Экзамен зачет учебный год 2023 / Dixon, Principles of Land Law

Principles of Land Law

for the good of the family with, of course, the ability to deal with the land (and sell it) if the need should arise.

There are also ‘trustees of the settlement’ and, although they rarely hold the legal title to the land, they exercise general supervisory functions over the settlement (Wheelwright v Walker (1883)). It is their responsibility to ensure that the rights and interests of all the beneficiaries under the settlement are protected, especially if the tenant for life misuses his statutory powers. The identity of the trustees is determined according to s 30 of the SLA 1925, although they will usually be named as such in the trust deeds.

If the person with the statutory powers chooses to sell the settled land, the interests of the beneficiaries are overreached if the purchase money is paid to the trustees of the settlement (who must be two in number, or a trust corporation), or into court. If overreaching occurs, the purchaser need not concern himself with the equitable interests, because these take effect in the purchase money: the ‘curtain principle’. The purchaser obtains a clean and unencumbered title to the land. If overreaching does not occur, the tenant for life cannot make a good title to the purchaser, and the purchaser may be bound by the equitable interests according to the provisions of the SLA 1925.

5.3.3The creation of strict settlements under the Settled Land Act 1925

Under the SLA1925, all strict settlements must be created by two deeds: a ‘trust instrument’ and a ‘principal vesting deed’ (ss 4 and 5 of the SLA 1925). The trust instrument declares the details of the settlement, appoints the trustees of it, and sets out any powers conferred by the settlement that are in addition to those provided automatically in the Act. The principal vesting deed is less comprehensive and describes the settled land itself, names the trustees, states the nature of any additional powers and, most importantly of all, declares that the settled land is vested in the person to whom the land is conveyed (the tenant for life) on the trusts of the settlement. The principal vesting deed is, in one sense, the statement of ownership of the tenant for life and it is with this that any purchaser will be concerned, not least because the equitable interests detailed in the trust instrument will be swept off the land by overreaching.

5.3.4The position of the tenant for life and the statutory powers

As indicated above, the tenant for life is given statutory powers to deal with the land. These powers are subject to various controls, usually overseen by the trustees of the settlement, in order to prevent the tenant for life from taking advantage of his dominant position. Certain controls are specific to certain powers, and these are noted below where appropriate; furthermore, the tenant for life is trustee of his powers and must have regard to the interests of the other beneficiaries when he exercises them (s 107 of the SLA 1925):

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(a)the tenant for life has power to sell the settled land, or to exchange it for other land (s 38 of the SLA 1925). However, he must obtain the best price that can be reasonably obtained and a court will take action to ensure this (Wheelwright v Walker (No 2) (1883)). This power is subject to the written notice procedure, as considered below, 5.3.5;

(b)the tenant for life has power to grant and accept leases of the land, although, for certain specific types of lease, the duration of the lease which the tenant for life may grant is limited (ss 41 and 53 of the SLA 1925). This power is also subject to the notice procedure;

(c)the tenant for life may mortgage or charge the land in order to raise money for specific purposes, these generally being purposes which would benefit the land per se, rather than any individual owner (s 71). This power is also subject to the notice procedure;

(d)the tenant for life may grant options over the land, including granting a person an option to purchase the land, or an option to purchase a lease (s 51). This power is also subject to the notice procedure;

(e)the tenant for life has various ancillary powers in relation to the settled land. This includes the power to dispose of the principal mansion house (s 65 of the SLA 1925), the power to cut and sell timber (s 66 of the SLA 1925), the power to compromise claims concerning the settled land (s 58 of the SLA 1925), and the power to sell and purchase chattels and family heirlooms (s 67 of the SLA 1925). These powers are subject to the tenant for life obtaining, variously, the consent of the trustees of the settlement or the leave of the court;

(f)the tenant for life may effect any other transaction for the benefit of the settled land under order of the court (s 64 of the SLA 1925);

(g)the trust deeds of the settlement may expressly confer additional powers on the tenant for life.

