Many couples own their home together as joint tenants under a joint tenancy. Under a joint tenancy an important legal consequence to remember with this type of property co-ownership is the legal right of survivorship.
The right of survivorship means that when the first owner dies, their interest in the property is automatically absorbed so that the surviving owner now owns the whole property, see graphic. This is due to the operation of law and is independent of a will.
When the survivor dies, the property then passes according to their will, or if no will left, according to the intestacy rules. For people co-owning property as joint tenants, it is therefore important to review their situations and wills on a regular basis to ensure outcomes on death are what is wanted.
Severing a joint tenancy
Sometimes a joint tenancy over a property may need to be severed, that is divided or broken into parts, for some reason such as when a couple divorce for example. The consent of the other person is not necessary, but not consulting the other may only lead to other trouble. Notifying mortgagees and the like is a different matter. Legal advice should be sought. The process to sever a joint tenancy is governed by state property legislation and administered by the Land Titles Office.
Unilateral severing of a joint tenancy – fraudulent conduct
In a recent case1, the deceased and her partner had owned their residence of many years as joint tenants. On purchasing the property one of them paid a substantial deposit, meeting the balance with a mortgage, which was paid off shortly afterwards with funds from his father. The title deeds or certificate of title were then kept at home in a safe.
Some fourteen years later, for reasons unknown, the deceased unilaterally severed the joint tenancy without telling her partner so that she owned the whole property. She actively sought to conceal it, including asking her daughter to do so, as evidence before the Court showed. Following her mother’s death, the daughter then informed the surviving partner of what had happened. The deceased had left a will leaving her whole estate to her only child and daughter, which resulted in the daughter inheriting the property.
Under s 97, Severance of joint tenancy by unilateral action, of the Real Property Act 1900 (NSW), registration of a transfer by a joint tenant of their interest in land as a joint tenant, severs a joint tenancy. Are other joint tenants required to be notified? Under this section the law states that if a joint tenancy is proposed to be severed by the unilateral action by one joint tenant, the Registrar-General may require provision of additional information about the other joint tenants, and the person’s efforts to contact them, before registration.
Court asked to make declarations by consent
The daughter and surviving partner approached the Court to make certain declarations by consent. However, even though parties may have reached agreement as to a way forward to resolve the legal problem, while relevant, as the Court said, it is not determinative on the court making such orders, it is not automatic. Quoting authority, the Court said it has a very wide discretion to make declaratory orders, it must be exercised in accordance with legal principle and rules, and it may determine that it is inappropriate to make a declaration.
The Court quoted from an earlier case2 citing authorities as to when a court may or may not make declarations by consent:
- First, declarations are somewhat of a rarity when made by consent.
- Secondly, the making of a declaration is a judicial act determining and pronouncing a legal right.
- Thirdly, as an order of the court, a declaration binds the parties to the proceedings but, because the impact of a declaration may not be confined to the parties, in doing so a court needs to take into account therefore the possible consequences of any declaratory relief granted.
- Fourthly, in circumstances where the court is satisfied the declaration is confined to the private rights between the various parties, it may be appropriate to make the orders sought.
The Court concluded from the evidence that the deceased had unilaterally severed the joint tenancy without notice to her partner and actively concealed that severance from him. Her conduct constituted fraud for the purposes of the Real Property Act 1900 (NSW). Under this legislation the court has power to set aside a dealing where it is of the opinion that the circumstances require it.
The court was satisfied that it was both appropriate and justified to make the orders and declarations sought, among them an order that the transfer unilaterally severing the joint tenancy be set aside.
1. Estate of Watson  NSWSC 596
2. Ajkay v Hickey & Co Pty Ltd  NSWSC 822
Updated 7 August 2019
© BHS Legal