#2023 - Regulating Trusts Of Land - Land Law

Regulating Trust of Land

Occupation under TLATA 1996

• When is there a right to occupy?

  • S.12(1) Only beneficiaries with interests in possession can occupy – means that beneficiaries must be ascertainable

    • (a) Purposes of trust must include occupation

    • (b) Land held must be available for occupation

    • (2) Land must also be suitable for occupation by beneficiary.

  • Smith: Do these condition have to be satisfied only at commencement of occupation? Or must they have to continue to be satisfied?

    • Problem = if the latter view, what happens if some surprising event happens?

      • Purpose “changes”

        • E.g. that a house meant for joint occupation of a widowed mother and daughter becomes only occupied by daughter as mother goes and remarries and leaves?

          • Can the purpose of the trust still be effective?

      • Availability changes

        • Section purports to confer right to occupy – unless snapshot view taken of trust only at time of creation

          • Then to describe occupation as a right seems meaningless as it depends upon a continuing intention upon the part of the trustees.

      • Suitability of property changes

        • Chan v Leung [2003]:

          • Held that this subsection looked not just at the property, but the personal characteristics and requirements of the beneficiary.

          • Smith: suppose a widow has a life interest in a house – if she gets too old to look after house, can trustees insist she moves to more suitable accommodation?

• Trustee control of the right to occupy

  • S.13(1): Trustees have power to determine the exercise of entitlements where two or more beneficiaries have right to occupy, but must allow at least one to occupy

  • S.13(2): Trustees can’t

    • (a) unreasonably restrict beneficiary’s entitlement to land

    • (b) restrict any right to an unreasonable extent

      • Rodway v Landy [2001]: Doctors co-own surgery. L suggests that split up practise by physically partitioning building equally.

      • Gibson LJ: Would make no sense if beneficiaries were all excluded from occupation of land

        • However, in a building which is able to be equally partitioned,

          • the trustees should be able to exclude a beneficiary’s entitlement to occupy one part + vice versa

  • S.13(3): Trustees can impose reasonable conditions on beneficiary in occupation

    • S.13(6) Where beneficiary entitled to occupation excluded

      • Beneficiary in occupation may be required to

        • (a) make payments by way of compensation to beneficiary excluded/restricted

        • (b) forgo any payment otherwise entitled to compensate beneficiary

    • French v Barcham [2008]: X and Y are tenants in common of house. X declared bankrupt. X and Y marry. C, trustee in bankruptcy, 12 years later attempts to sell house and take 50% and gain occupation rent against Y for being excluded from occupation.

      • Blackburne J:

        • Operation of s.13 only excluded where trustee in bankruptcy who is entitled to interest in possession of land

          • has no such right of occupation (and neither do the creditors). Fact that no statutory right irrelevant.

        • The essential point = where it would be unreasonable practically to expect co-owner-not-in-occupation to exercise his right as a co-owner to take occupation,

          • it will normally be fair to charge the occupying co-owner an occupation rent in compensation.

• S.14(2) allows the court to make orders relating to exercise of trustees’ powers

  • So the court itself can step in and make orders relating to s.13(3) and (6) itself

    • This will particularly be the case where the trustees are also the beneficiaries and are at a disagreement

      • However, where the occupier is paying the mortgage, this will probably cancel out the excluded occupier’s claim to rent.

    • Smith: Court it less likely to step in where independent trustees have made arrangements/ not done something in good faith.

• Interplay with Family Law

  • Family Law Act 1996 gives wings to specific other situations to regulate occupation

    • It is unclear how far this statute interplays with TLATA 1996

  • Spouses and Civil Partners

    • S.30: Party with no property interest or merely equitable interest is entitled to retain occupation of Family home

      • And with leave of court, to go into occupation of said home.

    • S.33 however gives powers to court to regulate who can remain/go into occupation.

      • Relevant criteria = children, schooling, financial resources, likelihood of harm to children/party involved

    • S.62 extends similar considerations to co-habitees (1) living together as husband and wife or civil partners.

      • Considering the nature and length of the relationship

        • But order can only be up to 6 months in length and only extended once
          

The Power of Sale

• Core Propositions

  • Smith: Trustees manage the land – s.6 TLATA confers unlimited powers upon them

    • Except that they must act in the best interests of the beneficiary and exercise care (s.6(5), (6), (9).