5.3.5The role of the trustees of the settlement in regulating the powers of the tenant for life

It has been indicated already that a major role of the ‘trustees of the settlement’ is to act in a general supervisory function in order to safeguard the rights of all persons entitled to an interest in the land. In addition to this, the most important powers of the tenant for life are subject to the provisions of s 101 of the SLA 1925. Under s 101, a tenant for life who intends to make a sale, exchange, lease, mortgage, or charge in respect of the land, or to grant an option over it, must give written notice to each of the trustees by registered post, and to the solicitor for the trustees, of his intention to exercise one of these powers. Each notice must be posted not less than one month before the sale, mortgage, etc, and, if there are currently no trustees of the settlement, these powers cannot be exercised (Wheelwright v Walker (1883)).

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These provisions are designed to ensure that the trustees are aware of all proposed major dealings with the land and are ready to activate the overreaching mechanism where appropriate. However, although at first sight this notice procedure appears perfectly adequate to protect all beneficiaries, the SLA1925 itself weakens this protection considerably. Thus, a trustee is under no obligation to interfere with a proposed dealing with the settled land of which he has notice (England v Public Trustee (1967)) and, except for the power to mortgage or charge, the tenant for life may give notice of a general intention to exercise these powers, rather than specific notice on each occasion (s 101(2)). Furthermore, the trustees may, in writing, waive the notice requirement, or accept less than one month’s notice (s 101(4)) and, importantly, a person dealing with the tenant for life in good faith is not required to inquire whether these procedural safeguards have been observed (s 101(5)).

5.3.6The fiduciary position of the tenant for life

According to s 107 of the SLA 1925, the tenant for life is trustee of his statutory powers for those entitled under the settlement, and ‘shall’ have regard to their interests when exercising those powers. This is meant to give further protection to those entitled to either the land or its monetary equivalent after the current tenant for life has departed. It has some practical consequences, albeit of a limited nature. For example, if the tenant for life sells the settled land, he must sell as fairlyasatrusteewouldsell,which,effectivelymeansforthebestpricereasonably obtainable paying due regard to the interests of the people entitled in remainder (Wheelwright v Walker (1883)). Moreover, the tenant for life cannot accept and keep a payment for exercising the powers because, as a trustee, he is under a duty not to profit from his trust (Chandler v Bradley (1897)). However, once again, the protection against a dishonest tenant for life is quite shallow, for it is clear that a court will not invalidate a sale simply because the tenant for life sells the property for a bad motive, or even if the tenant for life is simply uninterested in managing the land (Cardigan v Curzon-Howe (1885)).

5.3.7Attempts to restrict the powers of the tenant for life

It should be apparent from the above that the tenant for life really is in control of the settled land, and that the statutory powers he is given are not subject to serious control either by the trustees of the settlement or under the general law of trusts. Consequently, there is a temptation for settlors to attempt to control or restrict the tenant for life in the exercise of his powers by inserting some express limitation clause in the deeds of the settlement. Unfortunately, this cuts against the philosophy of the SLA 1925 which was designed to prevent just this sort of control being exercised over the settled land by the ‘dead hand’ of the settlor. Therefore, according to s 106 of the SLA1925, any provision inserted in a settlement which purports or attempts to forbid a tenant for life to exercise

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a statutory power, or any provision which attempts, tends or is intended to induce the tenant for life not to exercise those powers, is void, as in Re Patten (1929). Likewise, in Re Orlebar (1936), the court discussed a so called ‘residence condition’, which stipulated that the tenant for life should lose his interest under the settlement if he ceased to occupy the land, and said that there would be no forfeiture of that interest if he left the land because of the exercise of a statutory power (although not if he left for another reason).

Obviously,s106isaverypowerfulstatutoryprovisionanditislargelyeffective to prevent settlors avoiding the policy of the SLA1925 by special drafting of the settlement. However, in Re Aberconway (1953), a majority of the court held that, if that which might be lost to the tenant for life through such a provision was not abenefittohim,s106didnotapplytomakethatprovisionvoid,althoughaccording to the dissenting voice of Lord Denning anything which even ‘tended’ to restrict the tenant for life in the exercise of his powers was void. Indeed, Lord Denning’s view does seem more consistent with the overall policy of the Act, and with the words of s 106 itself. It is echoed in s 104, whereby any contract entered into by the tenant for life himself not to exercise a statutory power is void.

