All land held by two or more individuals is held on a trust of land. It can either be held as joint tenants or as tenants common and if the latter, in equal or unequal shares. The choice is made by checking the appropriate box in panel 10 of a TR1, or panel 11 of a TP1, or prescribed clause 14 in a new lease and it dictates what will happen to each proprietor's share of the equity in the property when they die. If the relevant section of the TR1/TP1/Lease is not completed then the default position is tenants in common.
Form A restrictions / sole proprietor restrictions / tenants in common restrictions
Devolution of the legal and beneficial interests on the death of a tenant in common
Devolution following the death of the last surviving tenant in common
Attorney acting for joint proprietor
Joint Tenants
Where land is held as joint tenants, each proprietor owns the whole of the legal and beneficial interest. On the death of a joint owner the deceased's interest passes automatically to the survivor(s). It does not form part of the deceased's estate and cannot be bequeathed in the deceased's will. When acting in a purchase of property held as joint tenants, where one or more proprietor has died (but at least one survives), a conveyancer need only evidence the death of any deceased owner, by way of a death certificate.
If all of the proprietors have died then the sale will need to be conducted by the personal representative(s) of the last of them to die.
Tenants in Common
Tenants in common hold the equity in the property in defined shares. The default position is equal shares unless specified in the transfer deed and / or a separate declaration of trust. When completing panel 10 of a TR1 or panel 11 of a TP1, for equal shares check the "tenants in common in equal shares" box. For unequal shares, check the third box "they are to hold the property on trust:" and either describe the shareholding, for example "in the following shares - 75% as to Joe Bloggs and 25% as to Jane Bloggs" or else make reference to a separate deed, for example "in accordance with the terms of a declaration of trust dated contemporaneously with this transfer and made between Jane Bloggs (1) and Joe Bloggs (2) [or other parties as the case may be]". Note that whilst it is usual for the proprietors to hold the property on trust for each other, it is equally possible for them to hold it for the benefit of third parties who are not proprietors.
Any percentage split is permissible, including 100% to one party and 0% to the other (in which case the one with 0% is typically a "bare trustee").
Assuming the property is held by the proprietors on trust for themselves then, on the death of a tenant in common their beneficial interest passes in accordance with their will or, if there is no will, in accordance with intestacy rules, which means it is controlled by their personal representatives. If the proprietors hold on trust for third parties, the beneficial interests remain with those third parties. In either case, the deceased's interest in the legal estate passes to the surviving tenant(s) in common just as if they were joint tenants. More on that later on this page.
Form A Restrictions / Sole Proprietor Restrictions / Tenants in Common Restrictions
When the proprietors elect to hold the property as tenants in common, the following restriction will be added to the title, in the Proprietorship Register:
"No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court."
This is a form A restriction (Land Registry publish a number of standard form restrictions, each one being identified by a letter, or letters). It is sometimes referred to as a sole proprietor restriction or tenants in common restriction. It prevents a property from being transferred for money or money's worth, or being mortgaged, by a single registered proprietor.
As well as being entered on the title on registration of a transfer or lease in favour of tenants in common, it will be entered if a joint tenancy is subsequently severed. If, in a transfer or lease to joint proprietors no indication is given as to whether they wish to be joint tenants or tenants in common, a form A restriction will be entered.
The form A is one of a category of restrictions called trust restrictions and in common with other trust restrictions it will, with some exceptions, be removed automatically following a disposition for value by at least two trustees (i.e. two proprietors). That is because of the operation of overreaching, whereby, when the purchase price is paid over to two or more trustees the beneficial interests behind the trust detach from the property and attach to the proceeds of sale.
Severing a Joint Tenancy
Where the proprietors initially elect to hold as joint tenants, they may later decide to sever that joint tenancy. They can do this either expressly, by serving notice of severance (which either party can do unilaterally - they do not need to be in agreement) or by their actions, by "acting on their undivided share", for example by mortgaging their share or entering into a trust deed where they agree to pass their beneficial interest to someone else. Severance can also happen by operation of law, such as where a joint tenant is made bankrupt or a charging order is made against them in respect of a debt.
