Summary
Summary Trusts of land and Co-ownership
- Module
- Land Law - MA in Law / GDL
- Institution
- Land Law - MA In Law / GDL
Trusts of land and Co-ownership
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4 trusts of land and co-ownership‘trust of land’ has only existed since 1 Jan 1997
Trusts of Land and Appointment of Trustees Act 1996 (“the 1996 Act”)
Replaced the two previous types of trust – the strict settlement and the trust for sale
Trustees of Land and their Powers
1996 Act sets out the powers of the trustees and the rights of the beneficiaries whilst that trust subsists
Trustees of land are the legal owners of the land and manage the trust land
Trustees’ powers generally – s6 1996 Act
Section 6(1) 1996 Act – ‘For the purposes of exercising their functions as trustees, and the trustees of land have in relation to the land
subject to the trust all of the powers of an absolute owner’
Section 6(2) and s6(3) and s8 Trustees Act 2000 → trustees of land are the legal owners – have the right to sell the trust land
Section 6(2) – trustees have authority to exercise the power to dispose of the legal estate in a specified way, ie transferring it to a
beneficiary to end the trust
Section 6(3) gives trustees power, ie permission to buy land
Section 6(5) – trustees must ‘have regard to the rights of the beneficiaries’ when exercising their powers
Section 6(6) – trustees mustn’t exercise powers given under s6 ‘in contravention of any rule of law or equity’
(under s6(3) 1996 Act and s8(2) Trustee Act 2000 trustees can only buy a legal estate, not an equitable interest in land (as investment))
Restrictions on the trustees’ powers
Trustees of land have all of the powers of an absolute owner under s6 1996 Act WITH duties;
1. duty to consult with certain beneficiaries and 2. duty to comply with restrictions imposed on the trustees
Duty to consult beneficiaries:
Section 11 1996 Act;
When selling trust land, the trustees under s11 must;
1. Consult with the beneficiaries who are of full age (18+) who have an interest in possession (entitled to immediate interest in the land)
2. Comply with the wishes of the majority in value
If the beneficiaries decide that they don’t wish the land to be sold, but the trustees decide it is in the best interests of the trust that the land should
be sold, the trustees can go ahead and sell → the trustees make the decision
Settlors can try and control the way in which the trustees exercise their powers under s8 1996 Act;
Section 8 → allows settlors of an express private trust to place restrictions on the power of the trustees contained in s6, eg preventing
the trustees from selling the land without first obtaining the consent of a named person
The Rights of Beneficiaries
Eg right to be consulted (under s11) and to give permission before the trustees exercise their powers (under s8); and
Right to occupy under ss12 and 13 1996 Act;
Section 12 – to have the right to occupy, certain conditions must be satisfied. The beneficiaries must be entitled to an interest in possession under
the trust, the purpose of the trust must include making the land available for the beneficiaries to occupy, or the trustees must hold the land so that
it is available for them to occupy
Section 13 – where the trustees do allow the beneficiary to occupy, they can attach conditions to that occupation (eg imposing a condition that the
beneficiary pays the outgoings on the property)
Resolving Disputes
Disputes between the trustees or between trustees and beneficiaries about whether or not the trustees should sell the trust land, the parties can
resolve this by making an application to the court
Applications must be made under s14 1996 Act;
Also, use s14 where trustees are required to obtain the consent of a named person before selling if, when the trustees try to sell the land, they
discover that the named person either cannot be found or refuses to give permission for the sale
→ (s14(s)(a) relieves trustees of the obligation to obtain these consents)
Under section 14, ‘Any person who is a trustee of land or has an interest in property subject to a trust of land may make an application to the
court’
, The Court has the power to make such an order as it thinks fit relating to the ‘exercise by the trustees of any of their functions’ or to ‘declaring the
nature or extent of a person’s interest’
When the court makes an order under s14, it has to take into account factors including those listed in s15;
- Looking at the purpose of the trust
- The intention of the settlor when creating the trust
- The welfare of any minor who occupies or may occupy the trust land
- The interests of any secured creditor of a beneficiary
- The list isn’t exhaustive – court will consider other relevant factors
Protection of Purchasers from Trust Interests
Purchasers want to ensure that they buy land free of the equitable interest of the beneficiaries under the trust
One method is ‘overreaching’. Another is s10 1996 Act;
Section 10(1) – where a trust deed requires the trustees to obtain consents before exercising any function such as sale and the purchaser
has knowledge of that requirement, a purchaser need only check that two consents have been obtained
Where one of the persons whose consent is needed to a particular disposition isn’t of full age, purchasers don’t have to ensure that this
consent is obtained (s10(3))
This protection offered to purchasers doesn’t protect the trustees – they are still bound by their duty to obtain the necessary consents
This^ applies to both registered and unregistered titles
Co-Ownership
…where two or more people have concurrent interests in the same estate in one piece of land
Any land subject to co-ownership is held on trust (ss34 and 36 LPA 1925, as amended by 1996 Act). The trust is a ‘trust of land’ governed by the
1996 Act
Two ways in which co-owners can own the land = Joint Tenancy and Tenancy in Common
Joint Tenants
Owners aren’t treated by the outside world as having separated shares in the property, but rather as a single person
The right of survivorship applies – if one owner dies, the other becomes the sole owner of the land
If the (now dead) owner attempts to make a gift of his land, the gift won’t be effective
→ The right of survivorship will vest ownership of the property in the surviving tenant(s)
If land held as joint tenants is sold, the joint tenants share the proceeds of the sale equally
Tenants in Common
The law treats them as owning distinct shares in the property that may be equal or unequal in size. They hold the land in ‘undivided shares’
When one owner dies, the land falls into their estate and passes under the terms of their will (or intestacy)
(owners can change their minds from joint tenants to tenancy in common = ‘severance’)
If land is held as tenants in common, the tenants in common receive a share of the proceeds of sale equivalent to the size of their distinct shares in
the land. These shares may be equal or unequal in size
The Position at Law and in Equity
Section 1(6) LPA 1 925 – ‘A legal estate is not capable of subsisting or being created in an undivided share in land’
→Only possible for co-owners of the legal estate (the trustees) to hold the legal title as joint tenants
S36(2) LPA 1925 – not possible to sever a joint tenancy of the legal estate in order to turn it into a tenancy in common
BUT co-owners can hold the equitable (beneficial) interest as either joint tenants or tenants in common
Art 36(1) LPA: “Where a legal estate (not being settled land) is beneficially limited to or held in trust for any persons as joint tenants, the same shall
be held in like manner as if the persons beneficially entitled were tenants in common, but not so as to sever their joint tenancy in equity”
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