#4646 - Co Ownership Part Ii - GDL Land Law

Appointment and Retirement of Trustees

New Trustees

• Trustee Act 1925 and TLATA 1996

• Maximum number of trustees permitted is four : s34(2) Trustee Act 1925

Can be appointed in 4 ways:

1. By the person named in the trustee deed as being able to appoint (s36(a) Trustee Act 1925)

2. By the existing trustees (s36(b) Trustee Act 1925)

3. By the personal representatives of the last surviving trustee (ss36(1) and (6) Trustee Act 1925); or

4. By the court in difficult cases (ss41 Trustee Act 1925)

• Trust of land is valid even if only one trustee – but two trustees is necessary to give a valid receipt and thus enable overreaching to operate: s27 LPA 1925

• Appointment should be by deed – if so, it automatically contains an implied vesting declaration – trust property is vested in the new T together with the continuing T(s) as JT without any separate conveyance or assignment (s40 Trustee Act 1925)

• Anyone may act as T provided he or she is sui juris and willing to act – Section 19 TLATA 1996 has modified s36 Trustee Act 1925 – permits beneficiaries in certain circumstances to select new trustees (although cannot actually appoint them) and to require T(s) to retire

• B(s) can only give such direction if there is no person nominated in the trust instrument for the purpose of appointing trustees and the beneficiaries are all together sui juris and absolutely entitled to the trust property (s19(1)(b) TLATA 1996) – they must be unanimous (s19(2) TLATA 1996)

• Beneficiaries may give the trustee(s) a written direction to retire from the trust and/or a written direction to appoint by writing to the person(s) specified in the written direction as T(s) – s19(2) TLATA 1996

Retirement of trustees

• Retirement should be by deed – if so, property becomes automatically vested in the continuing trustees without the necessity for a separate conveyance (s40 Trustee Act 1925) – A T cannot however retire without a simultaneous new appointment without consent of co-trustees and there can be no retirement if this will leave just one trustee (ss40 and 39 Trustee Act 1925)

• A T who is also a B can assign his/her beneficial interest -if so, s53(1)(c) LPA 1925 applies – (signed by assignor and in writing) – T will nevertheless remain a T of the legal estate, as disposal of equitable interest does not equate to retirement from the trust

Functions of Trustees

• Legal title vested in the T(s) who are given the powers of an absolute owner (s6(1) TLATA 1996) – they can sell, lease, mortgage, grant options or easements etc.

• Wide powers set out in ss6 and 7 TLATA 1996 – in exercising their powers under s6 – T(s) must have regard to the rights of the beneficiaries (s6(5) TLATA 1996)

• Must also get the best possible return from the trust property and exercise reasonable care and skill (s1 Trustee Act 2000)

• Section 6(2) TLATA 1996 – allows T(s), where the B(s) are sui juris and absolutely entitled to the land – to convey the land to these B(s), even if the B(s) do not require the T(s) to do so

• Under s6(3) – T(s) have a power to acquire land under s8 Trustee Act 2000 – allows them to acquire freehold or leasehold land in the UK as an investment, for occupation by a B or for any other reason

Restriction of a trustee’s power

• Wide powers set out in ss6 and 7 can, under s8 TLATA 1996 be excluded or restricted by the settlor/testator in the document/will giving rise to the trust of land

• Contrast with the strict settlement and the trust for sale – as the settlor can substantially restrict the wide powers of the trustees

Consent and consultation

1. Consent

• S8(2) TLATA 1996 – T powers may be made subject to the consent of the beneficiaries (or other persons), if so stated y the settlor/testator in the instrument creating the trust

• Purchaser of the land need only be concerned that the consents of any two of them have been obtained (s10(1) TLATA 1996) – however the trustees will be in breach if they fail to obtain all consents required

• Where the trust instrument requires trustees to obtain the consent of a minor then the trustees must obtain consent from those with parental responsibility for the minor or from a guardian (s10(3) TLATA 1996)

2. Consultation

• S11(1) TLATA 1996 – Trustees have a duty to consult (but not obey) the beneficiaries of full age and beneficially entitled to an interest in possession in the land

  • They must give effect to the wishes of the majority by value –but only so far as consistent with the general interest of the trust

  • It is the trustee who decides what is in the general interest of the trust

• The rule in s11(1) does not apply in the following circumstances:

1. If it is excluded - can be the case in an express trust of land (s11(2)(a) TLATA 1996)

2. A trust created or arising under a will made before 1 January 1997 (s11(2)(b) TLATA 1996)

3. To the trustee’s power under s6(2) TLATA 1996 to insist upon transferring the land to the beneficiaries who are of full age and absolutely entitled to the land (s11(2)(c) TLATA 1996)

4. to a trust created before 1 Jan 1997 by a disposition (i.e. expressly created) (s11(3)) - unless a deed is executed making provision for s11(1) to apply – such a deed would be irrevocable (s11(4) TLATA 1996)

• By s16(1) TLATA 1996 - a purchaser shall not be concerned as to whether there has been compliance with these consultation rules

• Prior to TLATA - there was only a duty of consultation in the case of statutory implied trusts – for express trusts there was only a duty to consult if the document setting up the trust included such a duty

• As a result of s11 – now a duty to consult in the case of trusts of land expressly created after 1996 – unless excluded by the trust instrument

Delegation of trustees’ powers

• By s9 TLATA 1996 – all trustees of land may jointly, by power of attorney, delegate any of their functions to any beneficiary/beneficiaries of full age who is/are entitled to an interest in possession in the land subject to the trust

• Includes delegation of the power to sell the land

• Beneficiaries to whom functions are delegated are in the same position as trustees (duties/liabilities) – but only the trustee can give a valid receipt for the purchase money – preserves their role in overreaching

• Delegation may for any period of time and must be made by all trustees – but the delegation may be revoked by any one or more trustees (s9(3) TLATA 1996)

• Duties and liabilities of trustees who delegate any of their functions under power in s9 TLATA 1996 are set out in s9A – duty of care under s1 Trustee Act 2000 applies to trustees of land in deciding whether to delegate – s9A(1)

• While the delegation continues the trustees must keep the delegation under review – s9A(3) and this is also covered by the duty of care (s9A(5))

• S9A(6) - trustees will not be liable for acts/defaults of any beneficiary/beneficiaries to whom they have delegated – unless the trustees failed in their duty of care in deciding to delegate or in carrying out duty to review

Right to occupy trust land

• As well as abolishing the doctrine of conversion ( s3 TLATA 1996) – which means that the B(s) have interest in land and not just in sale proceeds – ss12 and s13 TLATA 1996 concern the right of B(s) to live in the property subject to the trust

• Right to occupy the trust land IF:

1. The trust was set up to provide land for their occupation (solely or jointly); or

2. Subsequent to the creation of the trust, the trustees acquired land for their occupation (solely or jointly)

• However - s12(2) provides that this right does not exist if the land is unavailable or unsuitable for occupation (e.g. if it is let to a tenant)

• Section 13 – enables trustees to deal with arguments btw B(s) – where 2 or more B(s) have a right to occupy the trustees may exclude or restrict the entitlement of any, but not all, of them as long as they act reasonably in doing so

  • Section 13(3) – trustees have power to impose reasonable conditions on the occupying B(s) (e.g. requiring B to pay outgoings/carry out repairs)

  • But must have regard to factors in Section 13(4):

1. The intention of the person(s) who created the trust;

2. The purposes for which the land is held; and

3. The circumstances and wishes of the B(s) entitled to occupy the land under s12

   • Section 13(6) - right to require occupying B to compensate any other B whose entitlement has been excluded/restricted - allows Ts to impose an occupation rent on the occupying B to be paid to non-occupants

• Payment of occupation rent by one co-owner to the other – Dennis v Mcdonald; Re Pavlou; Re Byford (deceased)

• Co-owner may be ordered to pay occupation rent to the other co-owner who has been ousted. Where the remaining co-owner pays mortgage interest payments on behalf of the ousted co-owner, payment may count as occupation rent

• Any B already in occupation is protected by s13(7) TLATA 1996 – cannot be prevented from continuing to occupy without their consent or the approval of the court

• Dispute over occupation – Rodway v Landy: court resolved dispute btw 2 GPs who were joint tenants of a surgery – divided it into two and gave each GP the right to occupy their half of the surgery

Powers of the Court

• S14 TLATA 1996 – any T, or anyone with an interest in the property subject to the trust of land, to apply to the court for an order relating to:

1. The exercise of the powers of the trustees; or

2. The need to obtain consents or consult B(s); or

3. The making of a declaration as to the extent of a B’s interest

• Thus s14 appears to cover any dispute which might arise regarding a trust of land

• Court is required, in exercising its jurisdiction under s14 to have regard to the...