Express Severance
Express severance will generally occur either where the proprietors are romantic partners and the relationship has broken down, so that each no longer wishes the other to acquire their beneficial interest on death, or else following professional estate/succession planning advice (it can be advantageous for couples to sever in certain circumstances but that is beyond the scope of this guide). However it happens, an application should be made to HM Land Registry to register a form A restriction, using form SEV. This evidences the severance. If the joint tenancy is severed by mutual consent then all of the proprietors should be listed as "the Applicant" and all should sign the form, and no further evidence is needed. Otherwise, the applicant for the restriction will need to have served a notice of severance on the other proprietor(s) and either a receipted copy from the other proprietors will need to accompany the application or else a certificate from either the applicant or their conveyancer confirming that the notice was given to the other registered proprietor(s), left at their last known place of abode or business in the UK or sent by registered post or recorded delivery service to them at their last known place of abode or business and not returned undelivered.
Severance by Operation of Law
If a joint proprietor is made bankrupt, Land Registry will register a restriction in form J in favour of the trustee in bankruptcy and, as the bankrupt's share is now held on trust for the benefit of the trustee in bankruptcy and cannot pass to the survivor on death, a form A restriction. Similarly, if a charging order is obtained against one of the proprietors a form K restriction will be registered and a form A.
Devolution of the legal and beneficial interests on the death of a tenant in common
As intimated earlier on this page, severing a joint tenancy only affects how the beneficial interest is held. It is not possible to sever a joint tenancy of a legal estate. It is important to understand this, as it dictates what needs to happen on a disposition following the death of a tenant in common. Before we get to the practicalities, it is worth looking at the legislation. The Law of Property Act 1925 says, at 1(6) "A legal estate is not capable of subsisting or of being created in an undivided share in land or of being held by an infant" and 36(2) "No severance of a joint tenancy of a legal estate, so as to create a tenancy in common in land, shall be permissible, whether by operation of law or otherwise, but this subsection does not affect the right of a joint tenant to release his interest to the other joint tenants, or the right to sever a joint tenancy in an equitable interest whether or not the legal estate is vested in the joint tenants". Taken together, these provisions tell us that the legal interest can only be held as joint tenants.
So, when a tenant in common dies, their beneficial interest passes to their PRs for the benefit of their estate but their share of the legal title passes to the survivor(s). That in turn means that only the survivor(s) has/have the power to transfer the property, or to mortgage it. It is a common mistake to think that, in order to overreach a form A restriction on a sale where there is only one surviving tenant in common the deceased's PRs should join in the transfer. The legal title does not vest in them and so they have no standing. Instead, either an application must be made to Land Registry to cancel the restriction, if the trust has come to an end (for example because the survivor inherits the deceased's share) or else an additional trustee needs to be appointed.
What is "Overreaching"?
Overreaching is the mechanism where, when the purchase price is paid to two or more trustees (i.e. two or more owners of the legal estate), any third party beneficial interests detach from the property and attach instead to the money, meaning that a purchaser doesn't have to be concerned about those interests as they will not be bound by them. This is set out in s27 Law of Property Act 1925.
Appointing an Additional Trustee
Where one or more tenants in common have died, so that there is only one survivor, and where the trust under which the tenants in common held the property has not come to an end, in order to overreach the beneficial interest of the deceased and avoid being caught by the form A restriction (which prevents dispositions by sole proprietors, except transfers for no money), it is necessary to appoint an additional trustee. This must be done by the surviving tenant in common and the right to do so is contained in s36(6) of the Trustee Act 1925. This can be done via a separate deed of appointment but more usually it is dealt with in the transfer deed, by inserting the following in panel 11 (TR1) or panel 12 (TP1): "For the purpose of giving a valid receipt for the purchase price and in exercise of his/her statutory powers contained in s36(6) of the Trustee Act 1925 [surviving tenant in common] hereby appoints [additional trustee] to be a trustee of the Property together with [himself/herself].". The trustee should be included in the Transferor panel and should sign the transfer deed simply as themselves i.e. not "as trustee").
