint tenants or registered as “joint

proprietors”

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Rights between Co-owners

• Right to Possession • Because co-owners have unity of possession, each

is entitled to occupy the whole land and there is no concept of trespass by one co-owner against another. However, if one co-owner ‘ousts’ the other co-owner (and we will see what this means later) such that they deny a co-owners right to possess the property, they can bring an action in trespass seeking repossession of the property - claiming that they have been ejected.

(c) Cameron Stewart

Rights between Co-owners

• It also follows that one co-owner cannot grant a right of possession to another person that would exclude the right to possession held by all the other co-owners. So if for example one co-owner grants a lease, this would not prevent the other co-owners from exercising their right to possession unless they were also parties to the lease. In this situation the co-owner has only given the tenant the right of possession that they themselves have – and that is a right to possession which is shared with the other co-owners.

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Rights between Co-owners

• Right to Value of Repairs / Improvements• Where one co-owner voluntarily undertakes

repairs or improvements to a jointly owned property they cannot force the other co-owners to contribute to those repairs or improvements unless they have reached agreement on the repairs or improvements first.

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Rights between Co-owners• In Leigh v Dickeson (1884-1885) LR 15 QBD 60, a co-owner who was

in possession of jointly owned property expended monies on repairs. The co-owner then sought a contribution to the cost of those repairs from his co-owner. The court refused to grant the request finding that there was no duty on co-owners to repair their property – and that they could, if they chose, allow the property to decay. The court said that if one co-owner makes a purely voluntary payment, then the other co-owners are under no legal obligation to reimburse them – even though the value of their property is increased. To find otherwise would allow one co-owner to force the other to expend monies against his or her will. Note Lindley J at 69: “Tenancy in common is a tenure of an inconvenient nature, and it is unfit for persons who cannot agree among themselves”.

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Rights between Co-owners• Cotton, LJ:

As to the claim for improvements, it has been urged that no tenant in common is entitled to execute improvements upon the property held in common, and then to charge his co-tenant in common with the cost. This seems to me the true view, and I need not further discuss the question as to improvements. As to the question of repairs, it is to be observed that when two persons are under a common obligation, one of them can recover from the other the amount expended in discharge or fulfilment of the common obligation; but that is not the position of affairs here: one tenant in common cannot charge another with the cost of repairs without a request, and in the present case it is impossible even to imply a request.

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Partition and adjustment• The only remedy for the improving co-owner

would be to apply for an order of partition forcing the sale of the property

• The court of equity would intervene in order to make an adjustment of the property in favour of the co-owner that spent money improving the property.

• However, while the co-ownership exists, there is no remedy and no right to get a contribution towards the cost of improvements without an agreement beforehand.

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Equity is defensive• The High Court in Brickwood v Young (1905) 2

CLR 387 per Griffith CJ at 396 noted that the equity operates defensively – ie – it only arises at the end of the co-ownership as a defence against the other co-owners asserting their rights to their pre-existing legal share without adjustment. Equity steps in to prevent the co-owners who did not contribute to the value of the repairs and improvements from taking the increased value of the property without having contributed to the cost of those repairs and improvements.

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Equity is defensive• Brickwood v Young (1905) 2 CLR 387 per Griffith CJ at

396:The principle appears to be that the making of permanent improvements by one tenant in common in sole occupation gives rise to an equity attaching to the land, analogous to an equitable charge created by the owners for the time being, but enforceable only in the event of partition or a distribution of the value of the land amongst the tenants in common. There can be no reason why such a charge should not run with the land in favour of purchasers from the person originally entitled to it.

(c) Cameron Stewart

Equity is defensive• In Brickwood co-owned land was compulsorily

acquired by the State. In distributing the value of the estate one co-owner of the property sought contribution from the other 3 co-owners for the value of improvements done by that co-owners predecessor in title:

• Ie A B and C own land; B does renovations. B sells his portion to D. On sale of the whole or partition, D can get a contribution for the value of the improvements carried out by B. Why given that D didn’t pay for them? Because presumably the price D paid for the land was increased by the value of the improvements that B did – so D in effect purchased B’s equity

(c) Cameron Stewart

What does the improver get?

