Property Law – Family Law – The concept of joint land ownership when family relationships break down
Joint land owners hold land either as joint tenants or as tenants in common.
Joint tenancy is far more common. Through this method of ownership, the interests of one spouse or partner are deemed by law to flow automatically to the surviving spouse or partner irrespective of whether the deceased spouse or partner has left a will or other testamentary document.In a tenancy in common, the interests of the deceased spouse or partner do not part automatically and will have to be dealt with either through the deceased partner’s will or, in the absence of a will, under the intestacy laws of an Australian State or Territory.
Joint ownership is much more common and is assumed by law in Victoria- see Section 33 (4) to the Transfer of Land Act 1958.
What happens to joint land ownership (whether joint tenancies or tenancies in common) when a family relationship breaks down?
The first thing that must be investigated is to determine whether or not a joint tenancy has been severed. If a joint tenancy has been severed,it becomes a tenancy in common.This makes extracting a particular spouse or partner’s share or entitlement much easier.
Severance of a joint tenancy may be achieved by-
>> The bankruptcy of one of the joint tenants;
>> A written agreement between the parties that they hold as tenants in common;
>> Conduct that makes it clear that the parties regard (in a past tense) that the joint tenancy has been severed; or
>> Court orders are made relating to the property which are incompatible with joint ownership.
Severance of a joint tenancy does not occur merely by any of the following:
>> unilateral declaration by one party that the joint ownership is severed;
>> Taking steps to bring the joint tenancy to an end – for example, merely applying to the Victorian Civil and Administrative Tribunal for an order ending the joint tenancy;
>> Any conduct that regards the severance as yet to occur even though it is desired;
>> One owner getting a mortgage;
>> Leasing of the property by one owner; or
>> Ejectment of one owner.
If there is no severance possible, it may be possible to argue that one party or spouse holds his/her joint land ownership in trust for and on behalf of the other partner or spouse.
The most common types of trust to be considered in this area of severance is the resulting trust and the constructive trust.
A resulting trust is when the legal title is transferred to someone who is not intended to be the beneficial owner of the property. A resulting trust is therefore been called “intention enforcing”.
The major question in relation to resulting trusts is what were the intentions of the parties at the time of the purchase of the property and the creation of the joint land ownership?If the intentions (and there might be more than one) had been frustrated, then the equitable assumptions become more important.
A particular type of resulting trust is called a Purchase Monies Resulting Trust. A Purchase Monies Resulting Trust was declared to exist in Calverley v. Green (1984) 155 CLR 242. In that case,Mr. Calverley’s higher contribution to the purchase of the family home meant that the High Court held he was entitled to more than half of the proceeds of the sale of the family home.
Where joint tenants make an unequal contribution to the purchase price, Australian equity law will assume that they hold their interests on trust for each other in proportion to the contributions they made to the purchase. However,Australian courts have stressed that this assumption can be rebutted by evidence to the contrary.
In determining whether or not a resulting trust exists,what is important is determining who paid what proportion of the purchase price.Who paid off the mortgage is not relevant to the question of who paid what when the purchase was made originally which is what is relevant to determine the existence of a resulting trust. Who may have paid off the mortgage is relevant to an accounting under the Property Law Act 1958 where, under sections 28A and 234, mortgagees can claim contribution from each other.
Where a parent buys an interest in land for a child, Australian equity law will assume that it is a gift. This is another assumption that can be rebutted by evidence to the contrary. However, this is a much harder presumption to rebut that the presumption referred to in Calverley v. Green in paragraph 12 above.
The other type of trust relevant in the issue of severance of joint ownership when personal relationships turn sour is the constructive trust. A constructive trust is where the court imposes a trust to do justice between partners and spouses. It is a remedial device that operates separately of intention.
In Muschinski v. Dodds (1985) 160 CLR 583, the Plaintiff, Mrs. Muschinski, contributed overwhelmingly to the improvement of the property. Mr. Dodds, her partner, contributed little. The High Court held that she had an interest in the land in proportion to her contribution to it to avoid giving Mr. Dodds (seen as a gold digger) a windfall profit.
A constructive trust is similar to the legal concepts of unjust enrichment and estoppel.
When considering joint land ownership, partners and spouses should always adopt the following:
>> Get a solicitor to make sure that the parties sign a document explaining what they are doing, and where the beneficial interest lies.
>> If partners and spouses are reluctant to do this for tax reasons, partners and spouses should be made aware that they are playing with fire and that the process could well become unstuck later on.
>> Even if one partner or spouse won’t assist, or is unavailable, the other partner or spouse should write a memo saying what their intentions are and what they understand the other person’s intentions to be.
>> If the relationship has broken down, and one partner does not want survivorship to apply, then proceedings for sale and division of proceeds should be commenced in VCAT so as to server any joint ownership.
The golden questions to ask when things go wrong in this area are as follows:
>> What was written?
>> What was said?
>> What was paid and by whom?
>> What was promised?
>> What was done in reliance on that promise?
>> What did you intend when the purchase was made?
This article is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this article without first obtaining specific professional advice.
If you are interested to know something more about Property Law – The concept of joint land ownership when family relationships break down. and Family Lawyers then please visit our website www.laclawyers.com.au
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