The additional trustee, together with the surviving tenant in common, is responsible for ensuring that the proceeds of sale are properly distributed to the correct beneficiaries and can be liable to any disappointed beneficiary for a breach of trust (which is a strict liability offence) if they do not. For that reason, and given that the conveyancer will already be acting for the surviving joint tenant, they cannot also represent the additional trustee. If the trustee is not represented, an ID1 form will be required in order to satisfy LRR 2003 rule 17. Although strictly not a conflict since completing an ID1 does not represent legal advice, it is not recommended that the conveyancer for the surviving tenant in common does complete it, as if the trustee goes to another, independent, solicitor for ID verification a conversation may ensue that may lead to them taking advice on the appointment, which can't happen otherwise, and it may be argued that that was the intention of the conveyancer when offering to deal with the ID1.
Although any adult, provided they have mental capacity and are not one of the Transferees, can act as additional trustee, it makes sense for one or more of the PRs of the deceased to be appointed (if they are willing) because they are anyway liable for ensuring the proceeds are properly distributed, so it is less onerous.
Applying to Cancel the Restriction
If, following the death of the other tenant(s) in common, the whole of the beneficial interest vests in a single survivor, so that the trust has come to an end, then an application can be made to cancel the restriction. This must be made on form RX3 (an RX4 can only be used where the restriction expressly names a beneficiary and a form A does not) and be accompanied by a statement of truth (preferably using Land Registry form ST5) from the surviving tenant in common explaining:
- how the restriction came to be on the register;
- what has happened to the deceased's beneficial interest; and
- confirming that that beneficial interest has not been separately charged etc
As with any RX3 application HMLR has discretion on whether to accept it, so it is better to submit it and wait for it to be successfully processed before proceeding to completion.
Devolution Following the Death of the Last Surviving Tenant in Common
When the last surviving tenant in common dies, the whole of the legal interest passes to their personal representatives, along with their beneficial interest. The beneficial interests of the other tenants in common that died earlier, if not already dealt with, remain vested in the PRs of those individuals, so that the PRs of the last tenant in common hold the property on trust for the estates of all proprietors. Personal representatives (whether executors or administrators) are trustees, therefore as long as there are at least two for the last proprietor to die they can give a good receipt and overreach the beneficial interests (though of course they will be responsible for ensuring the proceeds of sale are distributed to the correct beneficiaries). If there is a single PR, then he or she will need to appoint an additional trustee. The process is the same as when a sale is by a sole surviving tenant in common.
Note that attorneys are not trustees. Where a proprietor acts via their attorney, it is still the proprietor that is the transferor, therefore having more than one attorney for a single transferor does not overreach the beneficial interests.
Attorneys Acting in Place of a Joint Proprietor
According to s1(1) Trustee Delegation Act 1999, an enduring, lasting or general Power of Attorney can only be used in connection with trust property where the donor of the power has a beneficial interest in the property at the date of the disposition. As all land held jointly is held on a trust of land, that means that s1(1) applies to any disposition of land where there are two or more registered proprietors. A written statement from the attorney made within 3 months following the disposition is conclusive evidence of the donor's interest (s2(2) TDA 1999). Where the disposition is a transfer, the best thing to do is to put this statement in panel 11 of the TR1 (or panel 12 of the TP1), or in the body of the lease. HMLR suggest the following form of words "[Name of attorney] confirms that [name of donor of the power] has a beneficial interest in the property at the date of this [transfer / lease]" .This could in theory be included in a charge but given that most institutional lenders have a standard form of deed with no amendments allowed, it will probably have to be given separately, in the case of a remortgage.
In the absence of such a statement, HMLR will consider "other evidence". It is logical to assume that where the proprietors hold as joint tenants, the absence of any trust restriction would be evidence enough.
An attorney is able to appoint an additional trustee, in which case the appointment clause will need to be adapted as follows: "For the purpose of giving a valid receipt for the purchase price and in exercise of of his/her statutory powers contained in s36(6) of the Trustee Act 1925 [surviving tenant in common] acting by [his/her] attorney [name of attorney] hereby appoints [name of trustee] to be a trustee of the Property together with [himself/herself]".
