Trusts OF LAND - Robert Hush PDF

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Robert Hush...

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TRUSTS OF LAND AND THE EFFETCT OF BANKRUPTCY: Legal and Equitable Ownership -

Trusts of Land arise by:

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i. Lifetime Trusts (Settlements) Settlor: Owner of Property Trustee: Holder of Property

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ii. Will Trusts – Testator/Testatrix – Beneficiary Testator: Owner of Property Beneficiary: Receiver of Property

Trusts of Land:  TOLATA (Trusts of Land and Appointment of Trustees Act 1996) - Regulates and manages ALL trusts of land

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S1 – All trusts of property which include land (created before or after 01/01/1997) are trusts of land

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S3 TOLATA abolishes Doctrine of Conversion

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S 6-13 – Framework of governing duties and powers of trustees and rights of beneficiaries S 6(1) – Trustees have power to deal with trust land as absolute owners of it – Must consult beneficiaries of full age and give effect to their wishes

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Co-Ownership Trusts: Joint Tenants in Legal Estate Husband and Wife purchase house – they hold legal estate for themselves in equity = Joint Tenants Both Co-Owners are TRUSTEES and BENEFICIARIES If there is no express declaration of trust:  LPA 1925 S 34-36 apply Beneficial Interest – In Equity A) Tenancy in Common:  S 1(6) & 34(1) LPA 1925 – imply Tenancy in common Separate interests No right of survivorship Only unity of possession is essential A&B hold legal interests as Joint tenants But A&B hold equitable interests proportionately

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B) Joint Tenancy :  S 36 LPA 1925 – implies Joint Tenancy If the land is owned by 2 or more people at law If an estate is given to A&B in fee simple (without the addition of any restrictive or explanatory words), the law gives effect to the whole of the grant by creating an equal estate in them both Tenants hold land as an indivisible unit Single Title deed or land title register The 4 Unities: Possession; Interest; Title; Time Survivorship A&B hold Legal and Equitable interests jointly

Severing (Dividing) a Joint Tenancy: - By Notice in Writing  LPA 1925 S196 – notice validly served if delivered by hand or ordinary post  Kinch v Bullard [1998] -

By unlawful killing  Forfeiture Act 1982 S2  Dunbar v Plant (1998)  Carol Glover v Staffordshire Police Authority (2006)

Statutory Occupation Rights and Shared Homes as opposed to ownership:  Family Law Act 1996 (Part IV) - Confers occupation (not ownership) rights where spouses, cohabitants, children and other relatives are involved. Affects property intended to be used as the family home.  S41 – Factors the court is to consider includes the nature and length of the relationship. a) Spouses: A non-owning spouse has a statutory right to occupy. In a case of marriage breakdown, the court can order that either party should occupy or leave the land. [Note that in cases of divorce the Family Division of the High Court can make property adjustment orders under Matrimonial Causes Act 1973 ss. 24 and 25] b) Cohabitants: Where only one party has the right to occupy, the court may order that the other party should occupy. Such an order cannot last more than six months, and can be extended only once.

Sale of the land 1) Consent: 

S. 8(2) – The trust may require obtaining someone’s consent to a sale

2) Consultation 

S 11 – before exercising any of their functions, the trustees must consult those beneficiaries who are adults with interests in possession. They must give effect to the wishes of the majority “so far as consistent with the general interests of the trust”.

3) Decision to sell - Trustees must act unanimously (unless trust deed provides otherwise, or charity trustees). Note that purchase by one beneficial co-owner of the other co-owner’s interest may be a more agreeable solution than a forced sale. 4) Application to court under s. 14 TLATA - If trustees cannot agree, or if a beneficiary or trustee in bankruptcy (with rights in a beneficiary’s interest) wishes to overturn a decision of the trustees. 5) Guidance to the Court  S 15 – guidelines on court’s exercise of its powers under s. 14. - Note therefore that S 15(1)(d) permits one beneficiary to damage the interest of other beneficiaries by mortgaging his or her beneficial interest, by exposing the land to sale at the behest (command) of a secured creditor (company to which money is owed to). - What weight will the court place on the different factors when they conflict, e.g. the welfare of minors vs the interests of secured creditors? Older case law was decided under LPA 1925 s. 30: Purposes for which the property is held:

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Re Buchanan-Wollaston’s Conveyance [1939] Ch 738. Four residents of houses purchased land near the sea at Lowestoft to protect their ‘sea view’. All agreed they would not sell the land except by unanimous consent. Application made under S.30 LPA 1925 to force sale. Main purpose still existed a) Family homes purpose Jones v Challenger [1961] 1 QB 176. Husband and wife co-owners. Purpose of purchase had been as a matrimonial home, later wife had departed. Upon divorce, this purpose had come to an end. Not inequitable for the wife to liquidate her share. Rawlings v Rawlings [1964] P 398. Marriage had broken down, but no divorce. Purpose held to be at an end when the marriage was dead as a matter of fact (i.e. even without divorce). Re Evers’ Trust [1980] 1 WLR 1327. Similar principles apply to unmarried couples. b) Home for children purpose

