Beneficial Ownership of Land
Ownership of land in England and Wales is essentially dealt with in two ways: the legal ownership (being those parties named on the title deeds) and the economic benefit, also known as the beneficial ownership.
Legal ownership will not necessarily be the same as the beneficial ownership, and it can be that the legal owners are merely holding the property on trust for the benefit of the beneficial owners.
The beneficial owners of the property have rights to the income from the property or a share in it and a right to, or a share of, the proceeds of the sale of the property.
Where property is owned by 2 or more people, they will need to agree as to whether they want to own the property as joint tenants or tenants in common (equal or unequal shares). Holding a property as joint tenants effectively means that upon one parties’ death, their share will automatically pass to the surviving owners. This is commonly referred to as ‘’the right of survivorship’’. Where a property is held as tenants in common, this means that upon one parties death, their share in the property would pass in accordance with their will (or in accordance with the rules of intestacy where no will is in place) and the surviving owners will continue to hold the property on trust for the benefit of themselves and the beneficiaries of the deceased parties estate.
Solicitors will be able to determine whether a property is held as tenants in common as there will be a standard form restriction on the title deed which confirms that it is held on trust. This alerts a third party reviewing the title of the deed to investigate the beneficial ownership, which should have been set out in either the Transfer document when the parties acquired the property and/or in separate a Declaration of Trust.
The Transfer and/or Declaration of Trust will record the beneficial ownership and the respective shares in the property.
The recent case of Williams v Williams saw an interesting situation arise where a farm was acquired by a son and his parents for business purposes. Upon purchase, no declaration of trust was entered into, assuming a joint tenancy was intended. Upon the last surviving parents’ death the son brought claims against his siblings who were executors of their fathers’ estate in relation to the beneficial ownership of the farm.
Upon consideration of how land is held beneficially when transferred into joint names without an express declaration of trust, the court held that whilst generally, the legal owner of property was at face value also the beneficial owner, unless there was some reason for concluding otherwise (i.e. a Declaration of Trust); where property was acquired for business purposes, the court would assume that survivorship was not intended and therefore that the property would be held on trust as tenants in common (meaning the beneficial interest would not simply pass to the surviving party).
The case highlights that ownership of business property will be treated different to that of domestic property and the importance of a Declaration of Trust being drawn up when a property is to be held as tenants in common, as this can be used as evidence as to the parties’ intentions regards beneficial ownership.
For further information, please contact:
Adele Walker
Solicitor, Real Estate
adele.walker@brmlaw.co.uk
