Beneficial interest of 3rd party

I am faced with a problem question as an assessment which concerns the beneficial interest of a 3rd party. The briefing of the facts are as follows:

A and B are joint tenants in an estate in which A contributed 10% to the deposit and B 70 % of the repayment of the mortgage. The other 20%, however, was given by a third party; a relative of B, which I will call C.

B is dying and I need to advise A.
It is clear that the rule of survivorship will take place in law. But what about Equity? Does C have an interest?
I thought I should maybe focus in intention.
And if he does have an interest, will this be overriding if A wants to sell the house after B's death?

Any relevant advice and case law would be of great assistance.

Thank you!

Reply 1

Forum User

Is C living at the property?

Reply 2

klr

No. Sorry I forgot to mention it myself. C is not living in the property. He simply has contributed financially (20% ) on mortgage repayments.

Reply 3

Forum User

Original post by klr

No. Sorry I forgot to mention it myself. C is not living in the property. He simply has contributed financially (20% ) on mortgage repayments.

How could he have an overriding interest then? Do you understand what the types of overriding interest are and where to find them?

Reply 4

klr

Well this is my question... Does he have an interest if the house is to be sold? Due to his monetary contribution. Maybe not overriding because he is not in occupation of the house. I understand that I have made an error above about 'overriding' , but I assume he must have some interest in the property through equity.

(edited 10 years ago)

Reply 5

Forum User

Well if he does have an interest, it must be an interest under a resulting trust, unless there was an express declaration of trust. The question is whether contributions to a mortgage can give rise to such an interest, or whether it can only arise from a contribution to the purchase money. There are a few cases that discuss this issue.

Reply 6

klr

Yes that makes sense. And if so I am not quite sure how that would affect the 'rule of survivorship' that now exists in law, for A and B. I mean right now without C in the picture. Both in law and in equity A and B hold equal shares. Upon B's death A would normally acquire the whole title of the property. But if a resulting trust arguably has risen, then where does that leave A in terms of shares?

Reply 7

Forum User

Original post by klr

Were A and B holding the beneficial interest as joint tenants or tenants in common?

Something has gone wrong with your terminology as A and B cannot have 'equal shares at law', because the legal title can only be co-owned as joint tenants and a joint tenant does not have a 'share'.

Reply 8

klr

They hold the beneficial interest as joint tenants. They are co-owners. legally that is not a 'share' but I used it above in the general sense to describe the 'relationship'.

Reply 9

Forum User

Original post by klr

They hold the beneficial interest as joint tenants. They are co-owners. legally that is not a 'share' but I used it above in the general sense to describe the 'relationship'.

If C acquires a 20% interest then that can only be as a tenant in common. So, if he has acquired such an interest, "A and B" and "C" will hold as tenants in common as to 80% and 20% each. "A and B" will hold their 80% share as joint tenants (i.e. acting together, they have an 80% share, they do not have individual 40% shares).

If B dies then A and C will hold the beneficial interest as tenants in common as to 80% and 20%. A will be the sole holder of the legal title.

Reply 10

klr

In other words his contribution will reflect his interest. Thank you that is very helpful!

Reply 11

Forum User

No problem. I'm only an undergrad law student like you so better check my understanding against your textbook !

Reply 12

klr

I just thought.. What if A either:

-. Asks B to sever his title. Would that still leave them in the same position after B's death (I think it would. She would still have only 80%)
or - A asks C to sign a waiver giving up his interest before the sale of the property. Could that leave her as the sole legal title holder in law and have the 100% interest? I am supposed to advise A to her best interest in this situation so I ma trying to think of ways to undermine or possibly extinguish C's interest.

(edited 10 years ago)

Reply 13

Forum User

There is no need for A to persuade B to sever, as A can sever by written notice to B. The position would be the same whoever severs, but that won't help A. If severance occurs then A, B and C will hold as TICs as to 40%, 40%, and 20% shares. When B dies someone will take his 40% share under his will. If that is A, then A will be in the same position as if there had been no severance (i.e. he has an 80% share). If that is someone else, then A will be worse off, as he will only have a 40% share.

Of course A can ask C to give up their interest in the property. A disclaimer of an equitable interest does not need to comply with s 53(1)(c) as it is not a disposition. Or C could transfer his equitable interest to A using writing complying with s 53(1)(c). If C does either of those then A will be the sole legal and equitable owner. But this advice to A is essentially 'try and persuade C to give away 20% of a house'. He may as well persuade C to give him his life savings as well - why would C comply with either?

Reply 14

klr

He wouldn't. I am just trying to understand what situations would leave A in a better position. I do not yet know realistically how she could get more than 80%.Which is not advice but simply explaining the reality of the situation. I still need to do some research on any possible further actions A could take.

Could she argue that C's contribution was a gift? That also relying on absence of intention. Because looking at a resulting trust some intention still needs to be present. Which in this case is not.

Reply 15

Forum User

Original post by klr

Could she argue that C's contribution was a gift? That also relying on absence of intention. Because looking at a resulting trust some intention still needs to be present. Which in this case is not.

That seems like a reasonable argument. It depends on the precise facts, I think the presumption would be that there was a resulting trust so A would need some evidence that C intended a gift.

Reply 16

klr

Original post by Forum User

That seems like a reasonable argument. It depends on the precise facts, I think the presumption would be that there was a resulting trust so A would need some evidence that C intended a gift.

Unfortunately I have been given no additional facts than those stated above. Since I am advising A , however, I can create such an argument in her favor.