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