5.3.8Protection for the beneficiaries

In a very general sense, the beneficiaries under the settlement are protected by both the notice procedures discussed above, the general supervisory role of the trustees of the settlement, and the overreaching machinery, especially if all they are concerned with is the income which the land may generate rather than the land itself.

More importantly, a very powerful provision is found in s 13 of the SLA 1925. As noted above, each settlement will be constructed via two deeds: the trust instrument and the vesting deed. Under s 13, if no vesting deed has been executed in favour of the tenant for life, any proposed dealing inter vivos by him with the legal estate operates only as a contract to carry out that transaction: it does not transfer the legal title to the prospective purchaser. In other words, in the absence of a vesting deed, dealings with the legal title are paralysed, except in four specified cases, the most important of which is a sale, etc, to a purchaser of a legal estate without notice of the absence of the vesting deed. Simply put, the absence of a vesting deed makes it difficult for the tenant for life to deal with the land. However, if he sells that land in violation of the settlement to an innocent purchaser (as most will be), that purchaser will obtain good legal title to the land. Once a vesting deed has been executed, s 13 no longer applies, and the beneficiaries must fall back on s 18 of the SLA 1925.

Under s 18 of the SLA 1925, once a vesting deed has been executed, and until the settlement is discharged, any transaction which is not ‘authorised’ by the SLA 1925 or other statute is void. Thus, any sale or mortgage, etc, by the tenant for life outside his statutory powers is ineffective to convey legal title to the land, and operates only to convey the tenant for life’s own equitable interest (Weston v Henshaw (1950)).

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5.3.9Protection for the purchaser of settled land

Once again, in a general sense, the purchaser of settled land is protected by the overreaching machinery. He need be concerned only with the vesting deed and can rely on the interests of the beneficiaries being overreached. However, of course, things can, and do, go wrong. To meet this situation, s 110 of the SLA 1925 provides that a purchaser who deals in good faith with the tenant for life is, vis à vis the beneficiaries, deemed to have paid the best price and to have complied with all the requirements of the Act. Although it is sometimes thought that this provision sits uneasily with s 18 (which voids all unauthorised transactions), it seems that s 110 is concerned with matters of detail, not of principle. Thus, s 110 will not protect a purchaser if the transaction with the tenant for life is wholly unauthorised (s 18), but will protect him if there are omissions of detail in an authorised transaction (Re Morgan’s Lease (1972)).

5.3.10 The overreaching machinery

Equitable interests under strict settlements are capable of being overreached on a sale of the settled land (s 2 of the LPA 1925). If successful, overreaching will confer legal title on a purchaser free of all equitable interests under the settlement. Of course, no legal rights are capable of being overreached and with three minor exceptions (annuities, limited owner’s charge, general equitable charge), neither are any equitable interests created prior to the settlement. As with all overreaching, the capital purchase money must be paid to at least two trustees (of the settlement) or a trust corporation. Failure to overreach may result in the purported transaction being void or the equitable interests binding the purchaser under the normal rules of registered or unregistered conveyancing save that equitable interests under a SLA 1925 settlement of registered land cannot be overriding interests—s 86(2) of the LRA 1925. Usually, such rights (in registered land) will be protected by the entry of a restriction on the register of title.

5.3.11 The duties of the trustees of the settlement

Thesupervisorydutiesofthetrusteesofthesettlement,andtheirroleinregulating the tenant for life in the exercise of his statutory powers, have been mentioned already. In addition to this, the SLA1925 gives the trustees other responsibilities, not least, receipt of the capital sum in order to facilitate overreaching. More specifically, the trustees may actually act as ‘statutory owner’ (with all the powers of a tenant for life) if there is no tenant for life, or the tenant for life is an infant and, under s 24 of the SLA1925, the court may authorise the trustees to exercise the powers of the tenant for life (in his name) if the tenant has ceased to have a substantialinterest intheland,orhasrefused(butnotmerelyneglected)toexercise those powers (Re 90 Thornhill Road (1970)).

