Devolution of title on the Death of a Tenant in Common

This article describes the correct way to proceed following the death of a tenant in common which results in a sole survivor. On the death of a joint tenant, or the death of a tenant in common that leaves two or more survivors, all that is needed is the deceased’s death certificate.

What is the Difference Between Tenants in Common and Joint Tenants?

When two or more people purchase property jointly, there are two ways they can hold it – joint tenants or tenants in common. As joint tenants, they each own the whole of the legal and equitable title, as if they were a single entity, so that when one of them dies the whole of the legal title as well as the equity in the property passes automatically to the survivor(s). The survivors are free to sell or otherwise dispose of the property and need only produce a death certificate for the deceased proprietor.

If the proprietors hold as tenants in common on the other hand, they hold the equity in the property in defined shares (which may or may not be equal shares) and on the death of a proprietor his or her share passes according to his or her will, or in the absence of a will, via the rules of intestacy. Control of their equitable share therefore passes to the deceased’s executors/administrators, but the same does not apply to their share of the legal title.

How to Tell if a Property is Held as Tenants in Common

If the owners choose to purchase as tenants in common, H M Land Registry will enter the following restriction on the title (in standard form A):

“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.”

It is possible that they could originally purchase as joint tenants and subsequently sever the joint tenancy – HMLR will enter a restriction at that point, but only if they are notified. If there is no restriction, an arm’s length purchaser for value is entitled assume there has been no severance.

To check if there is a form A restriction registered, you’ll need to order an Official Copy of Register of Title.

How to Proceed Where There is a Sole Surviving Tenant in Common

The form A restriction prevents registration of a disposition (i.e. a sale or remortgage) by a sole proprietor, so how can this be complied with if all but one proprietor is deceased? A common mistake is to assume that the deceased’s personal representatives should join in the disposition, but that’s not correct. When property is held as tenants in common, it is only the equitable title that is split. The joint tenancy of the legal title cannot be severed and it always held as join tenants. This is because of s36(2) Law of Property Act 1925:

“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…”

All land held jointly is held on trust. The owners of the legal title are the trustees and the owners of the equitable title (beneficial interest) are the beneficiaries. As with any trust, it is only the trustees that can sign deeds and make decisions relating to the trust property. So, the PRs of the deceased are trustees of the deceased’s beneficial interest but not of the legal estate. For that reason, they have no standing to execute deeds or make decisions in relation to the disposition of the legal estate.

The surviving proprietor, as trustee of the legal estate, has two options:

• If the deceased’s share has been left to them in the will or passed via the rules of intestacy, the PRs can assent the share to the survivor via an equitable assent; or
• The survivor can appoint an additional trustee to provide a receipt for the proceeds of sale (if the property is to be sold – this wouldn’t be appropriate for a remortgage).

Appointing a Trustee

A surviving proprietor in their capacity as trustee can exercise the power conferred by s36(1) of the Trustee Act 1925 to appoint an additional trustee. This can be done in a separate deed of appointment but is more commonly done in the transfer deed, by inserting the following in panel 11: “In exercise of [his/her] statutory powers and in order to give a good receipt for the capital money arising on this transfer [surviving proprietor] hereby appoints [trustee] to be a trustee of the Property together with [himself/herself]”

The Transferor panel then includes the names of both the proprietor and the trustee and there should be a standard attestation clause for the trustee.

The purchase price should be paid to, or at the direction of, the trustees – so that it is acceptable to pay the whole price to the proprietor if the newly appointed trustee so directs.

Accepting the appointment of trustee carries a risk – he or she could be sued by a disappointed beneficiary should the proprietor misappropriate the funds. It makes sense if there are other beneficiaries to appoint at least one of them (up to 3 additional trustees can be appointed). In any event the proprietor’s conveyancer should not act for the trustee because of the inevitable conflict and he or she should be advised to seek legal advice (they may choose not to).

What is the Purpose of a Form A Restriction?

Joint tenants hold the property on trust for themselves absolutely. Tenants in common may hold on trust for each other, but may equally hold on trust for someone who is not a joint proprietor. The restriction ensures that if the property is sold, the purchase price is paid to at least two trustees. Where this happens, any beneficial interests are automatically overreached in accordance with s27 Law of Property Act 1925. The effect of overreaching is that the beneficial interests detach from the property and attach to the proceeds of sale.

Can a Sole Surviving Proprietor Gift the Property?

The wording of the Form A restriction makes cleat that that it only relates to dispositions “under which capital money arises”. In other words, the property is transferred for no money, it will not be caught. The restriction will remain on the register however and the beneficial interest will continue to bind the transferee.