JOINT TENANCY
2.1 A joint tenancy is one of two ways in which two or more persons may co-own real property - a tenancy in common is the other. To create and maintain a joint tenancy, the so-called “four unities” must be present:
- unity of title - the joint tenancy must be created by the same deed, will or other instrument;
- unity of time - each joint tenant’s interest must vest simultaneously;
- unity of possession - each joint tenant must have an equal right to possession (this also applies to a tenancy in common); and
- unity of interest - each joint tenant must have exactly the same type of interest.
The distinguishing feature of a joint tenancy is the right of survivorship. If one joint tenant dies his or her share passes automatically to the remaining joint tenant(s), without the need for a will or probate. A joint tenant cannot leave his or her share of the property by will to another person.
2.2 Tenants in common are also two or more owners of the same property, but they do so in specified proportions, not necessarily equal. On the death of a tenant in common his or her share passes to the person so designated in the deceased’s will, and that person becomes a tenant in common with the survivors.
SEVERANCE OF A JOINT TENANCY
2.3 A joint tenancy may be ended by a joint tenant severing the tenancy during his or her lifetime. Severance converts a joint tenancy to a tenancy in common in equal shares allowing the interest to be devised by will.
2.4 There are three ways in which a joint tenancy can be severed. These are outlined in the classic statement on severance by the Vice-Chancellor, Sir W Page Wood, in Williams v Hensman3 and cited with approval in Corin v Patton:4
in the first place, an act of any one of the persons interested operating upon his own share may create a severance as to that share. The right of each joint-tenant is a right by survivorship only in the event of no severance having taken place of the share which is claimed under the jus accrescendi. Each one is at liberty to dispose of his own interest in such manner as to sever it from the joint fund - losing, of course, at the same time, his own right of survivorship. Secondly, a joint-tenancy may be severed by mutual agreement. And, in the third place, there may be a severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common. When the severance depends on an inference of this kind without any express act of severance, it will not suffice to rely on an intention, with respect to the particular share, declared only behind the backs of the other persons interested.
Only the first method (i.e. an act of any party operating on his or her own share) allows unilateral severance of a joint tenancy. The second and third methods involve at least an implicit agreement between the parties to sever a joint tenancy.
UNILATERAL SEVERANCE
2.5 A joint tenancy may be unilaterally severed in one of two ways:
- by alienation
- by conversion.
Severance by alienation
2.6 A joint tenant is free at any time to sell or transfer (alienate) his or her interest in the property, the subject of the joint tenancy, to a third person.
2.7 Severance by selling or transferring a joint tenant’s interest to a third person does not require the consent or notification of the remaining joint tenant(s). Upon transfer, the transferee and the other joint tenant(s) will hold equal shares as tenants in common. If there were originally, for example, three joint tenants, then following alienation, the transferee holds a one-third share as tenant in common. The other two tenants hold the remaining two-thirds as joint tenants, so that the one who survives takes the whole of the two-thirds share. Provided there is consideration for a transfer, severance of a joint tenancy in equity will be immediately effective on exchange of contracts for sale of the interest. In the case of Torrens title land, severance at law will occur only when a transfer is registered.5
2.8 This method of severance has some significant shortcomings. It offers no comfort to a joint tenant who does not want to dispose of his or her interest, but merely wishes to convert it to that of a tenant in common to avoid the risk of survivorship operating to pass the interest to the other joint tenant(s). Even if a joint tenant is willing to dispose of his or her interest, there will almost invariably be a delay while a purchaser is found and contracts prepared and exchanged. This could expose an interest to survivorship where the joint tenant wishing to sell is elderly or suffering from a terminal illness. Moreover, it will normally prove very difficult to find a purchaser who is willing to buy an interest in property as co-owner with a stranger, particularly in the case of residential property. If a buyer is found, the consideration obtained can be expected to be significantly less than would have been obtained had the entire property been sold and the proceeds divided.
2.9 To minimise the likelihood of receiving a reduced price for an interest in a joint tenancy, a joint tenant may apply to the Supreme Court for an order to sell the estate or partition it, that is, physically divide the estate into ascertainable portions.6 Section 66G of the Conveyancing Act 1919 provides that the Court may, upon the application of one or more of the co-owners, vest the estate in trustees to sell the estate and distribute the proceeds among the co-owners or partition the estate.
2.10 However, the mere commencement of proceedings for sale or partition will not effect severance.7 Furthermore, delays may be experienced if the Court stays proceedings to await the outcome of proceedings in another jurisdiction, such as the Family Court.8 In the case of estranged couples, an application for sale or partition may be stayed until the Family Court delivers judgment.
