Co-Ownership & Trusts
Trust held for Another
If one person is given land to hold on trust for another, then the trustee should collect any rents or profits from the land and pass them onto the beneficiaries
What if they don't pass on the money?
Under the common law courts, the trustee did no wrong as he is the legal owner and the beneficiary has no right to complain
Under the chancery courts, it is unconscionable that the trustee accepted a gift for the beneficiary and used it for himself.
Estates and Interests
Equitable Estates and Interests
Inherently equitable interests are set out under s1(3) LPA 1925
Equitable interests can be formed by virtue of:
Failure of formalities/registration
Being carved out of an equitable estate
Legal Estates and Interests
Estates capable of existing at law fall under s1(1) LPA 1925
Interests capable of existing at law covered in s1(2) LPA 1925
Questions to be asked when considering if it can be legal
Does the person creating the estate or interest have a legal estate or interest themselves
Have any formality requirements been fulfilled
Have any registration requirements been fulfilled
Co-Ownership
The form of ownership where two or more people are simultaneously entitled in possession to an interest or interests in the same asset
Can arise as 2 different forms
Joint Tenancies
Tenancies in Common
The entire trust own the land together meaning each person in a sense, owns everything
No tenant is treated as owning any particular part of the land
Right of survivorship applies, meaning shares in the estate continue to be held by the remaining tenants and cannot be passed on
4 Unities must be present for a joint tenancy
Possession
Interest
Title
Time
Tenants treated as co-owners of separate shares of the trust even though it has not been separated out amongst them
Only unity required is possession
Right of survivorship does not apply
Tenancies in common cannot be legal rights, but merely equitable ones
Number of legal owners is limited to 4 under s34(2) Trustee Act 1925, and is limited to first 4 named over the age of 18
Each tenant must take their share at the same time
Tenants must receive share through the same instrument
Tenants must have equal interest in the land
Each tenant has equal right to occupy the land
Creation of Tenancies in Common and Joint Tenancies
Are the four unities present?
Is there any express indication in the conveyance?
An express declaration is conclusive under Goodman v Gallant [1986]
If no words to the contrary, presumption is made that it is a joint tenancy
However, in business transaction, tenancies in common can be assumed in scenarios where partners bought the land as a partnership asset
If business partners pay unequal shares the there is a tenancy in common and the contribution will be reflected in level of interest
Severance of Trusts
Severance of a legal joint tenancy is prohibited under s36(2) LPA 1925
Severance of joint tenancy can still be made in equity
4 methods of severance
An act operating on share of one of the JT's
A JT assigns their share to another, thus removing their stake in the trust
Mutual Agreement
Valid contract to sever entered into by all JT's causes severance, assuming it satisfies s2 LP(MP)A 1989
Course of Dealing
Severance by any course of dealing is sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common - Williams v Hensman
Notice In Writing
New method introduced under s36(2) LPA 1925
Notice must be of intention to sever immediately - Harris v Goddard
There is a suggestion in the section that notice in writing can only be given when the same people of the trust are both the trustees and the beneficiaries, but this is likely to be construed widely
Rights, Duties and Powers within a trust
Trustee Powers
Trusties have all the powers of an absolute owner under s6(1) TLATA
Trustee Duties
Must have regard to the rights of beneficiaries under s6(5) TLATA
Must not exercise their powers in contravention to any rule of law or equity - s6(6) TLATA
Equitable Duties Include:
Must act in beneficiaries' best interests
Exercise powers for their proper purpose
Must not put themselves in a position of conflict
Limits on Trustee Powers
Duty to consult beneficiaries with interests in possession under s11 TLATA
Beneficiaries have a right to possession of the land under s12 TLATA
No right to occupy if the land is deemed unsuitable for the beneficiary under Chan v Leung [2002]
Exclusion and restriction of right to occupy - s13 TLATA
Can exclude beneficiaries from having the right to occupy, or impose reasonable conditions on the right
In exercising power to exclude or restrict, trustees must have regard to:
Intention of the settlor
Purpose for which the land is held
Circumstances and wishes of beneficiaries who would otherwise be entitled to occupy the land
Cannot exclude someone who is already in possession without approval - s13(7) TLATA
An occupation rent payable to the other beneficiaries may be payable under Dennis v McDonald
Power to Partition
Trustees may partition the land between the trustees if they are of full age and absolutely entitled to undivided shares s7(1)
Trustees must first obtain the consent of all the beneficiaries s7(3)
Partitioning requires new titles to be registered at the land registry
Application to the court
Applications can be made to the court by the trustees, in order to limit their responsibilities or duties, such as the right to consultation under s14
s15(1) Applications must have considerations to:
Intention of the person who created the trust
Purpose of which the trust is held under
Welfare of any minor who occupies or might reasonably be expected to occupy any trust land as a home
The interests of any secured creditor of any beneficiary
Bankruptcy
s335 Insolvency Act 1986: On application by a trustee in bankruptcy for a sale of land subject to a trust of land, the court may make an order, having consideration to:
The interests of the bankrupts creditors
When the land is a family home, a partner's contribution in bankruptcy, needs of the spouse and any children
All circumstances of the case other than the needs of the bankrupt
Where the application is made after a year of bankruptcy, then the creditor's interests outweigh all other considerations
Impact of land trusts on 3rd parties Purchasing Land
Overreaching
Purchaser overreaches beneficial interests in land if purchase money is paid to two trustees of the legal estate
Even if beneficiary in occupation of the land - City of London Building Society v Flegg [1988]
Protection from obtaining consent
If trust instrument requires more than 2 people to consent to the purchase, purchaser is protected if consent of any two trustees is obtained - s10(1) TLATA
But trustees may be liable for breach of trust