Co-ownership has many benefits, but also some pitfalls, in particular when it comes to the ending of a co-ownership arrangement. There are several ways in which co-ownership can cease, and it very much depends on the form in which the co-ownership takes.
Co-ownership:
The Property Law Act 1974 (Qld) defines the two forms of co-ownership that exist today, with s 33 stating; “any property and any interest, whether legal or equitable, in any property may be held by 2 or more persons,” as either a) joint tenants, or b) as tenants in common.
Joint Tenancy:
Joint tenancy occurs where no separation of ownership exists between the tenants, so that no single tenant owns any identified share of the property. The tenants are at law identified as if they are the ‘single owner’ of the property, and do not have any distinct shares in the land.
The Four Unities:
For a joint tenancy to exist the joint tenants must all share exactly the same rights, with the elements required for this being known as the requirement of ‘four unities.’ These four unities are, ‘unity of possession’, ‘unity of interest’, ‘unity of title’, and ‘unity of time’. Under the law joint tenants are classified as the single owner of the property.
Termination of Joint Tenancy:
There are several ways in which a joint tenancy can be terminated, bringing an end to the co-ownership of the property. A joint tenancy can be terminated, through the conversion of tenancy into severalty, by the application of S 59 of the Land Title Act 1994 (Qld), by the unlawful killing of one joint tenant by another, through a merger, or survivorship, or by the sale of the property pursuant to a statutory trust.
Conversion of Tenancy in Severalty:
The first way in which co-ownership under a joint tenancy can cease is through severance, in which the joint tenancy is converted to a tenancy in common. This can occur through alienation, partial alienation, or agreement or conduct.
Alienation:
Alienation of a tenant’s interest can occur at law or in equity, with severance not occurring until actual alienation by way of registration of the change in ownership status is made.
If one joint tenant signs a contract for the sale of the co-owned property this will result in a severance in equity, but not at law. Section 36 of the Property Law Act clarifies the position joint tenants will find themselves in should this occur, with the tenants becoming tenants in common in law and equity.
Alienation can also occur where a joint tenant transfers their interest to another co-owner, and is known as a cross-transfer of interests. This will result in the transferee holding interest as a tenant in common.
Partial Alienation:
Partial alienation can also be sufficient to sever a joint tenancy, but must be of such a nature that it destroys the unity of the title or interest. An example would be where the parties believed they all had separate rights, being ignorant of joint tenancy, then equity would step in to convert the joint tenancy to a tenancy in common.
Agreement or Conduct:
A mutual agreement can also be reached between the tenants that will sever the joint tenancy, and must normally be made in writing if it is a shared interest in property.
It is important to note that the parties intentions and dealings, along with any written evidence will be considered by the court in deciding if severance has occurred.[10] In Burgess v Rawnsley [1975] 1 Ch 429 the intention of the parties was considered, as finalization of an agreement did not occur.
If a valid mutual agreement is reached between the join tenants that they are to hold the property as tenants in common, this will equal a severance in equity.
Section 59 Land Title Act 1994 (QLD) Severance:
A joint tenancy can be terminated by S 59 of the Land Title Act 1994 (Qld). This section will convert the joint tenancy into a tenancy in common if a transfer to this effect is registered in accordance with the section. This does not result in the co-ownership ceasing, but rather converts its form.
Unlawful Killing of One Joint Tenant by Another:
Perhaps one of the nastier ways in which co-ownership can end, but nonetheless at law if one tenant kills another this will result in the severance of the joint tenancy. The result will be that the surviving tenant will hold the property by way of survivorship, however they only hold an equitable estate on constructive trust for themselves and the deceased tenant’s estate.
Merger:
Co-ownership can also cease when a merger occurs in a joint tenancy. This occurs when one joint tenant gains a greater interest than what is held by the co-tenants. An example of this would be if one tenant purchases the fee simple of the shared property, resulting in the severance of the joint tenancy.
Survivorship:
The most obvious way for co-ownership through a joint tenancy to cease is through the right of survivorship. The right provides that upon the death of a joint tenant, the property will vest in the surviving tenant(s). This right of survivorship is best characterized as the deceased tenant’s interest ceasing to exist, rather than transferring to the surviving tenants. The problem of what occurs when all tenants die simultaneously was discussed in Hickman v Peacey [1945] AC 304, where it was held that the tenants died in order of seniority, with the youngest being deemed to have died last.
Co-ownership will cease where there is one surviving tenant, who at this time becomes the sole owner of the property.
Partition or Sale:
A joint tenancy can also be terminated by an order of the court for the sale or partition of the property.
Section 41 of the Property Law Act contains the provision for the sale or division of chattels, with s 41(1) stating. “Where any chattel or chattels belong to 2 or more persons jointly or in undivided shares any such person or persons may apply to the court for an order under this section.”
The sale of the land will result in the co-ownership ceasing.
Terminating a joint tenancy in most cases simply converts ownership to a tenancy in common. Only survivorship, where there is only one tenant remaining, or a sale of the property, will result in co-ownership ceasing.