Co-ownership

first title residential insurance conservatory

By Paul Butt

Consultant Solicitor,
Rowlinsons Solicitors

Conveyancers often seem to be looked down upon by those practising in other aspects of the law – it is so very easy and far less important than their particular specialism! And then, of course, we have people banging on about the de-skilling of conveyancing and that this and the growth of volume conveyancers is the cause of all the ills in the modern world.

However, the real position with conveyancing is that the skills and knowledge necessary to conduct a conveyancing transaction have actually increased greatly over the last 20 years or so – as indeed have clients’ expectations! Just think for a moment about the wide range of diverse matters that a conveyancer needs to be able to advise upon in today’s market place. We need to consider, to name but a few:

  • various aspects of tax law – CGT; SDLT; sometimes inheritance tax;
  • the details of planning law and building regulations;
  • the criminal law involving money laundering;
  • the prevention of online fraud and mortgage fraud;
  • contract law;
  • the complications of shared ownership properties;
  • the byzantine bureaucracy of
    Help to Buy;
  • the intricacies of unmarried (and indeed married) couples buying property in their joint names;
  • the added problems where some loving relative provides part of the purchase price;
  • and, oh yes, all the myriad aspects
    of property law!

Co-ownership Problems

The recent case of Turner v Bromets Jackson Heath LLP [2016] EW Misc B15 (CC). reminds us of the problems we are faced with every day in advising on co-ownership. Virtually every purchase we are asked to deal with these days seems to be a purchase in joint names. And in such a purchase we are under
a duty to advise on the ownership arrangements between the two (or more) purchasers.

This is a particular problem, of course, when the purchasers are not married or in a civil partnership.
If the buyers are married etc, then, should the marriage break down, the court has wide powers to adjust the parties’ property rights in order to give a fair division. So, looked at very simplistically, it does not matter so much who actually owns what, the court has wide powers to make property adjustment orders transferring the house from one party to the other if need be.

However, if the parties are not married then what happens to the property on a breakdown of the relationship depends almost entirely upon what was agreed at the time of purchase – which is where the conveyancers come in. The court does not have
the same powers as where the parties are married etc. Some clients still do not realise this.

So obviously we have to advise the buyers as to the differences between a joint tenancy and a tenancy in common – the existence of the right of survivorship when they are joint tenants so one person’s share in the house cannot be left by will and cannot pass under the intestacy rules. And then we have the problems that can be caused in a tenancy in common where the share will pass by will or intestacy. And the particular issues where there is an intestacy or a will and the deceased’s share passes to someone other than the surviving owner. Of course, we must emphasise the need for a will in tenancy in common cases, but also consider the practical implications for all concerned if the share of the house is left to someone other than the surviving owner. Will the house have to be sold, and if so where will the survivor live? The survivor could end up losing their partner and their home.

And don’t forget to advise that if the buyers start off as joint tenants that this can later be unilaterally changed to a tenancy in common by severance –
a simple written notice is sufficient to do this, remember. And also remember the cricketer Geoff Boycott’s negligence action against his solicitors a few years ago claiming that he was not advised
about this and so expected that on the death of
his co-purchaser he would inherit the whole property (see Boycott v Perrins Guy Williams [2011] EWHC 2969 (Ch).

Also, we need to advise that if there is a severance of a joint tenancy, then this will result in the two buyers owning half each – irrespective of the size of the financial contributions made by each of them. This again is something that is not always appreciated by clients and is particularly important where one co-owner is contributing considerable more of the purchase price than the other.

However, the problems really present themselves when the clients, having had all this advice, want to be tenants in common – how do you advise as to what those shares should be – and indeed how far can you advise at all when there will almost certainly be problems of a conflict of interest? You cannot say to one party ‘Well, you are paying the mortgage, you ought to have a bigger share’ and then to the other ‘You cannot work because of looking after the children, it is unfair if you have a smaller share because of this’.

How do we advise?

Many conveyancers adopt the approach that they will give clients an information sheet containing all the factors the buyers need to take into account in reaching an agreement as to shares – how much cash each is putting in, who will pay the mortgage instalments, who pays for the other outgoings, how
is the impact of child care to be taken into account etc, – and then ask them to let the conveyancers know what has been agreed between them. However, do be careful in drafting this information sheet. Can we please have it in plain modern English? No references to ‘severance’, joint ‘tenants’ etc, – why not just say joint ownership and refer to ‘converting’ it to ownership in common?

