We are all aware of the distinction between a tenancy in common and joint tenancy. Though joint tenancies have been the norm since land registration became compulsory, this has changed in recent years. Modern tax planning has encouraged severance of joint tenancies to ensure that the nil-rate band for inheritance tax purposes can be used on the first death, particularly when the deceased’s estate does not have enough liquid assets (such as shares and cash) to cover it. The increase in divorce and the emergence of more second families has also meant that more couples want to be able to differentiate between their individual assets and ensure that their ‘share’ passes to their chosen beneficiaries. In addition, rising house prices have led to first-time buyers looking for family support to buy property and to this interest being recorded on the title.

When property is registered as a tenancy in common the Land Registry standard Form A restriction is placed on the title, providing that there can be no disposition by a sole co-owner under which capital money arises. To all intents and purposes the co-owners’ positions are protected. One of them cannot give a valid receipt and sell the property without the other co-owner. But are personal representatives (PRs) equally protected?

In an ideal world the answer is, of course, yes; traditionally we have relied on the surviving co-owner to honour the trust of land and, for example, appoint the PRs as their co-trustee and enter them on the title. But what happens where the co-owners were estranged at the time of one co-owner’s death? Should PRs be confident that the estate property, for which they are liable, is safe? The answer is that it is remarkably easy for the surviving co-owner to over-reach the interest of the PRs or beneficiaries of the estate and therefore the interests of their deceased co-owner and the terms of the trust of land. It makes little difference whether this is a formal or informal trust.

The Land Registry is not, and has never been, interested in the underlying trust of land. Its position is that the restriction on the title is not there to protect co-owners but to guard potential purchasers. When a co-owner dies, whether a joint tenant or a tenant in common, the Land Registry will automatically remove their name from the title on production of the death certificate. The PRs are still protected by the restriction, which cannot be removed by a sole co-owner. While this is quite true, the surviving co-owner can appoint their own co-trustee without reference to the PRs of the deceased’s estate. They can then transfer the property into the names of themselves and this co-trustee. The restriction does not stop this, as money does not change hands. Once the new co-trustee is on the title there are the requisite two co-owners to give a valid receipt and sell the property. The PRs would know nothing about this.

What remedies and options are open to the PRs?

The only remedy is to sue the surviving co-owner for breach of trust, but the PRs could well find themselves suing a ‘man of straw’, particularly if the co-owner has spent the proceeds, if indeed they can even track the co-owner down.

The obvious way for the PRs to try and protect their position is to ask the co-owner to agree to transfer the title of the property into their joint names, ensuring that they would have to be involved in any disposition of the property in order for the purchaser to get a good receipt. If this proves to be impossible then they can apply to enter a restriction on the title, seeking to prevent the surviving co-owner from disposing of the property without reference to them. This could take the form of an agreed restriction with the co-owner or a unilateral restriction using Land Registry Standard Form N or Q. Unfortunately, if the only option is for the PRs to make a unilateral application for a restriction on the title, particularly where there is an estrangement with the co-owner, the Land Registry can and will refuse the application, its grounds being that PRs, or beneficiaries of estates, do not have a sufficient beneficial interest in the property and therefore have no right to apply for a restriction.

The Land Registry cannot be swayed from this position, and has taken the point to counsel with reference to s42 Land Registration Act 2002 (see box) and to ask advice on the entry of a restriction in respect of an interest arising under a trust of land (this is saved as counsel’s opinion number 132 with the Land Registry – a full copy of which can be requested). Counsel advised that any person with a derivative interest – we assume they mean an interest derived from a co-owner’s interest – will not be able to apply for a different form of restriction (other than Form A):

1. Section 42(1)(a) is only concerned with preventing unlawfulness or invalid dispositions of registered estates and not with subsequent dealings with the proceeds of sale.

2. A derived interest is not a right or claim in relation to a registered estate within s42(1)(c) as it is a right or claim in relation to the interest under the trust of land (not in relation to the registered estate).

There is no obvious indication as to whether this extends to s42(1)(b), which seeks to secure an interest that is capable of being overreached on a disposition of the registered estate, but in practice the Land Registry does refuse such applications.

It seems, then, that PRs are not protected at all by the standard form of restriction on tenancies in common, and there is little they can do to protect their beneficial interest after the death of the co-owner. They could find themselves in the uncomfortable and costly situation where a co-owner has sold the property and applied the proceeds without reference to the estate.

This is not a new position, but it is one that does not seem to sit well in modern society. As lawyers we are in the unenviable position of having to tell our clients that there is nothing we can do to protect their interest as PRs. Where we are the PRs we could even be liable to claims on our indemnity insurance. Also, as conveyancers do, we explain to our clients the extent, or lack, of protection that the standard form restriction provides. The only way to ensure total protection is for co-owners to agree to an added restriction on the title before either of them die or before they become estranged. We should seriously consider advising all tenants in common to do this, or run the risk of further indemnity insurance claims. © Property Law Journal