• Upon sale of the property subject to co-ownership, the improving owner is entitled to recover either the cost of the improvements undertaken to the property OR the increased value of the land attributable to those improvements – whichever is the LESSER amount

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Boulter v Boulter• Boulter v Boulter (1898) 19 LR (NSW) Eq 135 per Simpson CJ at 137:• Where an owner of an undivided interest in land spends money on

improving the property so that on a sale .. it fetches an enhanced price, a Court of Equity in dividing the proceeds of sale will not allow the other co-owners to take their shares of the increased price without making an allowance for what has been expended to obtain that increased value … This course of action cannot inflict any injustice on the other co owners, for it takes nothing out of their pockets, it only prevents them putting into their pockets moneys obtained by the expenditure of another person, unless they recoup him such expenditure. In no case can the co-owner who has improved the property obtain more than his outlay, though such outlay may have trebled the value of the property. And, on the other hand, the increase in the price obtained is the limit of what he can receive, though his actual outlay may be far larger.

(c) Cameron Stewart

McMahon v Public Curator of Queensland

• McMahon v Public Curator of Queensland [1952] St R Qd 197 Macrossan C.J. referred to Leigh v Dickeson and said:

• ... It is clear, I think from this, that the amount to which a co-owner making improvements may be entitle against another co-owner in taking the accounts in a partition action, is limited to the actual cost of the improvements, and if the present value of the increment to the property is less than the actual cost of the improvements, he is further limited to that present value.

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Squire v Rogers• Squire v Rogers (1979) 39 FLR 106 : Squire and Rogers were co-

tenants of land in Darwin under a perpetual lease. The lease required that in one year there be buildings on the land of a total value of not less than $15,000.00. In June 1963 Rogers left Australia and voluntarily left the land in the occupation of the Squire with the expectation that Squire would spend the money necessary to comply with the covenant contained in the lease. Squire did so by constructing flats and other improvements and carried on a business of providing accommodation in flats, rooms and caravans and by letting caravan sites. Much was destroyed by Cyclone Tracy but then Squire rebuilt. Rogers returned to Australia in 1976 and commenced proceedings for the sale of the estate of the appellant and the respondent and that an account be taken.

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Squire v Rogers• The defendant estimated that he had spent $100 000

on the property over the course of the 14 years. An independent valuation estimated that the improvements had only improved the value of the land by $15 000 – so when the property was sold, he was entitled to take $15 000 out of the proceeds before the remainder was divided between the two co-owners. He received nothing for his other $85 000 from his co-owner. There is also an interesting aspect of this case relating to rents and profits from co-owned land which we will return to when we look at entitlement to rents and profits.

(c) Cameron Stewart

Mortgage Payments• Improvements are not limited to physical improvements and can include

mortgage payments because mortgage payments increase the equity in the property and the amount available for distribution

• HW – if you want mortgages payments on dissolution then you must do equity

• In Ryan v Dries [2002] NSWCA 3 (6 February 2002) the Court of Appeal considered issues of accounting in respect of occupation, accounting in respect of repairs, maintenance, and outgoings, including mortgage repayments. Hodgson JA at [70] said:

• If a co-owner makes a claim for contribution to mortgage payments in reliance purely on a legal right, with no reliance on equitable principles, then it would seem that the co-owner is not seeking equity and is not required to do equity. However, if the co-owner does rely on equitable principles in making such a claim, in my opinion the co-owner is seeking equity and is required to do equity, no less than if allowance for improvements was being sought

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Occupation Rent

• If one co-owner goes into occupation of the property they are not obliged to pay rent or an occupation fee to the other co-owners. This is because co-owners are seised of the entire estate and each has a present right to possession of the whole property (along with any other co-owner who chooses to occupy it as well).

(c) Cameron Stewart

Occupation Rent• Luke v Luke 36 SR (NSW) 310, John Luke died leaving

his estate subject to a life tenancy in favour of his widow with the remainder to his two daughters in equal shares as tenants in common. John Luke’s widow died in 1915 and Laura, one of the daughters, died in 1920. From that date until the trial in 1936, Ada (the other daughter) occupied the property. In 1929, Ada was removed as a trustee of the estate and the Public Trustee appointed. In 1932, Ada Luke became a bankrupt and in the case before the Court an order was sought that the Public Trustee be authorised to sell the real estate and that Ada Luke be charged an occupation rent.

(c) Cameron Stewart

Occupation Rent

• Long Innes C J in Eq. cited the matter as follows: The conclusion to which I have come is that the

contention that the defendant Ada Luke should be charged with an occupation rent in this case is neither supportable on principle, nor established by authority, and that , in fact, the balance of authority is to the contrary.

