Trusts in Land
- Trust arises if an estate in land is conveyed to more than one person.
- LPA 1925 Legislation
- When land is held on trust it is one of three types of trust
- Trust for sale: before 1925 create a trust which the trustees had a duty to sell the property and reinvest the proceeds to be held on trust for specified beneficiaries.
- Converting land into money: after 1925 it adopted the trust for sale as a device for most cases of co-ownership - most suitable type of trust which could arise. Slightly modified how it works. The most obvious was that the trustees have the power to post-pone the sale save where the settlor had expressly ruled this out: whenever there is a trust which is not a trust which did not fit into the other two types it is a trust for sale. S34, 36 LPA and S36(4) Settle Plant Act. Bull v Bull 1955.
- Strict Settlement: describe a specialised form of successive co-ownership of land. They were skilfully drafted arrangements, popular from 15th Century through to the 19th - designed to preserve family estates intact through succeeding generations.
- The restrictions imposed by strict settlements were gradually loosened by a series of statutes. Modern Rules of Strict Settlements - Settled Land Act 1925. Would arise where ever there was successive ownership but it was not expressed as a trust for sale.
- Very rare by the late 1900s - changes in society no longer required for aristocracy.
- The Bare Trust:
- Not entirely clear what it means - where there is owner of the legal title and one separate owner of the equitable title.
- Bare trusts involved neither successive co-ownership nor concurrent co-ownership of either legal or equitable estates.
- They could not be regarded as either trusts for sale or strict settlement.
- Defined in S34 and 36 of the LPA
- Trusts of Land and Appointment of Trustees Act 1996
- Renting went down and co-ownership of homes went up - to describe a co-ownership as a trust for sale seems out of set with the co-ownership of most family homes.
- The need to keep land in the family has become unimportant over time.
- No more strict settlements.
- Bare trusts fell outside the trust for sales scheme thereby creating anomalies and complications.
- TLATA 1996 - creates a new trust - 'Trust of Land'
- There are now only two types of trust:
- Trust of Land and Strict Settlement before 1997
- Powers of a trustee:
- General Powers: S6 (1) provides that the trustees have all the powers of an absolute owner 'for the purpose of exercising their functions as trustees'. The powers thus conferred on trustees of land are wider than those previously conferred on trustees for sale. S8(1): a person who created the trust can strike down powers if they choose to do so. e.g. the power to sell the land. - you can not cut it down forever but can for a period of time. S8(2) provides that the exercise of any of the powers conferred s6 may be made subject to consent of a particular person.
- Specific Powers: S25(1) LPA implied a power to postpone sale into all trust for sale except where a contrary intention had been expressed. Must have all trustees permission to postpone sale if there is a duty to sell. S6(2) Convey the land to beneficiares. S7 TLATA Power to partition. Trustees can not exercise a power unless they all agree to do so - Re Mayo 1943 Interests of Beneficiaries. Under the doctrine of conversion 'the interests of the beneficiaries were notionally converted into the money into which the land was destined to be converted' - treated as interests in the money when the land was actually sold. - courts began to make exception to this rule, applied it in some cases and not in others.
- Cooper v Critchley 1955 - concerned what is NOW S2 of Law of Property and Provisions Act - Ignored the doctrine.
- Williams and Glyn's Bank v Boland 1981 - Land Registration Act 1925 - Ignored the doctrine.
- There is no longer such a doctrine due to S3(1) TLATA Rights of Occupation
- There was some debate whether beneficiaries had a right to occupy - was resovled in Flegg 1988 - they had a right to occupy unless the purpose was otherwise (duty to sell).
- S12 and 13 TLATA - Does the beneficiary have right? The purposes of the trust include making the land available - this would not be the case if it was expressed to sell. The other way is if it is held by the trustees to be available. Will not exist if it is not available or is unsuitable.
- If the land was not easy to access then it would be unavailable
- If the land being rented out - unavailable.
- Has it been excluded? Allows trustees to restrict or deny this right to one or more of the beneficiaries who would otherwise be entitled to it but does not allow them to restrict or deny the right to all the beneficiaries concerned. S13(3) allows the trustee to impose reasonable conditions on a beneficiary in relation to the occupation of the land.
- Consultation: S11 - beneficiaries with an interest in possession have a right to be consulted by the trustees.
- Overreaching: Defence to being bound by an equitable interest behind a trust
- Three Conditions:
- There has been a conveyance by trustees of land; there must be at least two, they all have to agree.
- The equitable interests must be capable of being overreached; and
- S2(3) LPA - only equitable interests behind trusts can be overreached.
- Capital monies must be paid over in the manner prescribed by s27(2) LPA.
- The equitable interests are capable of being overreached, the act of a sale is a conveyance and money must be paid over in the manner prescribed by s27(2.). E.g. A and B are the trustees of Brownacre, C and D own the equitable estate as 50:50 tenants in common. - A and B sell the legal titled to X for 200,00 overreaching occurs that there had been a conyenance, and C and D's equitable interests are capable of being overreached and the capital monies have been paid over in the prescribed way. Result - A and B become the legal owners of the 200,000 + C and D own the money at equity in 50:50 proportions - ownership of land converted to ownership of monies. X takes the land free of A and B's interest. - Whether X would be absolute owner or hold on a new trust is considered in the next topic.
