Trust of Land

Introduction

A person can set up a trust of land by his or herself for many reasons, however whenever two or more people have an interest in the same piece of land a trust is imposed by law. This chapter includes important provisions provided under The Trusts of Land and Appointment of Trustees Act 1996 (TOLATA), which a buyer or seller of a registered or unregistered land must be aware of as TOLATA imposes a trust of land whenever two or more people have interest in the same piece of land

Example

Ali and Meera bought a family house together, the TOLATA 1996 will impose a trust of land on both Ali and Meera. Which means in order to sell this family house a prospective buyer, has to get the consent of both Ali and Meera and all other rules on trusts will apply. Please refer to the heading of Trust, Wills and Probate.

Important provisions

TOLATA provides for a new ‘trust of land’ and defines the trust of land as:

 “any trust which consists of or includes land including an express, implied, resulting or constructive trust, a bare trust or a trust for sale”

No new Settled Land Act settlements can be created after the commencement of the TOLATA 1996

Effect of TOLATA 96

The effect of TOLATA was to convert all existing trusts for sale into trusts of land.

S3 of the TOLATA 1996 – the interests of the beneficiaries are regarded as being in real and not personal property.

S 5 of TOLATA 1996 – a trust of land will now arise in all co-ownership situations irrespective of the date when the property was purchased.

Example

Mike and Elizabeth purchased a house together in 1995 – a trust for sale would have arisen.

On 1st January 1997, their trust for sale would have been converted into a trust of land governed by TOLATA.

 The imposition of trust is aimed to safeguarded the interests of the co-owners, implied co-owners and successive interests holders.

Powers of Trustees of Land

  • Trustees have the power to postpone the sale of property under trust of land
  • This power is implied irrespective of the grantor’s intention.
  • One trustee can enforce a duty to sell but any trust power, including the power to postpone the sale, must be exercised unanimously by the trustees. 
  • This means that if one trustee wants to sell, the property must be sold.
  • Trustees have all the powers of an absolute owner of the land. 
  • Powers can be restricted or made subject to the consent of any person for example
  1. Consent of the beneficiaries, or
  2. Subject to investment on land or both

Delegation of Trustees’ powers under TOLATA 96

  • The trustees have the power to delegate any of their functions relating to the land in the trust to any beneficiary or beneficiaries of full age who are entitled to possession.
  • The delegation must be by power of attorney given by all the trustees jointly.  
  • The trustees are liable for the actions of the delegate if they failed to exercise reasonable care in deciding to delegate

Important

The duties of Trustees and beneficiaries along with further rights and obligations are provided in detail under the heading of Wills Trusts and Probate, please refer if you would like to know more about the functioning of Trusts 

Consent

  • Trustees are required to obtain the consent of beneficiaries under section 11 which states that trustees of land shall consult the beneficiaries who are over 18 years of age and of sound mind, in relation to functioning of the land
  • Where numerous consents are required – the buyer of land needs only to ensure that two consents are given or obtained at lease – Overreaching.
  • The trustees, however, may still be liable to an action by the beneficiaries for breach of trust unless all the consents are obtained.

Consultation with beneficiaries

(1) The trustees of land shall in the exercise of any function relating to land subject to the trust—

       (a)  so far as practicable, consult the beneficiaries of full age and beneficially entitled to an interest in possession in the land, and

      (b)  so far as consistent with the general interest of the trust, give effect to the wishes of those beneficiaries, or (in the case of dispute) of the majority (according to the value of their combined interests).

(2) Subsection (1) does not apply—

     (a)  in relation to a trust created by a disposition in so far as provision that it does not apply is made by the disposition,

    (b) in relation to a trust created or arising under a will made before the commencement of this Act, or

   (c)  in relation to the exercise of the power mentioned in section 6(2).

(3)  Subsection (1) does not apply to a trust created before the commencement of this Act by a disposition, or a trust created after that commencement by reference to such a trust unless provision to the effect that it is to apply is made by a deed executed—

        (a)  in a case in which the trust was created by one person and he is of full capacity, by that person, or

       (b)   in a case in which the trust was created by more than one person, by such of the persons who created the trust as are alive and of full capacity.

(4) A deed executed for the purpose of subsection (3) is irrevocable

Application to Court for Exercise of powers

Under section 14 TOLATA 1996

  • If a consent cannot be obtained from the beneficiaries either the trustees or the beneficiaries have the power to apply to court under section 14
  • Any person who has an interest in the land has a right to apply to the court for an order.
  • Any beneficiary or trustee may apply for an order and the court may make such an order as it thinks fit, including an order declaring the nature and extent of a beneficiary’s interest

Court’s Discretion

Under section 15 TOLATA the court has been provided with the discretion to exercise in regards to the matters under section 14 including the following factors which are considered by the court for the exercise of its’ discretion

  • the intentions of the person or persons (if any) who created the trust.
  • the purposes for which the property subject to the trust is held,
  • the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home, and
  • the interest of any secured creditor of any beneficiary.

Disclaimer

While every effort has been made to ensure the accuracy of the information provided in this article, it does not constitute legal advice and cannot be relied upon as such. Each legal case and issue may have unique facts and circumstances, as a result legalally does not accept any responsibility for liabilities arising as a result of reliance upon the information provided. For further help and guidance, you can always rely on and seek advice from our experienced lawyers.

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