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S 15(1)(c) the welfare of minors is a statutory factor

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c) More than one purpose Bedson v Bedson [1965] 2 QB 666. Property bought by husband both as a drapery business and as a home for the family. Co-owning wife departed, taking the children, and sought sale. The drapery business purpose of the purchase could still be achieved. No sale ordered, but rent payable to wife by husband. d) A dominant purpose Charlton v Lester [1976] 1 EGLR 131. House bought by mother, daughter and son-in-law, where mother was already a tenant. When daughter and son-inlaw bought a separate house for themselves, they sought sale of the mother’s house. Held: purpose of mother retaining her home had been more significant that the purpose of using the house for all of them.

RESOLVING DISPUTE: TOLATA Replaced S30 LPA: Trusts for Sale - Presumption that land is to be sold when… trustees no longer wished to postpone sale - Where continuing purpose for land had ended - Family Homes – continuing purposes when relationship breaks down  

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S14 – Wide discretion of court to make orders for sale S15 – Guidelines Criteria that the court must take into account when deciding an application under S.14: (a) The intentions of the person or persons who created the trust (b) The purposes for which the property is held (c) The welfare of any minor who occupies the trust as his/her home (d) The interests of any creditor Law Commission “Transfer of Land, Trusts of Land” Law Com No. 1989

Bankruptcy: Trustee in Bankruptcy (Officer of the Court) Upon bankruptcy, the property as a co-owner is vested in the trustee in bankruptcy. The trustee will seek sale of the property under S.14  S.15 considerations do not apply - Interests of creditors come first - Needs of any children – 4th! - Interests of creditors outweigh all other interests except in the most exceptional circumstances -

 S.335A Insolvency Act 1986 criteria applies  Insolvency Act 1986 ss. 335A–337 principles apply, displacing the normal s.15 guidelines. Relevant factors under S.335A: (a) The interests of creditors

(b) Where the house has been the home of the bankrupt or the bankrupt’s spouse, the conduct of the spouse as regards the bankruptcy, the needs and resources of the spouse, and the needs of any children (c) All the circumstances of the case other than the needs of the bankrupt  s. 337 requires the needs of any children living with the bankrupt to be taken into account  s. 336 provides protection where a spouse has statutory occupation rights under FLA 1996 s. 30  S.336 (5) provides that after one year the interests of creditors are to be assumed to outweigh all other considerations, unless the circumstances of the case are exceptional Exceptional Circumstances  Re: Bailey (A Bankrupt) [1997] 1 WLR 278 - no postponement for son to complete his A Level studies  Claughton v Charalambour [1999] 1 FLR 740 - chronic illness and disability of wife meant sale postponed indefinitely  Re: Citro [1991] CH 142 - Wife applied for postponement of sale on basis her children were young and would be forced to move school. - Nourse LJ “these are not exceptional circumstances.... they are the melancholy consequences of debt and improvidence with which every civilised society has been familiar.

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Recommendations: Cork Committee on Insolvency Law and Practice (1982) Cmnd 8558 – Report led to the introduction of the IS 1986. Para 1129 – “In balancing potential hardships involved in the sale of the family home against the interests of creditors, the court will give primary consideration to the welfare of dependent children to the circumstances of the wife and to the situation of dependent parents who are resident in the family dwelling – How far is the Insolvency Act 1986 consistent with these recommendations? Barca v Mears [2004] EWHC 2170 (Ch) the bankrupt son’s special education needs would not postpone sale of the family home because the prejudice to the creditors would be substantial; the educational problems were not extreme; he would not have to move school – See the judgment of Nicholas Strauss QC and his important (Obiter Dicta) comments on the meaning of ‘Exceptional Circumstances’ and the Right to Family Life under Article 8 ECHR at paragraphs 33 and 37-43. Ford v Alexander [2012] EWHC 266 (Ch) – argued that parliament has established the balance between the interests of creditors and the affected family and that the courts should be slow to interfere

The Enterprise Act 2002 Bankruptcy orders and the Family Home 1st April 2004 – new regime S. 283A EA 2002 If bankrupt’s estate includes a dwelling house – the principal residence of the bankrupt or their spouse The trustee in bankruptcy has 3 years to ‘take action’ to realise the asset.

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If no action taken – the asset reverts to the bankrupt. Note: after 1 year interests of creditors outweigh all other interest

Human Rights  Article 8 ECHR  Article 1 of the First Protocol ECHR (right to family life)  Mortgage Corp v Shaire  Barca v Mears [2005] 23 FLR 1 – Judgment of Nicholas Strauss QC on Article 8...