This advice will address the legal position of Bessie concerning the property, Tydu. It will firstly establish the current legal and equitable ownership of the house following several key events. Secondly, it will analyse whether Bessie can prevent a sale of the property sought by City Bank. Finally, it will consider how the situation would differ if Carl, one of the co-owners, were to be declared bankrupt.
(a) The Ownership of Legal and Equitable Interests in Tydu
To advise Bessie on the current ownership of Tydu, it is necessary to trace the legal and equitable interests from the point of purchase.
The Initial Position
In 2019, Tydu was transferred to Alan, Bessie, Carl, Denis, and Ellen. The transfer document expressly stated they were to hold the property as “legal and equitable joint tenants”.
In law, a trust of land was created. The legal title is held by trustees for the benefit of the equitable owners. According to section 34(2) of the Trustee Act 1925, the maximum number of legal owners (trustees) is four. As Alan was only 17, he could not hold a legal estate in land, as per section 1(6) of the Law of Property Act 1925 (LPA 1925). Therefore, the first four named adults on the transfer deed become the legal owners: Bessie, Carl, Denis, and Ellen. They hold the legal title as joint tenants, as a legal tenancy in common cannot exist (s.1(6) LPA 1925). The legal joint tenancy cannot be severed (s.36(2) LPA 1925).
In equity, the express declaration that the five friends are “equitable joint tenants” is conclusive, regardless of their unequal contributions to the purchase price (Goodman v Gallant [1986] Ch 459). Therefore, initially, Alan, Bessie, Carl, Denis, and Ellen were all joint tenants in equity, each holding an equal, undivided share.
The Effect of Alan’s Death
A defining feature of a joint tenancy is the right of survivorship (jus accrescendi). When a joint tenant dies, their interest in the property is automatically extinguished and absorbed by the remaining joint tenants. Two weeks after the purchase, Alan was killed. As he was an equitable joint tenant, his interest passed automatically to the surviving equitable joint tenants: Bessie, Carl, Denis, and Ellen. His minority is irrelevant to his capacity to hold an equitable interest. Consequently, after Alan’s death, Bessie, Carl, Denis, and Ellen remained legal joint tenants and became the sole equitable joint tenants.
Ellen’s Attempt to Sever
In 2020, Ellen left a note indicating her desire to leave. This raises the issue of severance of the equitable joint tenancy. Severance is the process of converting a joint tenancy into a tenancy in common, which extinguishes the right of survivorship for the severing party's share.
One method of severance is by written notice under section 36(2) of the LPA 1925. This requires a notice in writing showing an immediate intention to sever the joint tenancy, which must be served on all other joint tenants. Ellen’s note was in writing. The wording, “I’m moving back to live with my parents tomorrow. You can buy my share of Tydu if you want,” must be assessed. To be effective, the notice must demonstrate an immediate and binding intention to sever, not just an invitation to negotiate (Harris v Goddard [1983] 1 WLR 1203). While the offer to sell her share might be seen as opening negotiations, the preceding statement about moving out immediately suggests a clear intention to end the co-ownership arrangement. It is arguable that the note, viewed as a whole, expresses the necessary immediate intention.
Regarding service, section 196(3) of the LPA 1925 provides that a notice is effectively served if it is left at the last-known place of abode of the person to be served. Ellen left the note on the hall table at Tydu, which was the home of all the joint tenants. This constitutes valid service on all of them, even though Denis did not see it. The notice takes effect when served, not when read (Kinch v Bullard [1999] 1 WLR 423).
Therefore, Ellen has successfully severed her equitable interest. The joint tenancy is severed as to her share. She now holds a 1/4 share of the equitable interest as a tenant in common. Bessie, Carl, and Denis remain as joint tenants of the other 3/4 of the equitable interest.
Carl’s Mortgage
In 2025, Carl mortgaged Tydu to City Bank by forging the signatures of the other legal owners. A forged deed is void and cannot create a valid legal mortgage over the entire property. However, equity may interpret Carl's actions as an act operating on his own share, which is a recognised method of severance under the rule in Williams v Hensman (1861) 71 ER 861. By attempting to mortgage the property, Carl was acting as if he had a distinct share, which is inconsistent with a joint tenancy. In First National Securities Ltd v Hegerty [1985] QB 850, a husband’s attempt to mortgage the matrimonial home by forging his wife's signature was held to sever the equitable joint tenancy and create an equitable charge over his resulting half-share.
Applying this principle, Carl’s act of creating the mortgage severed his share in the equitable joint tenancy. His share was one-third of the 3/4 held by him, Bessie, and Denis, which equates to a 1/4 share of the whole property. This share is now held by Carl as a tenant in common, and City Bank has a valid equitable mortgage over this 1/4 share. Bessie and Denis continue to hold their combined 1/2 share as joint tenants with each other.
Conclusion on Ownership
- Legal Title: Bessie, Carl, Denis, and Ellen hold the legal title as joint tenants.
- Equitable Title: The beneficial ownership is held as a tenancy in common in the following shares:
- Ellen: 1/4 share as a tenant in common.
- Carl: 1/4 share as a tenant in common (subject to an equitable mortgage in favour of City Bank).
