Экзамен зачет учебный год 2023 / Dixon, Modern Land Law

Modern Land Law

However, this presumption can also be rebutted by reliance on the wider constructive trust found in Stack v. Dowden.

The nature of the trust of land: the effect of the Trusts of Land and Appointment of Trustees Act 1996

The trustees hold the legal title for the benefit of the equitable owners (who may be themselves), but it is the legal owners who have powers equivalent to those of an absolute owner to deal with the land (section 6 of TOLATA 1996). These powers can be restricted by the document establishing the trust or by order of the court (section 14 of TOLATA 1996) and must be exercised in conformity with the TOLATA regime. The trustees may delegate powers to a beneficiary, except the power to conduct an overreaching transaction. The trustees are not under a duty to sell the land (as was the case with the old trust for sale). Any person interested in the trust of land may apply to the court under seciton 14 of TOLATA 1996 (replacing section 30 of the LPA 1925) for an order affecting the land, including an order for sale. The powers of the trustees, including sale, may be made subject to the consent of a specified person (e.g. a beneficiary), but only in limited circumstances. Providing the trustees are two or more in number and are in agreement and are not subject to a protected consent requirement, and that the equitable rights are overreachable, a sale will overreach the equitable interests, sweeping them off the land and into the purchase money so that they do not bind the purchaser.

The advantages of the trust of land as a device for regulating co-owned land

By abolishing tenancies in common at law, the LPA 1925 has ensured that there is but one title to investigate: the legal joint tenancy. The number of potential legal joint tenants is limited to a maximum of four (irrespective of the number of equitable owners). The right of survivorship diminishes the inconvenience and cost if a legal joint tenant dies. If there are two or more trustees of the land, the purchaser may usually ignore all the equitable owners because of statutory overreaching. The court’s powers under section 14 of TOLATA 1996 prevent co-owned land becoming inalienable. TOLATA 1996 gives concrete rights to the equitable owners to possess and enjoy the fruits of the land, subject to the possibility of overreaching.

The disadvantages of the trust of land as a device for regulating co-owned land

There may be disputes between the legal owners as to whether a sale or mortgage, and so on, should take place or whether the land should be retained for

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the benefit of the equitable owners. The problem is greater if the trustees’ powers are subject to the consent of some other person, although disputes may be resolved by application to the court under section 14 of TOLATA 1996. The powerful effect of overreaching may effectively destroy an equitable owner’s valuable rights. The ability to prevent overreaching through the imposition of a consent requirement is of limited value only. The trustees’ duty to consult the beneficiaries is likely to offer little practical protection. In cases of bankruptcy, it is very likely that the land will be sold, despite any objections by the equitable owners.

The position of a purchaser who buys co-owned land: overreaching or not?

If a purchaser buys co-owned land from two or more legal owners (i.e. there are two trustees) the equitable interests are transferred to the purchase money and the purchaser obtains the land free from their rights (overreaching). If the purchaser buys the property from a single trustee only, then the purchaser cannot rely on overreaching to protect him from the rights of the equitable owners: he may be bound by them according to the normal rules of registered and unregistered conveyancing.

The position of the equitable owners when overreaching occurs

If overreaching has occurred, the fundamental rule is that the equitable owners have no claim against the purchaser (which includes a mortgagee) to remain in possession of the land (City of London Building Society v. Flegg (1988)). In order to protect the equitable owner in this position, the Law Commission offered various devices for consideration, none of which were practical or sensible. In any event, it is important to see this ‘problem’ in perspective. Under TOLATA 1996, the trustees’ power to sell or mortgage may be made subject to the consent of another person. In registered land, this will prevent overreaching if the consent requirement is registered as a restriction against the title (assuming consent is not given!) and in unregistered land a purchaser will not be able to overreach if he has actual notice of the consent requirement.

The question of possession: who has a right to occupy?

All the legal owners have a right to occupy the property unless there is something specific to the contrary in the document establishing the trust of land. A purely equitable owner has a right to occupy under section 12 of TOLATA 1996, although this may be excluded or made conditional in the limited circumstances specified in section 13 of TOLATA 1996.

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The payment of compensation for exclusive use

Under section 13 of TOLATA 1996, a co-owner enjoying exclusive use of the land (i.e. where the other or others are excluded) can be required to pay compensation for such use. This had been the position under the old trust for sale (Re Pavlou (1993)).

