Workshop: Updated practice on joint ownership

Many joint ownerships raise difficult issues about conflicts of interest and we all need to be alive to the new conflict rules. Any case in which those contributing to purchase costs do not share the equity in the same proportions, will raise a possible conflict issue as well as tax issues. Is there a potential conflict between the interest of the joint owners and does the limited ‘substantially common interest’ test apply?

Wills and tax specialists should work closely with property colleagues to try and ensure cases with any tax implications are referred across, if the conveyancer is not able to advise. If clients reject the offer of advice, letters of engagement need amending with suitable warnings and exclusions.

It provides clarity over intentions and will help mitigate future disputes if joint-owners declare beneficial interests at the outset.This may include declaring a joint tenancy. The practice note highlights the importance of advising on the consequences of death, and the need to make wills. I encourage you to work from a presumption that joint tenancies will not normally be appropriate, unless it is two spouses who are both very clear of their wish to hold as such. A good starting point would be to own as tenants in common in proportion to their contributions to the full purchase costs. With anything different from this – tread with care.

Form JO allows a declaration that joint owners hold as joint tenants, or as tenants in common in equal or unequal shares, or hold the property on some other basis, for example under the terms of a separate declaration of trust. Joint owners must sign Form JO. Their conveyancer can only sign for them if the form refers to a separate signed declaration of trust, confirming whether they are joint tenants or not. The Land Registry automatically enter a Form A restriction where two people own land unless it is clear they hold it as joint tenants.

If an express declaration of trust is being signed, that can be referred to under the fourth option on Form JO.

If clients will not take specific advice on wills and tax, it is particularly important to record details, noting the risks taken, for future reference and to cover your backs.

Declarations of Trust may include arrangements for sale and the division of sale proceeds if the parties separate. It may detail respective responsibilities for mortgage and outgoings, and information about the contribution each made to purchase costs – whenever this is unequal, it is best to cite details showing how the unequal beneficial shares arose. If advice is sought from a family practitioner, for example for a prenuptial, postnuptial or separation agreement, it is important that this ties in with whatever is done on the property. The new Land Registry practice draws on lessons from two cases illustrating the problems where no express declaration of trust is made on acquisition:-

? In Stack v Dowden [2007] UKHL 17 the House of Lords held that, where there is no express declaration of trust, the parties are presumed to be joint tenants and entitled to equal shares, unless one party can show different intentions. This presumption
does not apply to commercial or
investment property.

? In Jones v Kernott [2011] UKSC 53, the Supreme Court broadly followed this, adding that if an intention to hold in separate shares could be shown, but not the size of the shares, the court would have to decide what was fair looking at the whole course of dealing between the parties on the property.

Making an express declaration of trust thus avoids the risk of dispute, of litigation costs and of the court dividing the property differently from what was actually intended.

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