- Overreaching wipes out the prior interests of the equitable owners.
- The danger is that the trustees may run away with the money and not give it to C and D.
- In most cases the trustees are the beneficiaries.
- Overreaching is inapplicable where there is only one trustee because two of the three conditions can not be met because there is only one trustee. in this event is the purchaser bound by the prior equitable interests.
- Applications under S14 TLATA: a way of resolving disputes about land held of trust. - who has standing? anyone who is a trustee or had an interest in property subject to trust. Trustees and Beneficiaries.
- The court may make orders as it thinks fit:
- Relating to the exercise by the trustees of any of their functions (s14(2)(a)
- Declaring the nature or extent of a person's interest in property subject to the trust (s14(2)b)
- Disputes of occupancy, partitioned, leased out by the trustees or whether the land should be sold.
- Example: A and B a cohabiting couple bought pinkacre - they are the legal and equitable joint tenants of it. relationship collapsed. A moves out to lives elsewhere - B remains in pinkacre caring for the two children - A wishes for it to be sold B does not. The trust is a 'trust of land' - trustee's have power to sell (s6 TLATA) however this must be exercised unanimously Re Mayo 1943. B's refusal prevents this exercise. A will have to seek a court order for sale under s14.
- • S15(1) sets a non-exhaustive list of matters which the court must have regarded in determining applications under s14. - in deciding what the court thinks fit it must have regarded to these factors.
- Intentions of the person or the persons who created the trust. e.g. a family home - if given by gift it must be the intention of the gift giver. Barclay v Barclay - testator left a house to 5 people the purpose was to sell it and divide the proceeds to the others, one had been living there prior to the death, said there should not be a sale as they should be entitled to live there - had to be sold because it was the intention of the person who created the trust. - S15 consolidates and rationalises the case law.
- Current purpose which the trust is hold - the courts devised a collateral purpose doctrine when there was a trust for sale - if there was a collateral purpose which is still ongoing this should go against the sale, the courts will weight this quiet heavily. Historical now as there is no longer a trust for sale. Essence of the case law - if that purpose was substantially capable of being carried out then they would be reluctant to order a sale.
- Jones v Challenger: when there is a husband/wife relationship (no need to be married) with no children if the relationship breaks down the purpose of providing a family home ends. The consequence is that a sale is very likely.
- Rollings v Rollings: married couple, separated for 2 years but did not divorce -this was the equivalent as a relationship break down.
- Re Everstrust: if there are children, the purpose of providing a family home does not end when the relationship ends. Therefore so long as some of the children remain in the property and still wish to live there, the purpose is still ongoing. The consequence is that the court is very reluctant to order sale. Postponed sale until the youngest is 16.
- Dennis v Macdonald: does not matter that some of the children wish to move out as long as some of them still remain.
- Re Buckanan Wallstons Conveyance: 4 people bought a property together for the purpose to not allow anyone to build on that land: 1 person wanted to sell, they argued that the purpose should be an end as they did not want it no more. The purpose was still ongoing because the other 3 people were still ongoing. The purpose must be a majority all 3 wanted to stay only 1 wanted to leave.
- Re Hydes Conveyance: two brothers bought property as business primacies, they fell out so one of them wanted to sell, the application was motivated by spite, the one that didn't want to be sold offered to buy out the other. Will probably order a sale unless the other can be bought out.
- The welfare of any minor on the property - where the minors want to leave the family home. You should not move a child out of the home if there welfare carries out a particular weight.
- Interests of the secure creditors - someone who lends money and the home is offered as collateral for that money. When they bring an application for the property sold, they want their money out.
- Does not indicate that it must be exceptional circumstances.
- The Mortgage Shire case suggested S15 had a more generous to prevent to property being sold.
- In Bank of Ireland v Bell: courts have reverted to the old law unless there is exceptional circumstances the property will be sold.
- Interest in possession - present right to present enjoyment.
- Jackson v Jackson 3 bedroom property too big for 1 person.
- Jones v challenger - if you pay up front for a ten year lease and there are only 6 years left, this is a wasting asset. Will count in favour of a sale.
- Edwards v Edwards - took into account the health of the occupant.
- Bankruptcy - when a equitable co-owner is bankrupt - their share goes to their trustee in bankruptcy - if they are a joint tenant there would be a severance and there share is give to the trustee in bankruptcy. They will push for a sale of the property to get the money out of the property - the court approaches this by 'if the application is brought within one year of bankruptcy the court may postpone up until the point falling one year after the onset of bankrupcy if it thinks this is reasonable.
- Going beyond the one year from the adjudication of bankruptcy can be considered if there are exceptional circumstances.
- Exceptions: wouldn't suffer if they would prolong the postponement (Re Holiday) or if someone has a very serious of terminal illness.