The express creation of co-ownership

Any land may be deliberately conveyed to two or more people. In such circumstances, the persons to whom legal title is transferred will be the legal owners (joint tenant trustees) and, in the absence of any statement to the contrary, they will also be the equitable owners. This conveyance may also expressly declare who are the equitable owners and the nature of their ownership, and this is conclusive for those parties (Goodman v. Gallant (1986)).

Creation of co-ownership even though the legal title is in one name only

The legal owner (A) may expressly declare in writing (section 53(1) of the LPA 1925) that he holds the land on trust for the claimant (B) or, more usually, a person may claim an equitable interest through the operation of resulting or constructive trusts, namely:

1A resulting trust arises where the claimant has contributed to the purchase price of the property. The share of the interest follows the proportion of the purchase price paid.

2A constructive trust arises either: (i) where the legal owner makes an express oral promise or express oral agreement with the claimant that they ‘own’ the property or have a share in it, provided this is relied on by the claimant to their detriment; (ii) a common intention can be implied from direct contributions to the purchase price, such contributions also providing the required detriment; or (iii) a common intention is deduced from the whole course of dealings between the parties in respect of their home, such course of dealing also providing the required detriment. The size of the share may

be determined by what is fair taking account the whole course of dealings between the parties.

Severance

Severance is the process of turning an equitable joint tenancy into an equitable tenancy in common, usually in order to avoid the effect of the right

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of survivorship (a legal joint tenancy cannot be severed.) Severance occurs either by statutory written notice under section 36(2) of the LPA 1925; or by the act of a co-owner operating on his own share (e.g. mortgaging it); or where the joint tenants decide to sever by ‘mutual agreement’; or where an intention to sever is manifested by the ‘mutual conduct’ of the joint tenants.

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CHAPTER 5

SUCCESSIVE INTERESTS IN LAND

5.1 What is successive ownership of land?

In the previous chapter, we examined one way in which two or more people could share in the ownership of land. This was the law of concurrent co-ownership, being where all the co-owners were entitled to the enjoyment of land simultaneously. Typical examples were spouses, civil partners or unmarried couples.1 However, there is another method by which two or more people can have ‘ownership’ rights over land at the same time, albeit that only one of them is entitled to the immediate physical possession of the property. This is the law relating to successive co-ownership of land, being where one person has an estate in the land for life and another person, or persons, have rights that ‘fall into’ possession after the ‘life interest’ has ended.2 For example, it was once quite common for property to be left by will3 to one person for their life, then to another, then to another, and so on, as where Blackacre is left to A for life, with remainder to B for life, remainder to C in fee simple. In such a case, A has a life interest in possession (and is known, somewhat confusingly, as the ‘life tenant’); B has a life interest in remainder (and will be the life tenant when A dies); and C has a fee simple in remainder (and will become the absolute owner on the death of A and B). As is made apparent by this example, the person that established the successive interests4 was able to control the destination of the land for a considerable period5 and often the reason for creating successive interests was ‘to keep land in the family’ by limiting its ownership to successive heirs (e.g. my son, my grandson, etc.), although it could also be used for business or commercial arrangements. Importantly, even though only one of the co-owners was entitled to the possession of the land (the life tenant), all the other persons interested in ‘the settlement’ also had property interests that could be dealt with in the normal way. That is why it is a form of co-ownership.

1Although, of course, concurrent co-ownership is not confined to persons in an intimate family relationship.

2That is, of course, when the holder of the life interest dies.

3Or transferred on the occasion of marriage.

4Usually called ‘the settlor’.

5The length of time for which the settlor could exercise such control was not unlimited. The ‘dead hand’ of the settlor might only exert influence for that period of time that complied with the ‘perpetuity rules’.

