Trust of Land Flashcards
(41 cards)
1
Q
What is a trust of land?
Where is it defined?
A
- arises when land is held by one or more persons (trustees) for the benefit of another (beneficiary)
- s.1 and s.2 TOLATA 1996
2
Q
When and how was a trust of land introduced?
A
through TOLATA 1996
3
Q
What does TOLATA 1996 say about a trust of land? (3)
A
- 1996
- separates legal ownership from beneficial ownership
- grants trustees significant powers over the land
- provides beneficiaries with rights
4
Q
What does a trust of land apply to?
A
-co-ownership of land (legal, equitable or both)
5
Q
What types of trust does it cover?
A
- express
- resulting
- constructive
6
Q
Why was land held historically?
A
- dynastic purposes
-> keep property in family across generations
-> now achieved through Settled Land Act 1925 - investment purposes
-> income exchange value (dynamic security)
-> use value (static security)
-> achieved through the trust for sale
7
Q
What was the old operation for trust for sale?
What did Flegg say about trust for sale?
A
- trustees had a duty to sell -> could postpone sale
- operated via doctrine of conversion (“equity looks on that as done which ought to be done) -> trustees ought to sell and interests of beneficiaries viewed as interests in personalty (potential sale of money) rather than realty (land itself)
- consistent with overreaching mechanism
‘mere conveyancing machinery’
8
Q
How have trusts adapted for modern times?
What did Law Commission no. 94 (1985) say about automatic imposition of a trust for sale
A
- expansion of residential ownership since 20th century
- more women work -> able to own property & contribute
- growth in co-habitation
- majority of trusts for sale directed towards retention of land rather than sale
perceived as ‘highly artificial and difficult to explain to a lay client’
9
Q
What was the key change from TOLATA 1996?
why did it happen?
case law
A
- replaced trust for sale with trust of land
- due to changes in social reality
- Mortgage Corporation v Shaire [2001]
-> TOLATA had ‘effect of rendering the trusts for sale obsolete […] replacing them with the less arcane and simpler trusts of land’
10
Q
Implications of trust of land (2)
A
- trust might not be visible on the Land Register
- priority disputes involve interests under a trust vs lenders - who wins?
11
Q
Consequnces of trusts not being visible on register
A
- increased priority disputes
12
Q
When is a trust visible on the register?
When is it not visible?
A
- legal title vested in 2 or more (up to 4) trustees -> co-ownership at law and in equity
- legal title vested in one trustee -> co-ownership possible in equity -> trust of land still imposed
13
Q
What is not registrable under a trust?
A
- interests
- s.33 LRA 2002
- mirror / curtain principle -> beneficial interests are off the register
14
Q
What is the mirror principle?
Exceptions?
A
- The register should mirror the state of the title, meaning it accurately captures all relevant information about the land, including ownership, rights, and any limitations or restrictions
- certain equitable interests
15
Q
When do interests under a trust (static security) take priority over lenders (dynamic security)?
what is this called?
key case
A
- coupled with actual occupation and are discoverable
-> sch 3 para 2 LRA 2002
-> Williams and Glyn’s Bank v Boland [1981] - overriding interests
16
Q
When do lenders take priority over interests under a trust?
key case
A
- when overreaching applies
City of London BS v Flegg [1988]
17
Q
What powers do trustees of land have?
Statute?
What do these powers include?
A
- all the powers of an absolute owner
- s.6(1) ToLATA 1996
- s.23(1) and s. 24 LRA 2002
- powers of management & disposition in respect of land -> sale, lease, mortgage existing land & acquire new land
18
Q
What special powers do trustees have?
statute?
A
- s.6(2) ToLATA 1996 -> terminate trust and convey land to beneficiaries regardless of consent
- s.7(1-3) ToLATA -> partition trust land between beneficiaries, subject to consent
- s.9(1) ToLATA -> power to delegate exercise of their functions to any of the beneficiaries
19
Q
How must the powers be exercised by the trustees?
statute that helps with any issues?
A
- unanimously
- s.14 (1-2) ToLATA helps resolve disagreements between trustees
20
Q
Restrictions of powers for trustees (7)
statute - ToLATA
A
- powers conferred for the purpose of exercising their functions -> s.6 (1)
- powers are fiduciary -> trustees obliged to have regard to rights of beneficiaries -> s.6(5)
- powers cannot be exercised contrary to rules of law or equity -> s.6(6)
- trustees have duty of care when exercising their powers -> s.6(9)
- duty to consult beneficiaries when exercising any of their functions relating to land as far as practicable -> s.11
- duty to give effect to wishes of beneficiaries so far as consistent with general interest of trust -> s.11
- when trust is expressly created, trustees’ powers (including power of sale) may be excluded / restricted -> s.8 (1-2)
21
Q
What do the beneficiaries have under trust of land?
A
equitable interest in the land
22
Q
What are the 5 rights that beneficiaries have?
statute
A
- right to be consulted -> s.11
- right to occupy -> s.12
- right to appoint / remove trustees (acting unanimously) -> s.19-21
- right to insist that consent be obtained in express trust
- right to apply for a court order -> s.14
23
Q
Is the right to be consulted limited?