- Bessie and Denis: 1/2 share held between them as joint tenants.
(b) Resisting a Sale of Tydu
Since Carl has defaulted on the mortgage repayments, City Bank, as an equitable mortgagee over his 1/4 share, will seek an order for the sale of Tydu. The bank can apply to the court for such an order under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996).
When considering an application from a person with an interest in the trust property (like a creditor), the court must have regard to the non-exhaustive list of factors in section 15(1) of TOLATA 1996. Bessie can use these factors to argue against an immediate sale. The relevant factors are:
- (a) The intentions of the persons who created the trust.
- (b) The purposes for which the property is held.
- (c) The welfare of any minor who occupies the land as their home.
- (d) The interests of any secured creditor of any beneficiary.
Bessie can argue that although the original intention was for the house to be a home for five friends, the purpose has since evolved into providing a family home for herself and her daughter, Gail. The courts have shown a willingness to refuse a sale where the underlying purpose of the trust is still ongoing (Re Buchanan-Wollaston’s Conveyance [1939] Ch 738). The fact that Tydu is a family home is a strong argument.
Furthermore, section 15(1)(c) explicitly requires the court to consider the welfare of any minor. Gail is a minor, and her educational needs are very specific. The fact that her school is "the only one of its kind in the whole country" is a powerful point for Bessie to raise. In Edwards v Lloyds TSB [2004] EWHC 1745 (Ch), the court postponed a sale for five years to protect the children’s home until they were older. This case could support an argument for at least a postponement of the sale.
However, the court must also consider the interests of the secured creditor, City Bank (s.15(1)(d)). The courts often give significant weight to the creditor's right to recover their debt, especially where the debtor has absconded, as Carl has. In Bank of Ireland Home Mortgages Ltd v Bell [2001] 2 FLR 809, the court stated that a creditor's interests should not be overlooked and that a sale should be ordered where there is no prospect of the debt being paid.
In advising Bessie, the court will balance these competing interests. While the bank's claim is strong, Bessie’s arguments concerning Gail’s welfare and the purpose of the property as a family home are also compelling. It is unlikely that a court would refuse a sale indefinitely, but Bessie has a good chance of persuading the court to postpone the sale. A postponement for five years until Gail has completed the educational programme is a possible, if optimistic, outcome she could argue for, based on the precedent in Edwards. A shorter postponement to allow her to find alternative accommodation and schooling is a more probable result.
(c) The Effect of Carl’s Bankruptcy
If Carl were to be declared bankrupt, the legal position would change significantly and would be less favourable for Bessie. Upon a bankruptcy order, Carl’s equitable interest (his 1/4 share as a tenant in common) would automatically vest in his Trustee in Bankruptcy (TiB) under the Insolvency Act 1986 (IA 1986).
The TiB would then be likely to apply for an order for sale under section 14 of TOLATA 1996 to realise the asset for the benefit of Carl's creditors (including City Bank). However, when an application for sale is made by a TiB, the court’s discretion is structured not by section 15 of TOLATA, but by section 335A of the IA 1986.
Under section 335A, if the application for sale is made more than one year after the bankruptcy, the court must assume that the interests of the bankrupt's creditors outweigh all other considerations, unless there are "exceptional circumstances".
The key issue for Bessie would be whether her situation amounts to "exceptional circumstances". The courts have interpreted this term very strictly. It means something more than the usual hardship associated with bankruptcy and losing a family home (Re Citro [1991] Ch 142). In Re Citro, the disruption to children’s schooling was held not to be an exceptional circumstance. While Gail's schooling situation is unusual, it is unlikely to meet this high threshold. For example, in Grant v Baker [2016] EWHC 1782 (Ch), a child's significant educational and medical needs were still not considered "exceptional" enough to prevent a sale. Exceptional circumstances are typically found only in cases involving severe long-term illness or disability of one of the residents, where moving would be severely detrimental (Re Raval [1998] 2 FLR 718).
Therefore, if Carl were declared bankrupt, it would become much more difficult for Bessie to resist a sale. After one year, an order for sale would be almost automatic. Bessie's powerful arguments under TOLATA regarding Gail's welfare would carry much less weight. The most she could likely hope for would be a short postponement of the sale, perhaps for a few months, to allow her time to make other arrangements.
References
Bank of Ireland Home Mortgages Ltd v Bell [2001] 2 FLR 809.
Edwards v Lloyds TSB [2004] EWHC 1745 (Ch).
First National Securities Ltd v Hegerty [1985] QB 850.
Goodman v Gallant [1986] Ch 459.
Grant v Baker [2016] EWHC 1782 (Ch).
Harris v Goddard [1983] 1 WLR 1203.
Kinch v Bullard [1999] 1 WLR 423.
Re Buchanan-Wollaston’s Conveyance [1939] Ch 738.
Re Citro [1991] Ch 142.
Re Raval [1998] 2 FLR 718.
Williams v Hensman (1861) 71 ER 861.
Legislation
Insolvency Act 1986.
Law of Property Act 1925.
Trustee Act 1925.
Trusts of Land and Appointment of Trustees Act 1996.