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5.2 Successive interests: in general

The Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996) has had a profound impact on the law relating to successive interests in land. Prior to the Act, there were two methods of creating successive interests: first, under a settlement (or ‘strict settlement’, as it was known) regulated by the Settled Land Act 1925 (SLA); second, under a trust for sale regulated by the Law of Property Act (1925) (LPA). However, since the entry into force of TOLATA 1996 on 1 January 1997, the picture has changed considerably. The purpose of TOLATA 1996 is to simplify the law, to make dealings with land subject to successive interests more transparent and to ensure that the rules by which successive interests are regulated reflects the modern use to which this form of co-ownership can be put. Simply, TOLATA 1996 changed the way in which successive interests could in future be created6 and established a much simpler legal mechanism for dealing with all of those people interested in the land than existed under the Settled Land Act 1925. The principal effects of TOLATA 1996 are as follows:

1Since 1 January 1997, it has not been possible to create any new settlement within the ambit of the Settled Land Act 1925. The institution of the ‘strict settlement’ has been abandoned for all successive interests established after that date (section 2 of TOLATA 1996). The obvious consequence is that no new land can be made subject to the regime of the SLA 1925, and, over time, the influence of this creaking statutory regime will diminish.

2Existing strict settlements will remain effective and be governed by the Settled Land Act 1925 – section 2 TOLATA 1996 – as will resettlements of existing settled land.7 Inevitably, however, much existing settled land will fall into absolute ownership (i.e. all the life interests will terminate on the death of the life tenants), and the land will cease to be ‘settled land’. Note, however, that if the ‘old’ settlement is perpetuated by the creation of new life interests before the termination of the existing settlement, the land continues to be ‘settled land’ and remains subject to the SLA 1925. If, by way of contrast, the settlement does indeed terminate, and no land or heirlooms remain subject to it, any subsequent attempt to create a life interest in that land really is a ‘new’ creation, and will be governed by TOLATA 1996.

3All new attempts to create successive interests in land must take effect under the rubric of TOLATA 1996 (sections 4 and 5 of

6From 1 January 1997 and the entry into force of TOLATA 1996.

7As where a pre-1997 settlement comes to an end only by reason of its replacement with a new set of similar arrangements, a resettlement of existing settled land.

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TOLATA 1996). The normal device will be the standard ‘trust of land’ devised by that statute.8 It will be possible deliberately to establish successive interests under a ‘trust for sale of land’ on or after 1 January 1997, but this will still be governed by TOLATA 1996 and the practical differences between it and the ‘trust of land’ are minimal.9 It is very doubtful whether many express trusts for sale will be created after December 1996 as, under TOLATA 1996, very little would be gained by adopting this approach.

4For those existing successive interests not governed by the SLA 1925 – being those created deliberately as ‘trusts for sale’ prior to the entry into force of TOLATA 1996 – they will now be governed by the rubric of TOLATA 1996. Technically, if the ‘trust for sale’ has been created expressly, it will continue to be a ‘trust for sale’ but once again this is unlikely to have many practical consequences. Moreover, in those rare cases where the successive interests were governed by a trust for sale that arose by operation of law prior to TOLATA 1996, it is to take effect as a trust of land within that statute. Once again then, the important practical point irrespective of the precise type of trust involved is that successive interests are now governed by TOLATA 1996, save only for that diminishing category that remain within the ambit of the SLA 1925.

5.2.1Successive interests under the Trusts of Land and Appointment of Trustees Act 1996

As we have seen in the previous chapter, TOLATA 1996 effectively abolished the concept of the trust for sale and replaced it with the trust of land.10 Furthermore, as noted above, the Act also ensures that all future successive interests shall take effect as trusts of land under the TOLATA 1996 rubric. In fact, the great majority of the provisions of TOLATA 1996 were designed specifically with cases of successive ownership of land in mind (rather than concurrent co-ownership). This is because, in cases of successive ownership, it is likely (indeed, almost inevitable) that the trustees of the land will be completely different persons from the person who is to occupy the land for life (the life tenant), or the persons who are entitled in remainder should the life tenant die. The trustees may well be a bank or independent advisers, and the life tenant will be the person most intimately connected with the land – say,

8Replacing the old ‘trust for sale of land’.

9The definition of a ‘trust of land’ includes a ‘trust for sale of land’ (section 1 of TOLATA 1996).

10As noted, it is possible to create an express trust for sale under TOLATA 1996, but this is within the definition of a ‘trust of land’ and subject to the TOLATA 1996 rules.

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the eldest son of the settlor. Necessarily, in such typical cases of successive interests, the life tenant will usually wish to occupy the land,11 and the life tenant is usually the person best placed to manage the land effectively by exercising the various powers open to either him or the trustees.12 In their turn, the trustees are likely to prefer to hold a ‘watching brief’ and allow the tenant for life to use the land as befits his limited ownership.

