LAW2100 – Land Law Lecture 6 PDF

# LAW2100 – LAND ## LAW Lecture Six – Trusts of Land (Part A) ### What is a trust? - A trust is an instrument which allows ownership of property to be split between: - **Legal Ownership/Title**: The owner's name and legal rights are recognized in law. - **Equitable Ownership/Title**: Bene...

# LAW2100 – LAND ## LAW Lecture Six – Trusts of Land (Part A) ### What is a trust? - A trust is an instrument which allows ownership of property to be split between: - **Legal Ownership/Title**: The owner's name and legal rights are recognized in law. - **Equitable Ownership/Title**: Benefits from the property are enjoyed by a person recognized in equity. ### The development of the trust instrument through equity - Legal title is given to someone to hold for the administration purpose but with the intent to benefit another. - The "true" owner is excluded and the holder of legal title wants to enjoy the property for his own benefit. - This goes against the conscience of the initial agreement. ### TERMINOLOGY: | Settlor | Trustee | Beneficiary | | :------ | :----------- | :-------------- | | Person who sets up the trust | Person who holds the legal title of the property | Person who enjoys beneficial title of the property | | Person who creates the trust of the property | Owes fiduciary duty to the beneficiary | Can enforce their title in equity | | | Can take all action of a legal owner | Minimum of one beneficiary, no maximum | | | Must act in best interests of beneficiary | | | | Minimum of one trustee, maximum of four | | ### What is a Trust of Land? - **S1(1) TLATA 1996**: Any trusts of property which consists of or includes land. - **S1(2)**: Refers to any description of trusts (express, implied etc) and includes trusts of land created before commencement of this act. - **S36(1) LPA 1925**: Where legal estate is held in joint tenancy, it shall be held in trust. - **S34 (2) LPA 1925**: Statutory trusts is imposed where land is conveyed to tenants in common. ### Trust of Land will arise when: #### EXPRESSLY CREATED:IMPLIEDLY CREATED: - **S53(1)(b)**: Declaration of trusts in respect of any land or interest therein must be manifested or proved by some writing signed by some person who is able to declare such trust or by his will. - **Express trust of land** - **Arises from circumstances/actions of parties** - **Resulting/constructive** - No writing or other formalities needed. #### WHEN THERE IS CO-OWNERSHIP OF LAND: - **Implied trust of land** - more in Lecture Eight. ### S36(1)LPA 1925: - When legal title is held in co-ownership as joint tenants, it will be held as trust of land. ### Where beneficial title is held in co-ownership as joint tenants: - It will be held as trust of land. ### S34(2) LPA 1925: - When beneficial title is held in co-ownership as tenants in common, it will be held as trust of land. ### Statutory trusts ### Considering the role and powers of trustees: - Who appoints them? - How many should there be? - Can they retire as trustees? - What are their powers? - Who or what controls their powers? ## Who appoints the trustees? - For express trust, usually settlor. - Settlor may also nominate a person to appoint trustees. - **S19-21 TLATA 1996**: Beneficiaries of full age and capacity, acting unanimously may direct person authorised to appoint trustees to appoint. - Appointment must be made by deed - **S40 TA1925**. - For implied trust, trustees are created when the trust crystallises and legal owner is recognised in equity as a trustee. ### How many trustees is ideal? - Ideally, at least 2 trustees (up to a max of 4) due to **S2(1)(ii) LPA 1925**. - **To allow overreaching to operate - protection for purchaser of trust land**. There can be a single trustee, mostly arising from situations of implied trusts. ### Can trustee be replaced/removed? - **S36 TA 1925**: Circumstances when trustee can be replaced. - **S19 TLATA 1996**: Beneficiaries of full age and capacity, acting unanimously, may give written direction to trustee to retire from the trust. ### POWERS AND DUTIES OF TRUSTEES - **S6(1) TLATA 1996**: Trustees of land have all the power of an absolute owner but cannot exercise such powers in contravention of any other enactment or rule of law or equity. - **S6(5) TLATA 1996**: When exercising powers of an absolute owner, must have regard to the rights of beneficiaries – fiduciary duty. - **S1(1) ΤΑ 2000**: Duty of care to exercise such skill and care as is reasonable especially if trustees have any particular expertise. - **S8(1) TLATA 1996**: Powers listed in S6 and S7 may be limited by any disposition creating the trust. - **S8(2) TLATA 