Why sever a joint tenancy?
Owning property with others in co-ownership can be either as joint tenants or tenants in common. The consequences of who inherits a co-owner’s share on death are different. It is important to bear this in mind when planning ahead and will-making so your interests go to who you want.
Joint ownership and death
If you own property jointly with another person then when you die the surviving owner or owners take your share. This happens automatically outside whatever you might say in your will.
Tenancy in common ownership and death
If you own part of a property as a joint tenant on death your share will go to whoever you specify in your will. If you haven’t made a will your share will go according to the legal rules on intestacy, a hierarchy of rules set out in legislation.
Many couples for example 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 example when a couple divorce. The consent of the other person was not necessary at the time. However not consulting the other person with an interest in the property can only lead to trouble. Notifying mortgagees and the like is a different matter and 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 case in New South Wales1 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 borrowing by a mortgage to meet the balance. The mortgage was paid off shortly afterwards with funds from his father. The title deeds, certificate of title, definition here, were then kept at home in a safe.
Owning property with others in co-ownership can be as joint tenants or tenants in common.
Some fourteen years later, for reasons unknown, the deceased unilaterally severed the joint tenancy without telling her partner. She then 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: s97(1).
If being done by a joint tenant unilaterally s97 provides that the Registrar may require that person to provide the Registrar-General with further information before recording. Doing something unilaterally ordinarily means doing so without notifying others who may be affected by the action and seeking their agreement.
Section 97 provides that such information to be sought by the Registrar-General includes the names and addresses of the other joint tenants, a statement that they are not aware of any limitations or restrictions on their entitlement to sever the tenancy and anyone else who may be affected.
Once lodged the Registrar-General must then give notice of the severance to all other joint tenants except in certain circumstances: s97 of the Real Property Act 1900 (NSW).
Court asked to make declarations
The daughter and surviving partner approached the Court to for certain declarations they had formulated in agreement.
However even though the parties may have come to some agreement on a way forward to resolve their legal problems, it was not automatic that what they proposed would be approved by the Court. The Court said it was not determinative on it making such orders. This is because the power to make such orders are exercised in accordance with legal principle and rules, even though the court has a wide discretion when exercising its power to do so. As the Court said it may decide that it is inappropriate to make a declaration in the circumstances.
When a court may make declarations by consent of the parties to the action
Quoting from an earlier case2 and legal authorities as to when a court may or may not make declarations by consent:
Firstly, 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.
From the evidence the Court found that the deceased had unilaterally severed the joint tenancy. Further she had done so 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 13 April 2020
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