With this in mind, a summary of the provisions of TOLATA 1996 may be given, remembering that these provisions apply to all new successive interests created on or after 1 January 1997 and for those previously governed by the rubric of the old ‘trust for sale’.

1First, save for pre-1 January 1997 strict settlements,13 there is to be one set of rules governing the creation and operation of successive interests – the trust of land under TOLATA 1996.

2Second, the doctrine of conversion is abolished, effective for all new and nearly all existing trusts of land (section 3 TOLATA 1996). The doctrine of conversion was an ancient doctrine applicable to certain property concepts whereby the interest of the persons entitled under the trust (e.g. in our case, the life tenant) was treated not as an interest in the relevant land, but as an interest in the proceeds of sale of that land. Hence, the rights were technically ‘personalty’ and not ‘realty’. Thus, a will leaving ‘my personal property’ to X, would actually pass the interest so converted to X, even though it looked like an interest in land. Its abolition means, in effect, that the interest of a person under the trust of land14 is to be regarded as an interest in the land itself, rather than in its monetary equivalent. Cleary, this accords with the perception of the persons having such interests and, in practice, this change in the law will have only limited consequences.15 The exception for which the doctrine of conversion may still operate is for trusts for sale of land created by the will of a person dying before 1 January 1997 – such a testator may have ordered his affairs precisely on the basis that the doctrine of conversion was applicable on his death.

3Third, the legal title to the land will be vested in the trustees of land and they will have all the powers of an absolute owner (section 6(1) of TOLATA 1996 and section 23 of the LRA 2002). The life tenant and

11See section 12 of TOLATA 1996.

12Hence the trustees’ ability to delegate their powers under section 9 of TOLATA 1996.

13Which will continue to operate under the SLA 1925 until exhausted.

14Including expressly created trusts for sale of land.

15The courts already treated such interests as ‘interests in land’ for many purposes irrespective of the doctrine of conversion; see for example, William & Glyn’s Bank v. Boland.

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persons entitled in remainder will have equitable interests in the land. However, the trustees’ powers are given in virtue of their status as trustees and consequently are subject to the general equitable jurisdiction in relation to the exercise of trustees’ powers. In other words, the trustees can be held accountable for the exercise of their powers on normal principles of trustee liability. More specifically, the trustees may delegate certain powers to the life tenant (or other person) and their powers may be restricted by the instrument that establishes the trust.16 Given that trusts concerning successive interests usually are created deliberately and with considerable formality,17 it is likely that the trustees will intend from the outset to delegate powers of management of the land to the tenant for life, including the power of sale. However, only the trustees can give a valid receipt for purchase money should any of the land be sold, hence preserving their role in overreaching.

4Fourth, the trustees must consult with the persons interested in the trust, both the life tenant and persons entitled in remainder. They should give effect to their wishes in so far as is consistent with the purposes of the trust of land (section 11 of TOLATA 1996). This raises similar issues to those considered in relation to concurrent co-ownership considered in Chapter 4.

5Fifth, the trustees’ ability to exercise their powers, including the power of sale, may be made subject to the consent of the equitable owners (e.g. the life tenant and persons entitled in remainder), but only if stated in the instrument creating the trusts (sections 8 and 10) or if imposed by the court following an application made under section 14 of TOLATA 1996. Given that the creation of successive interests is not usually undertaken lightly, it is quite likely that a consent requirement will be imposed as part of an overall strategy to deal with the land. In relation to registered land, a purchaser will be concerned to comply with the consent requirement if it reflected by the entry of a restriction against the title (section 26 of the LRA 2002). The position in respect of unregistered land is governed by section 16 of TOLATA 1996, on which see immediately below.18

16See generally sections 6 to 9 of TOLATA 1996.

17It is quite difficult for successive interest trusts of land to be created accidentally, although this can sometimes be the result of a successful claim of constructive trust or proprietary estoppel, as contemplated by Ungarian v. Lesnoff (1990) (see Chapter 4, constructive trust) and Dent v. Dent (1996) (see Chapter 9, proprietary estoppel).

18In the unlikely event of a successive trust of land arising informally, there will be no express requirement that the trustees should seek consent, so an application must be made to the court under section 14 of TOLATA 1996 if one is required.

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