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5.4The trust of land

The second method of regulating successive interests in land was the trust for sale.Although trusts for sale expressly created before or after 1 January 1997 may continue to exist in name, they will take effect under the TOLATA1996. Further, any such trusts which had been or will be imposed by statute will become the ‘pure’ trust of land, subject to an identical TOLATA 1996 regime. Consequently, in terms of pre-1997 law, the ‘other’ method of creating a trust for successive interests (the old trust for sale) comes under the new TOLATA1996 regime. This has been discussed above, and reference also should be made to Chapter 4.

5.5A comparison between the old strict settlement under the Settled Land Act 1925 and the new Trusts of Land and Appointment of Trustees Act 1996 regime

As noted at the outset of this chapter, pre-1997 existing successive interest trusts for sale, and all new attempts to create successive interests in land, will take effect under the TOLATA 1996. This is regardless of whether they take effect as the ‘pure’ trust of land (likely for all new trusts), or whether they retain their ‘trust for sale’ status, having been created as such expressly. Again, as noted above, the difference between the two is minimal, as it is the provisions of the TOLATA1996 that are important and these apply equally. In order to appreciate more fully the difference that the obligatory application of the TOLATA 1996 will make to the law of successive interests, a comparison with the ‘old’ strict settlement of the SLA 1925 is appropriate:

(a)settled land is governed by the complicated provisions of the SLA 1925. The trust of land under the TOLATA 1996 is relatively easy to understand and operate (and this includes expressly created trusts for sale). The abolition ofthestrictsettlementfornewsuccessiveinterestsshouldmeanlesslitigation and less cost;

(b)the strict settlement was ideally suited to keeping land ‘in the family’, especially where the tenant for life may have wished to occupy the land and consequently refused to exercise his power of sale. This was perfectly legitimate, even if those entitled on his death saw the value of their prospective interests dwindle. The new machinery can ensure occupation by interested persons (that is, the tenant for life), but also has the flexibility to ensure that land is sold if this is in the best interests of every equitable owner (see s 14 of the TOLATA 1996);

(c)under a strict settlement, the tenant for life has legal title and is in effective control of the land. Under the TOLATA 1996, the trustees have legal title, and have all the powers of an absolute owner. They will control the land

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unless they choose to delegate to the person with the life interest or other person. They will not divest themselves of legal title unless the land subject to the trust is sold;

(d)the tenant for life under the SLA 1925 is constrained by the fact that his powers and the legal estate are held on trust. Moreover, certain powers are subject to notice procedures, consent of the trustees of the settlement, etc. The trustees under the TOLATA 1996 are obliged to consult the beneficiaries (for example, person with life interest), and should endeavour to give effect to his wishes. But, they are not bound to do so. Under the TOLATA 1996, the trustees may have delegated their powers irrevocably, and may be subject to consent requirements;

(e)on the death of a life tenant under a strict settlement, the legal estate can be transferred only by means of the expensive and time consuming process of obtaining a vesting deed. On the death of a trustee of land under the TOLATA 1996, legal title simply accrues to the remaining trustees under the right of survivorship. No cost, no documents and no fuss;

(f)the position of a purchaser of land subject to a strict settlement was not always clear, but was generally quite favourable. Under the TOLATA1996, a purchaser may be bound by equitable interests if overreaching does not occur.

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SUMMARY OF CHAPTER 5

SUCCESSIVE INTERESTS IN LAND

What is successive ownership of land?

Successive ownership of land occurs when one person has an estate in the land for life and another (or others) has (have) rights which ‘fall into’ possession after the ‘life interest’ has ended. There are two ways in which land can be held subject to successive interests. First, for successive interests created before 1 January 1997, a settlement (or ‘strict settlement’) may be used. Such land is called settled land and falls within the machinery of the SLA 1925. Secondly, for successive interests created on or after 1 January 1997, the TOLATA 1996 requires that a trust of land be used. No new strict settlements can be created after this date, save for resettlements of existing settled land.