I make the order for sale as asked, and declare that the defendant Ada Luke is not chargeable with an occupation rent.

(c) Cameron Stewart

Occupation Rent

• Three exceptions– the co-owners have contractually agreed amongst

themselves that the occupying co-owner will pay a fee;– One of the co-owners has been excluded from the

property through an ‘ouster’– One of the co-owners has voluntarily expended money on

repairing or permanently improving the co-owned property and has been in occupation during that time. If they seek a contribution from the other co-owners towards the repairs or permanent improvements, the extent of this contribution will be reduced by an occupation fee covering their occupation of the property

(c) Cameron Stewart

Ouster• An ouster will occur when one co-owner

physically excludes or threatens to physically exclude another of the co-owners. An ouster must be wrongful and suggest that there is a denial of the excluded persons title and right to possession of the property. Exclusion will amount to ouster where one party leaves due to violence or threats of violence; or where one party asserts that the other has no proprietary interest in the property. No ouster occurs where one co-tenant makes life difficult or uncomfortable for the other

(c) Cameron Stewart

Ouster• Biviano v Natoli (1998) 43 NSWLR 695 – Ms Biviano and Mr

Natoli bought a house together in 1979 and lived in the house until October 1992. In Oct 1992 they had an argument, there were threats made, and Mr Natoli left. Ms Biviano then got an Apprehended Violence Order under the Crimes Act 1900 which prevented Mr Natoli from occupying the premises. Mr Natoli subsequently took court action seeking the sale of the house and an occupation rent from the time of the AVO. Ms Biviano defended the action claiming a. that she was the full owner of the house (denying Mr Natoli was a co-owner) and in the alternative b. that there had been no ouster entitling him to an occupation fee.

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Ouster

• The court dismissed the first argument and found that they were tenants in common of the fee simple. With respect to the issue of ouster, the court said:

The true nature of ouster is that it constitutes a trespass by one co-tenant of another co-tenants rights in respect of the property … ‘an express denial of the title and right to possession of fellow tenants brought home to the latter openly and equivocally’ would clearly amount to an ouster (per Beazley JA at 701 (Powell JA and Stein J in agreement)

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Ouster• The court held that court order AVO did not constitute ouster.

Because Mr Natoli was not wrongfully excluded from the property but was excluded pursuant to a statutory order, Ms Biviano had not trespassed on Mr Natoli’s rights to the property. His lack of access to the property came through a lawful AVO

• The court found that if Mr Natoli could not lawfully have sustained an action in ejectment against Ms Biviano, she could not have wrongfully excluded him.

• However there was an ouster in the case. The court found that an ouster occurred when Mr Natoli lodged his claim for sale of the house and she defended the action by alleging that he had no title to the property. This action amounted to a denial of his proprietary interest in the property and was an ouster – so she had to pay an occupation rent for the period from the date of the court action.

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Claim for mortgage payments• Foregeard v Shanahan (1994) 35 NSWLR 206 – Co-owners of 50% of

land. • She was in sole occupation for 9 years (judge notes – she ‘installed

her paramour’). • During that time she made all the mortgage payments on a jointly

owed mortgage. • He sought a partition to sell the house. • She raised 50 % of the mortgage payments as a defensive equity in

partition. • Her defensive equity was reduced by 50% of the rent the property

would have fetched over those nine years as an occupation fee – this amount exceeded the mortgage payments – he sought the extra

• He was denied on the basis that the occupation rent claimed cannot exceed the defensive equity raised.

(c) Cameron Stewart

Claim for mortgage paymentsHeadnote says: (2) (By Meagher JA with whom Mahoney JA agreed; Kirby P dissenting) In common law partition and similar cases,

the rights of one co-owner against another co-owner of real property, when one has been in occupation and the other has not, include:

(a) the payment of an occupation fee by the co-owner in possession but only where: (i) the other co-owner has been excluded from occupation; or (ii) the owner in occupation claims an allowance in respect of improvements

(b) the entitlement to an allowance in favour of a co-owner in occupation who effects improvements (which is more than mere repairs and maintenance) is for the lesser of the value of the enhancement of the property and the cost of effecting the repairs, where the non-occupying owner seeks an occupation.