Severance by conversion
2.11 Where a joint tenant wishes to sever a joint tenancy but retain his or her interest and otherwise avoid the difficulties involved with alienation to third parties, conveyancers have sought to adopt the device of converting the interest by alienation back to the joint tenant who will then hold his or her interest as a tenant in common. This can be effected in either of the following ways:
- by conveyance to a third party to hold on trust for the transferring joint tenant;
- by direct conveyance from the joint tenant to himself or herself.9
2.12 Severance occurs in either case, provided that the conveyance is effective to pass an interest in the subject property either at law or in equity.10 The joint tenancy is severed because the conveyance has the effect of destroying the unity of title. Following the conveyance, the transferring joint tenant claims his or her interest as a tenant in common under the new conveyance and not under the deed or document which created the joint tenancy.11
There are no cases on s24 of the Conveyancing Act in New South Wales but in Canada and New Zealand, where similar statutory provisions exist, a deed expressed to convey an interest in land from a joint tenant back to himself or herself has been held to be effective: Re Murdoch v Barry (1975) 64 DLR (3d) 222; Samuel v District Land Registrar [1984] 2 NZLR 697.
2.13 It is relevant to consider the effectiveness of each of the above alternatives to pass an estate at law or in equity, and the time at which such transfer will occur. This will differ depending on whether the estate is old system land or Torrens title land.
Old system land
2.14 This is the name given to land not yet brought under the Torrens title land registration system. In order to establish a title to old system land it must be possible to trace a chain of title through a series of instruments. To transfer an interest under old system title at law and in equity the transferor must execute and deliver a deed of conveyance. Where a joint tenant intends to create a trust, the interest is passed when the deed of conveyance is delivered to the trustee. The position is, however, less clear when a joint tenant transfers the interest to himself or herself.
2.15 In the Canadian case of Re Sammon12 a deed of conveyance executed by a husband (who was joint tenant with his wife) in favour of himself and lodged with his solicitor was held to be ineffective to sever the joint tenancy because there had been no delivery of the deed. This means there must be, if not physical delivery of the document, then the manifestation by acts or words of the intention on the part of the person making the deed to be immediately and unconditionally bound by the document. In the circumstances the Court said there had to be an acknowledgement by the husband of an intention to immediately and unconditionally convert the joint tenancy into a tenancy in common, regardless of which of the couple died first. In the event of his wife’s prior death this would have meant that he had relinquished his right of survivorship. A policy underlying the decision appears to be a desire to discourage joint tenants from executing deeds of conveyance to themselves, and only allowing them to be produced in the event of their dying before the other joint tenant(s).
2.16 Delivery may be effected if the deed is registered or lodged for registration,13 or if the existence of the deed is brought to the attention of the remaining joint tenant.14 It is noted that nothing short of execution and delivery of a deed of conveyance (either to a trustee or back to the joint tenant) will be effective to pass any interest whatever in the property, as equity generally will not assist a volunteer or intervene to perfect an imperfect gift.
Torrens title land
2.17 Under the Torrens system, no interest in land can pass at law until a transfer is registered.15 Delay may be experienced in obtaining registration where, for example, there is a caveat on the title or the relevant certificate of title is in the possession of another joint tenant or a mortgagee. It is therefore important to consider whether any equitable interest passes prior to registration.
2.18 Two recent cases consider the position in equity prior to registration: Freed v Taffel16 and Corin v Patton17.
2.19 In Freed v Taffel a joint tenant executed memoranda purporting to transfer interest in property to himself as tenant in common. The transfers were not registered. The Court held that severance of a joint tenancy of land under the Real Property Act 1900 could not be effected by anything less than an act sufficient to assign the interest at law or in equity. An attempt by a person to alienate his or her interest as joint tenant is not sufficient.
2.20 In the leading case of Corin v Patton the wife had attempted to create a trust in favour of herself by executing a transfer of her interest in the joint tenancy to a trustee. The wife died prior to registration without taking any action to obtain the certificate of title which would have enabled the transfer to be registered. The trial judge, McLelland J,18 held that the joint tenancy had not been severed. The Court of Appeal19 upheld the trial judge’s decision, applying the principles set down in Milroy v Lord20 and followed in later decisions21, stating that at best the trustee had a right or power to register the transfer, but that the transferring joint tenant could defeat this right by withdrawing it at any time. In dismissing the appeal in the High Court22, Mason CJ and McHugh J, in a joint judgment23, and Deane J24, held that no interest arose in equity because the donor had not done everything that was necessary for her to have done to effect a transfer of legal title.
