Plan to part company** - the need for property owners’ deeds

Last week’s post summarised some of the key issues to consider in relation to agreements documenting arrangements between parents and their children for the provision of elder care.

Where substantive assets, particularly housing accommodation, are to be jointly acquired by a parent and one or more children, best practice is to implement a formal deed setting out the exact terms of the arrangement.

Generally, it will be appropriate to implement a deed that has provisions, which are virtually identical to the type of arrangement entered into by arm’s length parties who jointly own property, or for that matter, family or friends who jointly acquire property where there is no elder care relationship in place.

The exact provisions of any agreement will obviously depend largely on the circumstances.

An example of some of the provisions normally included is as follows:

1. the exact financial obligations between the parties;
2. rights of access to the property;
3. term of the agreement;
4. events that will trigger an ending of the agreement;
5. rights of first refusal or pre-emption if a party wishes to sell their interest;
6. circumstances in which a sale of the entire property is to take place;
7. whether any existing joint owner can attempt to acquire the entire property if a forced sale takes place;
8. to the extent the property will be rented in a holiday pool, the basis on which a co-owner can access the property;
9. how costs are to be apportioned;
10. what is to occur if a party is in default;
11. what happens if a party loses capacity or dies; and
12. dispute resolution provisions.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Go Betweens song 'Part company'.

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(all your) Elder** care agreements

One form of legal documentation that is becoming increasingly prevalent is contractual arrangements between children and their parents where those children are providing support to their parents.

Most commonly, the agreements set out the exact legal basis on which support is provided, whether it be direct financial support (such as paying expenses), indirect financial support (for example, providing accommodation without seeking reimbursement of expenses) or in kind support (for example, caring services).

A comprehensive agreement will deal with a range of matters, many of which can potentially lead to later litigation if not appropriately addressed.

Examples include:

1. agreed financial values for all support provided;
2. the timeframe over which support will be provided;
3. legal ownership of any jointly acquired assets;
4. impact on the entitlements of each child under their parents’ estate plan;
5. principal and interest repayment terms in relation to any loans that may have been made;
6. consequences of death or incapacity;
7. consequences of any relationship breakdowns (for example, the divorce or separation of a child who is a primary carer of a parent);
8. consequences of any relationship breakdown between the relevant child and the parent;
9. dispute resolution provisions; and
10. consequences of termination (including potentially compensation for any foregone opportunities).

Ideally, although arguably not strictly required in a legal sense, the parties to this style of agreement should include all family members, particularly those who might otherwise have different expectations as to what they might receive pursuant to the estate plan for the parents.

** For the trainspotters, the title of today's post is riffed from the Go Betweens song 'Ask'.

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No debate** - Can shares be owned as tenants in common?

Recent posts have considered various aspects of the rules in relation to assets owned as joint tenants.

Another aspect of the rules in this area that continues to cause debate relates to the manner in which shares in a company may be owned.

Often a constitution of a company will mandate that shares registered as owned by 2 or more people may only be owned as joint tenants. Often the constitution will also state that the name first listed on the share register will have all voting rights in relation to the shares.

Where a constitution of a company does not set out that joint share owners must own as joint tenants the issues are more complex if a will does not distribute a discrete number of shares to separate people. That is, instead of (say) giving 100 shares to A and B, giving 50 shares to A and 50 shares to B.

Despite there being a number of conflicting cases, it appears as though the long standing decision in McKerrell [1912] 2 Ch 648 continues to apply. In that case it was held that despite a will stating that the recipients of the gift of shares were to take as tenants in common – ‘That is not possible. At least, it is not possible that a chose in action, such as shares, can be held as tenants in common at common law’.

In other words, the only assets that can be owned as tenants in common at law are real property and chattels. This means, as one example, bank accounts in joint names are deemed to be owned as joint tenants. This is because there is essentially a chose in action, being the contractual right of the account holders against the bank, for recovery of a ‘debt’ (being the balance from time to time in the bank account).

Another example in this regard is the well known case of Equititrust Ltd & Anor v Franks [2009] NSWCA 128, where it was held in relation to a debt (and related mortgage), that the common law presumption of a joint tenancy applied despite the deeming provisions under legalisation that would have otherwise seen the parties hold as tenants in common.

As usual, if you would like copies of any of the abovementioned cases please contact me.

** for the trainspotters, the title today is riffed from the Breeders song ‘Lord of the thighs’. View hear (sic):

Assuming makes an a%& of you and me ... presumptions** and jointly owned assets

Last week’s post considered various aspects of the rules in relation to assets owned as joint tenants.

At law there is a presumption that where property is gifted to two or more people, they receive that property as joint tenants (subject to any contrary intention).

A number of jurisdictions have also enacted legislation confirming this outcome, including Western Australia, South Australia and Victoria.

In New South Wales and Queensland however there is legislation that ‘flips’ the position at law.

This means that where real property is gifted to two or more people in those jurisdictions it will be deemed to pass to the parties as tenants in common, in equal shares.

** for the trainspotters, the title today is riffed from the Midnight Oil song ‘Blot’. View hear (sic):