  • Equally, while settlor can exclude all other powers in terms of trust

    • The settlor cannot exclude the power of the trustee to postpone sale of the land.

• Requirements for sale:

  • Consent

    • S.8(2): First protection is that trust may require the consent of a person (normally, but not always, the beneficiary) before trustee’s powers are exercised

      • Smith: although words of statute appear to require express consent, courts were willing in old days to imply consent

        • Even though old statute had similar wording to new statute.

  • Consultation

    • S.11(1) requires trustees, before exercising any function, to consult with beneficiaries who are adults with interests in possession

    • S.11(2) can exclude this in disposition creating trust if wished.

  • Unanimous agreement of all trustees

  • OR court application

    • S.14 confers wide power on court to deal with disputes

      • Normally happens where trustees disagree

      • Or where beneficiaries disagree with trustees

    • Smith: courts unlikely to interfere with decisions of independent trustees where not unreasonable decision

• S.15 (1) Court should look at following considerations when deciding to use s.14 discretion:

  • (a) the intention of the person or persons (if any) who created the trust

    • White v White [2003]:

      • Arden LJ:

        • Where more than one person created the trust,

          • the intention for the purposes of this section must be the intentions common to all the persons who created the trust

            • And this is the intention they had before and at the time the trust was created

        • Otherwise Parliament would have stated some other time, or stated that the “wishes” of the parties should be taken into account, which are subject to change.

  • (b) the purposes for which the property subject to the trust is held

    • Bank of Ireland v Bell [2001]: X and D were co-owners of house, with 90% and 10% share respectively. X forged D’s signature to obtain a mortgage, then left house and divorced. C sought sale to realise 90% share as trustee of bankruptcy over X’s share.

      • Gibson LJ: Judge entitled to use discretion within s.15 of act and look at relevant considerations

        • However, fact that the purpose of the trust was for matrimonial home is irrelevant

    • As X had left and therefore the purpose for the trust had come to an end

    • First National Bank v Achampong [2003]: X and Y marry, buy house at tenants in common in equity, X takes out mortgage without Y’s consent, X leaves house, abandoning Y with three grandchildren and mentally disabled child. C tries to sell through X’s share.

      • Blackburne J:

        • The purposes of the trust, which were to provide a matrimonial home

          • Have now disappeared because A and X are essentially divorced.

        • The intention of creating the trust – to provide a family home

          • Should therefore not be a factor that is given much weight.

    • Probert: If purpose of having a family home ends once one party leaves and only original purposes are taken into account

      • It appears that it is a straight contest between creditor and welfare of children

        • Where welfare of the children decreases in weight as children get older.

        • Courts appear to have blown back to situation where we started before s.15.

  • (c) the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home

    • Mortgage Corporation v Shaire [2001]: D and F live as husband and wife, each with beneficial interest, acting as trustees to selves as tenants in common in equity. F forged documents to secure mortgage with C, then died. C attempted to act charge on F’s estate and thereby order sale.

      • Neuberger J:

        • Old view of the law was that where a wife has a beneficial interest in the matrimonial home and their husband becomes bankrupt

          • Then voice of the creditors to sell the property and realise debts normally prevails over the voice of the wife.

        • And s.15(1) holds that interests of children and spouses is to be given same weight as the interests of creditors, not that creditor gets a greater voice.

    • Bank of Ireland v Bell [2001]:

      • Gibson LJ:

        • S.15 allows the court to give more weight and discretion to the needs of the spouse over the creditor

          • However, powerful consideration ought to be whether creditor is properly compensated.

  • (d) the interests of any secured creditor of any beneficiary.

    • First National Bank v Achampong [2003]:

      • Blackburne J:

        • Order for sale must be made

          • Creditor can’t be kept waiting indefinitely for any payment.

          • While consideration of infants is relevant

            • Must be evidence of how welfare will be adversely affected by the sale.

• Effect of Bankruptcy

  • When on the beneficiary co-owners becomes bankrupt, it is common for the trustee in bankruptcy to seek sale so that value on the bankrupt’s...