2.21 In light of Freed v Taffel, it is unlikely that an equitable interest will arise where a joint tenant transfers his or her interest to himself or herself without obtaining registration. Corin v Patton would suggest, however, that an equitable interest may arise where a joint tenant does everything necessary to effect a transfer of title to a trustee to hold on trust. This might happen where the transferring joint tenant gives the trustee the certificate of title or authorises the trustee to obtain the certificate from a mortgagee. The position is made less clear by the decision in In the Marriage of Badcock25 which involved a similar fact situation to Corin v Patton except that the wife’s solicitor gave a photocopy of the deed of trust and transfer to the husband. The Court in that case decided the joint tenancy had been severed in equity.
Unilateral declaration of an intention to sever
2.22 Another issue for consideration is whether a unilateral expression of an intention to sever a joint tenancy will effect severance. In Australia it is clear this will not be effective.26 Acts constituting a unilateral expression of intention would include the following:
- one party drafting a will purporting to devise his or her interest in a joint tenancy;
- one joint tenant serving written notice of severance on the other;
- the commencement of proceedings for partition;27 or
- the commencement of proceedings for an order for alteration of property interests under s79 of the Family Law Act 1975 (Cth).28
2.23 The reason why a unilateral intention will not effect severance was stated in Corin v Patton29:
as a matter of history and principle, the severance of a joint tenancy can only be brought about by the destruction of one of the so-called four unities: see Blackstone, Commentaries on the Law of England, (1778), vol 2, pp 185-6. Unilateral action cannot destroy the unity of time, of possession or of interest unless the unity of title is also destroyed, and it can only destroy the unity of title if the title of the party acting unilaterally is transferred or otherwise dealt with or affected in a way which results in a change in the legal or equitable estates in the relevant property. A statement of intention, without more, does not affect the unity of title. Thirdly, if statements of intention were held to effect a severance, uncertainty might follow; it would become more difficult to identify precisely the ownership of interests in land which had been the subject of statements said to amount to declarations of intention. Finally, there would then be no point in maintaining as a separate means of severance the making of a mutual agreement between the joint tenants.
FOOTNOTES
3 (1861) 1 J & H 546, 557-8; 70 ER 862, 867.
4 (1990) 64 ALJR 256, 258; (1990) 92 ALR, 5.
5 Real Property Act 1900, s41.
6 Conveyancing Act 1919, s66F to 66I.
7 In the Marriage of Badcock (1979) FLC 78,888; (1979) 5 Fam L R 672.
8 Williams v Williams [1979] 1 NSWLR 376 at 383.
9 The common law considered a conveyance back to oneself a nullity, but s24 of the Conveyancing Act 1900 recognises it.
10 Freed v Taffel [1984] 2 NSWLR 322.
11 Re Murdoch and Barry (1975) 64 DLR (3d) 222 at 226.
12 (1979) 94 DLR (3d) 594.
13 Re Murdoch v Barry (1975) 64 DLR (3d) 222.
14 per Morden JA obiter dicta in Re Sammon (1979) 94 DLR (3d) 594 at 609.
15 Real Property Act 1900, s41.
16 [1984] 2 NSWLR 322.
17 (1990) 64 ALJR 256; (1990) 92 ALR 1; (1988) 13 NSWLR 15; (1988) 13 NSWLR 10.
18 (1988) 13 NSWLR 10.
19 (1988) 13 NSWLR 15.
20 (1862) 45 ER 1185.
21 e.g. Anning v Anning (1907) 4 CLR 1049; Brunker v Perpetual Trustee Co Ltd (1937) 57 CLR 555; (1937) 11 ALR 108; [1937] ALR 349.
22 (1990) 92 ALR 1.
23 ibid 13-14.
24 ibid 26.
25 (1979) FLC 78,888; (1979) 5 Fam L R 672.
26 See per Mason CJ and McHugh J in Corin v Patton (1990) 64 ALJR 256, 258; (1990) 92 ALR 1, 5; per Helsham CJ (obiter dicta) in Freed v Taffel [1984] 2 NSWLR 322, 324.
27 In the Marriage of Badcock (1979) FLC 78,888; (1979) 5 Fam L R 672.
28 id.
29 (1990) 92 ALR 1, 6; (1990) 64 ALJR 256, 258.
