Mother in Law: Selling properties held by a surviving tenant in common

'Keep your breath to cool your porridge' said Jane Austen once. I could cool a lot of porridge with the breaths I waste telling my children to bring their empty lunch boxes through to the kitchen after school, telling Deceptively Angelic Child 2 not to eat her toenails, telling my team how to use semicolons and, most recently, telling experienced conveyancers how to sell properties held by a surviving tenant in common. I genuinely hope what I am about to say helps.

Whenever you own a property with someone else, you hold it on trust. Usually, you both hold it on trust for yourselves. This means you are the legal owners (or trustees) and also the beneficial owners. For the most part, the Land Registry is only interested in the legal ownership. As such, it is always the trustees that show as the owners on the Proprietorship Register. If property ownership was a pond, the ducks would be the legal owners and the fish would be the beneficiaries. The Land Registry doesn’t usually see below the surface.

The legal owners of my house are myself and my husband. The lack of a restriction in Form A on the title indicates that we are joint tenants. We are the trustees of the property and we are the beneficial owners too. We are the ducks and the fish (and yes I accept my analogy doesn’t exactly work). We hold the whole of the beneficial interest for each other. Hopefully everyone knows that this means if one of us dies, the whole of the property passes to the survivor: both the legal ownership and the beneficial ownership. There is no longer a trust. If the survivor of us (probably him, as I am driving myself into an early grave arguing until I’m blue in the face on countless minor topics as mentioned above) dies, his executors can sell the property with a grant of probate being their proof that they have the authority do so.

If we were tenants in common, or held the property according to the terms of a declaration of trust, the situation is different. The legal owners listed on the Proprietorship Register will be the same. The only difference to the Title Register would be the Form A restriction. This shows the outside world that there is a tenancy in common. It says:

No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.

It could, certainly, be clearer. But it means that, if one tenant in common were to die, the survivor cannot sell it by themselves. Remember, this is a trust and you need two trustees to give a valid receipt for the sale of trust property. The options are, therefore, as follows:

• To appoint a second trustee, or
• In some limited circumstances, to remove the restriction (for example, if the surviving legal owner can prove they are now entitled to the whole of the beneficial interest, which is unusual in a tenancy in common).

As I say above, the Land Registry is not particularly interested in the beneficial ownership. They do not care that a percentage of the sale proceeds will form part of the deceased owner’s estate. They care about the legal ownership. The legal ownership has passed to the surviving trustee. It has nothing to do with the deceased’s estate.

This is why the sale or transfer of the property is not made by the survivor and the deceased co-owner’s personal representatives. The deceased co-owner’s personal representatives only have an interest in the sale proceeds, not the property itself.

The surviving legal owner should appoint an additional trustee to act with them in the sale. The wording to include in the transfer deed is:

For the purpose of giving a valid receipt for the purchase price, [Mr X] (Current Trustee) in exercise of the power under section 36(1) of the Trustee Act 1925 appoints [Mr Y] to be a trustee of the Property with the Current Trustee in place of [Mr Z], who died on [DATE].

The trustee doesn’t need to be one of the deceased co-owner’s personal representatives. It can be anyone. It is all a bit mad, I know, but here we are. It means that the survivor could appoint their new girlfriend as an additional trustee and run off with the money meant for my poor children. However, of course, they would be in breach of trust and I pity the fool who tries to take on DALC1 and 2.

The trustees should, of course, deal with the proceeds of sale in accordance with the terms of the tenancy in common - paying the correct percentage to the estate of the deceased owner.

Does this mean there is no need to get a grant of probate for that owner, the first to die? Well, opinion differs. You certainly don’t need a grant of probate to deal with the sale, for the reasons set out above. But if you, as a solicitor, end up with half the sale proceeds of a property in your client account, do you really want to distribute it without sight of a grant of probate proving the executors are the right people to be dealing with the funds? I wouldn’t.

Some facts and identities have been altered in the above article