(3) Accordingly, in determining the rights of joint tenants for the purposes of making orders pursuant to the Conveyancing Act 1919, s 66G, where one owner has left the jointly owned property but has not been excluded from occupation:

(a) insurance premiums and expenses for pest control incurred by the occupying co-owner cannot be claimed as improvements which are recoverable from the other owner;

(b) an occupation fee should be charged to any occupying owner but the fee should not exceed the value of improvements made by the occupying owner; and

(c) an allowance should be made in favour of the owner making mortgage repayments, water and council rates, but such allowance arises from a claim for contribution for payments made by one debtor of a debt jointly owed and not because of the co-ownership of real estate.

(c) Cameron Stewart

Calculation of occupation fee• What are you paying an occupation fee for? The

occupation fee is to occupy the portion of the property that the co-owner does not own. So, if one co-owner has 50% of the property, then they have to pay half the value of the occupation (because you don’t have to pay to occupy your half). Equally, if the co-owner owns 1/3 of the house, then they have to pay an occupation fee for their occupation of the other 2/3 of the property. An occupation fee is generally calculated by reference to the open market rental for the property – So, if a co-owner owns 60% of the property, their occupation fee will be 40% of the market rent.

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Rents and Profits • In equity, an account for profits lies as part of a suit for

partition. • There is also an argument that the equity court can still

exercise an inherent jurisdiction for an account between co-owners. If this jurisdiction still exists then the court can order only an account of those profits received from third parties. The fact that one co-owner has had a greater benefit from actual occupation of the property does not found an action.

• In an action for an account of profits, a claim for the cost of improvements will be dealt with by the court making an order for the whole of the cost of the improvements made to earn the income.

(c) Cameron Stewart

Rents and Profits

• The general rule is that each co-owner is entitled to share in the rents and profits of the property in accordance with the size of their respective shares in the property. (1/3 share = 1/3 rents and profits).

(c) Cameron Stewart

Rents and Profits

• Rees v Rees [1931] SASR 78, four brothers owned a farm in equal shares as tenants in common. Two of the four brothers farmed the land and sought an order that they were entitled to the whole of the produce from the land and the money derived from that produce and that they were not liable to account for any portion thereof to the defendants.

(c) Cameron Stewart

Rents and Profits • The point raised by the defence in the present action; that in

farming the land the plaintiffs did so as trustees for themselves and the defendants, is dealt with in the note in Lindley on p. 37, “nor can one co-owner, by leaving the management of the property in the hands of the other, impose upon him an obligation of a fiduciary character.” The authority cited for this proposition is Kennedy v de Trafford, [1897] A.C. 180 (see especially per Lord Herschell at p. 189), which is cited by Collins M.R. in In re Biss, [1903] 2 Ch. 40, at p. 57, for the statement that “tenants in common do not stand in a fiduciary relation to each other.” There is nothing in the circumstances of the present case giving rise to any such relationship concerning the management of the farm or the produce thereof, and it seems clear that the plaintiffs were entitled to the declarations and order for which they asked.

(c) Cameron Stewart

Rents and Profits • Back to Squire v Rogers (1979) 27 ALR 330. - The plaintiff sought an

account of the rent earned from structures built:• The court agreed with claim for rent but if one party voluntarily

improves the land, and those improvements earn rents or profits, you are only entitled to those rents and profits IF you are prepared to pay for a share of the improvements (per Deane J (Brennan and Forster JJ in agreement) at 348):

In my view, [the plaintiff] is … only entitled voluntarily to adopt the benefit of the improvements [the rents and profits] by claiming and receiving one-half of any profit resulting from their use at the price of being liable to contribute to, or make an allowance in respect of, their cost over and above the amount included in the restricted allowance to which the defendant was independently entitled to on partition or sale. If she accepts the benefit of the profit earned, she must bear her share of the burden of earning it.

(c) Cameron Stewart

Rents and Profits • Conclusion: the plaintiff couldn’t be made to pay for the

improvements beyond the fact that the defendant got a $15 000 property adjustment to account for the increased value of the land (remembering that he spent $100 000);

• She could not then also seek to collect the rent and profits that flowed from the improvements.

• Plaintiff was entitled to a one-half share of the rent from the caravans for 14 odd years because the caravans stood on unimproved land BUT she wasn’t entitled to a share of the rent from the boarding rooms that the defendant had constructed unless or until she forked out for the cost of building them.

(c) Cameron Stewart

Rates

• Section 560 of the Local Government Act provides that co-owners are jointly and severally liable for the payment of rates. Also applies where there are lessees.

(c) Cameron Stewart