Lecture notes
overreaching
- Module
- Land Law
- Institution
- University Of Southampton (UOS)
Lecture notes about overreaching under UK land law.
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By: Patrick95 • 8 year ago
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OverreachingTrusts of Land
1925 Act created trusts for sale. It was amended to introduce the
trusts of land scheme. This is implemented by the Trusts of Land
and Appointment of Trustees Act 1996 (TLATA), and it operates in
relation to all land.
“Any trust of property which consists of or includes land”
No longer need conveyancing mechanism like a trust for sale.
Consequence of Act is to introduce simple trusts where it is simply
said that property is conveyed to the trustees on trust for…
Consequence of this kind of trust is that there is no longer any kind
of question, interest of the beneficiary is an interest in the land
directly.
Central point of the trust is the point introduced in 1925, concept of
overreachability.
Creation of a trust
Parties – settlor, trustees, beneficiaries.
Trustees hold the legal estate.
Beneficiaries hidden from the register by a curtain. Registrar cannot
put beneficiaries on the register.
Two steps to create trust:
o Pass legal estate to the trustees, trustees become the
registered proprietors of the land
o S53 Declaration of Trust – needs evidence (usually in writing)
Fundamental that the register does not say that the trustees are
trustees, just names these people.
Trustees are not owners, they are trustees. Because of this their
powers are restricted. The trust will only be shown on the register by
the entry of a restriction.
Overreaching
When trust land is sold, the beneficial interests are detached from
the land and attached instead to the proceeds of sale.
S2 LPA
Curtain implemented by s72 Land Registration Act 2002 – says
registrar and purchaser has no notice of any trust. Object is
therefore that if you are looking at land from the point of view of
buying it, you need only look at register to see who proprietors are,
and see any restrictions.
Therefore, when land is sold, beneficiaries have no interest in the
land, interest is now in proceeds of sale.
Fundamental requirement – s27 LPA 1925 – specifies that a receipt
for purchase money shall not be given by fewer than 2 trustees. This
is basically what the restriction says. As long as there are 2
registered proprietors this restriction does not apply.
City of London Building Society v Flegg – A house in Kent was being
bought by a couple, the Maxwell-Browns. They paid £18,000
, towards the purchase of the property. This wasn’t enough to buy the
property, and the consequence was that they arranged to share with
the wife’s parents, the Fleggs. Consequence was that Fleggs paid
about £20,000 to purchase the house. Therefore there was a joint
tenancy of the legal title. The crucial thing to note is that there are
two trustees and four tenants in common. MBs were on legal title.
Fleggs kept off the legal title because they didn’t trust their son in
law, they thought this would prevent them from being liable for the
mortgage. MBs remortgaged the property, borrowing a lot more
than they had told the Fleggs. MBs were unable to pay, building
society sought repossession of the house. MBs beneficial interest in
the property ended. Are the property rights of the Fleggs valid
against the mortgager? In order to be valid they would need a
property interest and priority.
o In this case there was a trust for sale – arguable that
beneficial interest was in money not in the house. Argument
has disappeared due to TLATA.
o Argument based on s70(1) para G of the Land Registration Act
1925, now read LRA 2002 sch 3 para 2, rights of every person
in actually occupation of land constitute an overriding interest.
Fleggs argued that they were in occupation of the land, their
interest overrode the register.
o Held: House of Lords rejected this. Indicated that the Fleggs
interest had been transferred to the mortgage money. They
had been detached from the land. Their action therefore was a
breach of trust action against the son in law and daughter.
They did not have rights in the property.
o Lord Oliver “The registered system is designed to dovetail with
the unregistered system” – he asserted that registration is just
a machinery, but the substantive rights of the parties should
be the same. (The Land Registration Act 2002 may have
slightly departed from this)
Irrelevance of:
o Notice of Trusts – a purchaser knowing about a trust does not
affect overreading.
o Occupation – as detailed in the Flegg case.
o Wishes of Beneficiaries
Basis of Overreaching
LPA 1925 s2 – basis of overreaching – proves on examination to be
flawed in its drafting, it provides for overreaching under an ad hoc
trust – unusual situation in which the trustees have been appointed
by the court. Almost never happens. In effect s2 means that
overreaching can only happen independently of s2.
Conventional understanding of basis of overreaching was conversion
under a trust for sale. Trust for sale was on trust to sell and to hold
the proceeds for the beneficiaries. Rights of beneficiaries were
always money rights.
TLATA gave beneficiaries rights in the land itself, not just the money.
Does this actually abolish overreaching then?
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