Is it important?
can it be excluded? How?
rights of beneficiaries
A
- yes, it is limited
- example of how it is important practically -> A owns legal title, A& B are co-owners in equity -> A holds trust for A & B -> A must consult B in exercise of powers
- can be excluded in express trusts -> s.11(2)(a) ToLATA
24
Q
Right to occupy -> under old trust for sale
case law in practice
A
- doctrine of conversion + equity maxim meant trustees ought to sell
- parties treated as if sale occurred already
- beneficiaries had no interests in land so couldn’t claim right to occupy
- in practice: right to occupy was recognised by courts (Boland, Flegg)
- nature of the right was still uncertain
25
Right to occupy under ToLATA
s.12
26
Purpose of the trust?
## Footnote
s.12(a) ToLATA
- it is specified in declaration of trust
- OR ascertainable from circumstances
- importance of primary object of trusts
-> e.g. long term provision of residential utility
-> e.g. immediate disposition of trust land and division of proceeds of sale
27
When is land not available?
## Footnote
s.12(b) ToLATA
- not available if land is held as an investment
- not available if there is an express duty to sell on the trustees
28
Restrictions to right to occupy under s.12 ToLATA
1. if land is unavailable or unsuitable for occupation by beneficiaries- no right
2. s.13 ToLATA
29
How do you know if land is unsuitable?
## Footnote
s.12 ToLATA
- suitability requires consideration of 'personal characteristics, circumstances and requirements of the particular beneficiary' - Chan Pui Chun v Leung Kam Ho [2002]
- e.g. land is a farm and the beneficiary is not a farmer
- e.g. land is house and is disproportionate to needs of beneficiaries
30
Occupation rent pre-ToLATA?
## Footnote
right to occupy
- doctrine of equitable accounting
- at the time the property was sold
- applied in any case where an occupation rent was necessary for equity between the parties
- backward looking approach (how much has been paid) to calculate amount of rent -> also based on value of property
31
Occupation rent under ToLATA
## Footnote
right to occupy
- statutory powers replace equitable accounting doctrine when s.12 is applicable -> equitable accounting remains possible in other cases
- trustees' powers to require compensation only triggered when beneficiary right to occupy is excluded or restricted
- forward looking approach -> considers wider range of factors
-> s.13(4) + welfare of minors -> s.15 -> rental value is still important
32
Right to apply for a court order
- statute (ToLATA)
- compared to LRA?
- s.14-15
- broader discretion and more active role under ToLATA than disputes regulated by LRA 2002
33
What types of situations are regulated by s.14-15 ToLATA
- disputes between couples
- disputes involving secured creditors
34
What types of situations involve disputes between conflicting interests?
- disputes between co-owners
- disputes between co-owners and secured creditors
35
Example of a dispute between co-owners
- A and B are joint tenants at law & in equity
- relationship breaks down
- A wants to sell, B wants to stay
- application brought by A or B - who wins?
36
Example of dispute between co-owners and secured creditors
- A and B are joint tenants at law & in equity
- Mortgage granted to bank C (through fraud / undue influence)
- C wants to sell - A/B want to stay
- who wins?
37
Disputes between co-owners - pre-ToLATA
- 2 approaches by court
1. strict approach
-> sale should be ordered unless trustees unanimously exercise power to postpone (Re Mayo) -> always impossible to exercise hwne co-owners are trustees and have conflicting wishes
2. lenient approach
-> sale (primary purpose) not ordered if a collateral (secondary) purpose could still be achieved by the trust
-> in presence of children: sale not ordered unless alternative (cheaper) accommodation can be provided
38
Disputes between co-owners -> post ToLATA
- common law
- Courts have broader discretion
- guided by s.15 factors
- White v White [2003]
-> list not exhaustive -> no weighing of factors in s.15
-> judges do 'as they think fit'
39
- (1)(a)
- (1)(b)
- (1)(c)
- (1)(d)
- (2)
## Footnote
s.15 ToLATA
- intention for which property is held - determined at time trust is created
- purpose of trust -> change over time
- welfare of minor children -> must always be considered even when home for children is not the purpose of the trust
- creditors -> may be relevant even if not in dispute
- wishes/circumstances of beneficiaries - might be relevant
40
disputes between co-owners and secured creditors -> pre-ToLATA
- case law
- applications by creditors considered under s.30 LPA 1925
- Rule in Re Citro applied (via Lloyds Bank v Byrne) - sale ordered unless exceptional circumstances
- exceptional circumstances defined in Re Citro
41
dispute between co-owners and secured creditors -> ToLATA
- statute & common law
- what did Law Commission say?
- applications considered under s.15
- Mortgage Corporation v Shaire [2001]
- Law commission: "factors in s.15 are not designed to restrict the exercise of judicial discretion [...] they are simply designed to indicate some of the more important factors"