The strict settlement and settled land

A ‘strict settlement’ will exist in a number of (complicated) circumstances, but the most common are where land is ‘limited in trust for any persons by way of succession’ or where land which is charged by way of a family arrangement with the payment of any sums for the benefit of any persons.

The essential characteristics of settled land

The person under the settlement who is of full age and entitled to immediate possession of the settled land (or the whole income from it) is generally regarded as the ‘tenant for life’ (s 19 of the SLA 1925). The tenant for life is holder of the legal estate and holds that estate on trust for the beneficiaries under the settlement (ss 4 and 107 of the SLA 1925). The tenant for life exercises most of the important statutory powers to deal with the settled land. These effectively place the tenant for life in control of the land. There are also ‘trustees of the settlement’ and they exercise general supervisory functions over the settlement. Where the person with the statutory powers chooses to sell the settled land, the interests of the beneficiaries are overreached if the purchase money is paid to the trustees of the settlement (who must be two in number or a trust corporation) or into court.

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The position of the tenant for life and the statutory powers

The tenant for life will usually have various powers to deal with the settled land, including the power to sell it, grant a lease of it and mortgage it for specific purposes. These powers are subject to the consent of the trustees of the settlement or the leave of the court, although the tenant for life may effect any other transaction for the benefit of the settled land under order of the court (s 64 of the SLA 1925). The trusts of the settlement may expressly confer additional powers on the tenant for life. Under s 106 of the SLA1925), any provision inserted in the settlement which purports or attempts to forbid a tenant for life to exercise a statutory power, or any provision which attempts, tends or is intended to induce the tenant for life not to exercise those powers, is void.

The role of the trustees of the settlement in regulating the powers of the tenant for life

Unders101oftheSLA1925,atenantforlifewhointendstomakeasale,exchange, lease, mortgage, or charge in respect of the land, or to grant an option over it, must give written notice to each of the trustees by registered post and to the solicitor for the trustees of his intention to exercise one of these powers.

The fiduciary position of the tenant for life

Under s 107 of the SLA1925, the tenant for life is trustee of his statutory powers for those entitled under the settlement and ‘shall’ have regard to their interests when exercising those powers.

Protection for the beneficiaries

In addition to the notice procedure, the general supervisory role of the trustees of the settlement and the overreaching machinery, the beneficiaries are protected by ss 13 and 18 of the SLA 1925 that can paralyse dealings with the land in certain circumstances.

Protection for the purchaser of settled land

Section 110 of the SLA 1925 provides that a purchaser who deals in good faith with the tenant for life is, vis à vis the beneficiaries, deemed to have paid the best price and to have complied with all of the requirements of the Act. This is concerned with matters of detail and s 110 will not protect a purchaser if the transaction with the tenant for life is wholly unauthorised (s 18).

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The overreaching machinery

Equitable interests under strict settlements are capable of being overreached on a sale of the settled land (s 2 of the LPA 1925). No legal rights are capable of being overreached.

The trust of land and the TOLATA

The TOLATA1996 regulates all successive interests of land (except resettlements) created on or after 1 January 1997. Legal title is vested in the trustees who have all the powers to deal with the land. The life tenant and others entitled will have equitable interests. The trustees may delegate their powers (except the power to overreach) to any person and may well give some powers to the person in occupation of the land, usually the tenant for life. The trustees must consult the beneficiaries before dealing with the land, but only in limited circumstances will they have to obtain the consent of the beneficiaries before exercising their powers. The tenant for life (and other beneficiaries) has a right to occupy the land, although this can be excluded. Usually, only the tenant for life will occupy. Asale (including a mortgage) by the trustees will overreach the equitable owners, providing the conditions for statutory overreaching are met. Any person interested in the trust of land may apply to the court under s 14 of the TOLATA 1996 for an order concerning the land.

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