Obviously, having received this information sheet, if they then cannot agree then it would be necessary to insist on them each obtaining independent advice so that an agreement can be reached at arm’s length. But by not actually advising on the terms of the agreement the problems of conflict may be avoided as well as all the practical difficulties of actually giving that advice.

Those who adopt this approach will have welcomed the recently reported decision of H.H. Judge Behrens in Leeds County Court in the Turner v Bromets Jackson Heath case. This involved events dating back to 2005. It involved a Mr. Millington and a Ms. Turner who had lived together for some years in a house solely in Mr. Millington’s name. There was an existing mortgage in favour of Halifax. Ms. Turner did not contribute to the mortgage payments. The couple had decided that the house would be remortgaged for a lesser sum than the Halifax mortgage, Ms. Turner contributing the £20,000 shortfall, and the house should then be put into joint names. The couple had agreed that on a future sale, after paying off the mortgage, Mr. Millington would receive £160,000 (the then current value of his equity), Ms. Turner would receive £20,000 and that they should share equally any further equity in the property. The solicitors drafted a Declaration of Trust embodying these terms.

Unfortunately, the relationship subsequently broke down. Ms. Turner negotiated a settlement with Mr. Millington but contended that she would have achieved a better settlement if she had not executed the Declaration of Trust.

Ms. Turner ultimately brought proceedings claiming that the solicitors had been negligent. She claimed that they had not explained the terms of the Declaration of Trust to her before she signed it and she would not have signed it if she had understood them. Secondly, she contended that they should have appreciated that there was a significant risk of a conflict of interest between herself and Mr. Millington and should have advised her to seek separate advice. If that had happened, she would have sought such advice and again not have signed the Declaration
of Trust.

The Judge rejected both of these contentions, finding that the terms of the agreement had been properly explained. With regard to the conflict point, the judge relied heavily on the recent Court of Appeal decision in Minkin v Landsberg [2015] EWCA Civ 1152 involving claims of conflict when drafting an agreement to reflect the terms of a divorce settlement reached by the parties themselves. Jackson LJ set out in that case the scope of a solicitor’s retainer as follows:

“ i) A solicitor’s contractual duty is to carry out the tasks which the client has instructed and the solicitor has agreed to undertake.
ii) It is implicit in the solicitor’s retainer that he/she will proffer advice which is reasonably incidental to the work that he/she is carrying out.

iii) In determining what advice is reasonably incidental,
it is necessary to have regard to all the circumstances
of the case, including the character and experience of
the client.

iv) In relation to (iii), it is not possible to give definitive guidance, but one can give fairly bland illustrations. An experienced businessman will not wish to pay for being told that which he/she already knows. An impoverished client will not wish to pay for advice which he/she cannot afford. An inexperienced client will expect to be warned of risks which are (or should be) apparent to the solicitor but not to the client.

v) The solicitor and client may, by agreement, limit the duties which would otherwise form part of the solicitor’s retainer. As a matter of good practice, the solicitor should confirm such agreement in writing.”

It was, said Judge Behrens, not possible to give definitive guidance as to whether advising the clients on the merits of an agreement reached by clients relating to the beneficial ownership of a home occupied by cohabiting couples was implicit in the retainer. All will depend on the facts of the individual case. In this case, the Judge held that the terms of the agreement were in any event fair to Ms. Turner and that there was no conflict. There was thus no duty on Bromets to advise Ms. Turner to seek separate advice or to advise her not to enter the agreement.

Conclusion

Presumably, had the terms of the agreement reached between the parties not been fair, then a different conclusion would have been reached – advising on the agreement had not been expressly excluded by the retainer in this particular case. The Law Society’s Conveyancing Handbook certainly seems to take the view that such advice is implicit in the retainer when acting on a purchase by co-owners- see in general Section A9 and in particular A9.1 – the solicitor ‘should advise as to the most suitable type of co-ownership to suit the particular situation.’

However, giving such advice can be expressly excluded from the retainer and this must be a sensible thing for conveyancers to do on a regular basis. This details of the retainer and what is and is not included in it should be expressly included in the engagement letter (or client care letter, if you prefer) so the clients know where they stand right at the start of the transaction.

Of course, the case itself is only a County Court decision and as such has no precedent value, but it is based on sound principles – the Court of Appeal decision in Minkin v Landsberg [2015] EWCA Civ 1152 and that does have precedent value.

It is refreshing to see a negligence case that gives good news to conveyancers.

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