1996**: Settlor can require trustee to obtain consent before exercise of any power listed in S6 and S7. ### S6(1) TLATA 1996: ALL THE POWER OF AN ABSOLUTE OWNER - Power to acquire land - Power to partition the land - Power to delegate functions to beneficiaries - Power to compel beneficiaries to accept conveyance of the land: - Power to postpone sale: ### S6(3)/S17(3) TLATA 1996: - Unless restricted, trustees may acquire freehold or leasehold land anywhere in UK and, for this purpose, may sell trust land and reinvest the proceeds. ### S7(1) TLATA 1996: - May petition the land between beneficiaries of full age and absolutely entitled. **S7(3): Need consent of beneficiaries** ### S9(1) TLATA 1996: - Power to collectively delegate functions to any beneficiary of full age and who is beneficially entitled to an interest in possession. ### S6(2) TLATA 1996: - Have a statutory right to terminate trust by demanding that beneficiaries of full age and who are absolutely entitled to take title. ### S4(1) TLATA 1996: - Have the power to postpone sale in every trust for sale. ### DUTIES OF TRUSTEE: - Duty to consult the beneficiaries - Duty to seek consents ### S11(1): - Trustees, in the exercise of any function, shall so far as practicable, consult the beneficiaries and so far as consistent with the general interest of the trust, give effect to wishes of the majority. - May be excluded or limited by express provision by settlor. - Two of them to the exercise of the function is sufficient in favour of a purchaser. - But trustees can apply to court to remove requirement to seek consent under **S14**. ### S10 (1): - If a disposition creating a trust of land requires the consent of more than two persons to the exercise by the trustees of any function relating to the land, the consent of any. ### RIGHTS OF THE BENEFICIARIES: - **Right to be consulted:** - **S11 TLATA 1996**: Right to be consulted by trustees but “as far as practicable”. - But trustees have no obligation to comply unless majority beneficiaries want it and such wishes are in “general interests of the trusts”. - If trustees ignore their wishes, they cannot go to court unless they can show trustees have gone against general interests of the trust. - **Right to appoint and remove trustees:** - **S19(2)**: Beneficiaries of full age and capacity, acting unanimously, may give written direction to trustee to retire from the trust or written direction to appoint by writing person to be a trustee. - **Right to require that consents be obtained:** - **S10(1)**: Require trustees to obtain consents of named persons before exercising any function relating to the land. - If beneficiaries are the named persons, then they can insist on their consent being obtained. ### RIGHT OF BENEFICIARIES TO OCCUPY TRUST LAND: - **S12(1) TLATA 1996**: All beneficiaries who are entitled to right in possession may occupy trust land if purpose of trusts include making the land available for his occupation, OR, if land is held by trustees to be so available. - **S12(2)**: Sub-section(1) does not confer a right on beneficiary to occupy if land is unavailable or unsuitable for occupation.. - **Medleycott v. Herbert**: Beneficiary cannot rely on right to occupy if trust does not include a provision to provide a home for them. - **Chan Pul Chun v. Leung Kam Ho**: No right to occupy if property is unavailable or unsuitable. - **S13(1)**: Trustees may regulate and prevent some beneficiaries from using the right. - **S13(3)**: Trustees may impose reasonable restrictions on occupying beneficiaries, eg: - Keep place clean, only use for certain purposes etc. - **S13(5)**: Trustees may impose a condition on occupying beneficiary to pay certain outgoings. - **S13(6)**: May be required to compensate other beneficiary who has been deprived of right to occupy – only apply to beneficiaries with statutory right of occupation. - Where there is no statutory right of occupation, courts may still impose occupation rent to compensate the other beneficiary. - **French v. Basham (2009)**: Courts used the principle of equitable accounting to impose occupation rent paid to trustee in bankruptcy. - **Ali v. Khatib(2022)**: Occupation rent is not payable simply because one beneficiary is occupying and the other is not. Something more must be shown which makes it just and equitable that he should pay the other – the focus should be on the behavior of the person occupying. - **S13(7)**: If beneficiary is ALREADY in occupation he cannot be made to leave unless he agrees or order is obtained from the court. ### ULTIMATE RIGHT OF BENEFICARY: - Right to an appropriate interest in the capital proceeds.