NATURE OF A TRUST
Generally speaking, a Trust is an artificial legal entity (similar to
a corporation) in Equity that can hold title to property in the same
manner as a natural person. A Trust can be created either expressly or
indirectly. Express Trusts can be created either by parol (orally,
that is, by spoken word) or by writing. Under UK law, if the Trust is
to contain land, it must be created expressly by writing by the person
holding title to the land or by a person authorized to act on behalf
of that person (an agent, usually possessing power of attorney).
Trusts can be divided into two broad classes, inter vivos (among the
living) and testamentary (by Will upon the death of the testator).
A Trust needs certain prerequisites to be considered valid. First,
there must be a Settlor, the person who is creating the Trust,
sometimes called the Grantor or Trustor. Second, there must be an
Intention to create a Trust, usually exemplified in an instrument, a
Settlement* or Declaration (although there are Implied, Resulting, and
Constructive Trusts). Third, there must be Property placed into the
Trust (any kind of property) by Deed. Fourth, there must be a Trustee,
the person who takes the title in trust and administers the duties
imposed by the Trust. Fifth, there must be a Beneficiary (called
Cetsui que trust), the person (even another Trust) who will eventually
benefit from the Trust.
[*A Settlement differs from a Declaration in that a Settlement is
signed only by the Trustee, while a Declaration is signed by the
Settlor. That they might very well be the same person is of no
importance. For land, a Declaration is mandatory.]
Universiy of Wales
LA 36130 - Land Law, 2001-2002
IX Trusts and Homesharers
http://users.aber.ac.uk/pes/land/lectures/h9.htm
"Hague Convention on the Law Applicable to Trusts 1987 Article 2
For the purposes of this convention, the term trust refers to the
legal relationships created - inter vivos or on death - by a person,
the settlor, when assets have been placed under the control of a
trustee for the benefit of a beneficiary of for a specified purpose. A
trust has the following characteristics - a the assets constitute a
separate fund and are not part of the trustee's own estate; b title to
the trust assets stands in the name of the trustee or in the name of
another person on behalf of the trustee; c the trustee has the power
and the duty, in respect of which he is accountable, to manage, employ
or dispose of the assets in accordance with the terms of the trust and
the special duties imposed upon him by law. The reservation by the
settlor of certain rights and powers, and the fact that the trustee
may himself have rights as a beneficiary, are not necessarily
inconsistent with the existence of a trust"
Sir Arthur Underhill
"an equitable obligation binding another person (who is called a
trustee) to deal with property over which he has control (which is
called trust property), for the benefit of persons (who are called
beneficiaries or cestui que trust) of whom he may himself be one and
any of whom may enforce the obligation""
[...]
"LPA (Law of Property Act) 1925 all land conveyed to more than one
person must be held on trust."
Thus, a person creates a Trust to hold title to property. Title to
land in the UK for which there is more than one owner is vested in two
forms, Joint Tenants and Tenants in Common. The maximum number of
co-owners that can be vested with joint ownership is four. (See below,
Title.)
Joint Tenants possess an absolute whole interest in the property,
i.e., they each own the property in its entirety. Joint Tenants cannot
sell, give, or Will their interest in the property separate from the
other owner(s). If husband and wife jointly own a property as Joint
Tenants, neither can sell the property without the consent of the
other, and each is entitled to the proceeds of a sale; and upon the
death of either spouse the Title automatically passes to the survivor.
This is tenancy with sole survivorship.
Tenants in Common, on the other hand, own a separate, defined interest
in the property which is unaffected by the interests of the other
owner(s). Thus, a Tenant in Common can sell or dispose by Will his or
her interest in the property. Husband and wife as Tenants in Common
each possess a percentage interest in the property. Each can sell his
or her interest. Each can Will his or her interest. Unlike Joint
Tenancy, then, there is no succession by sole survivorship.
In the great majority of cases involving husband and wife, Title for
property, especially land, is taken as Joint Tenants. However, it is
possible to sever the interests of the Joint Tenants so that they can
take Title as Tenants in Common. This is done by the creation of a
Trust by Declaration of Trust, the Trust Deed. The Trust Deed creates
a Trust in which the undivided interest becomes divisible, husband and
wife each then possessing an interest in the Trust. There are some
good reasons for doing this, chiefly that there is a reduction of
death duties and a flexibility in the disposition of the interest that
does not exist in Joint Tenancy. (See Tax Advantages, below.) Another
reason is to provide for children by a previous marriage.
When the property placed in a Trust is real property (land), the Trust
must be created by a Declaration of Trust that is executed as a Deed,
for which reason the Declaration is also known as a Trust Deed. A Deed
is a specialty, a form of contract executed under special formalities,
particularly under seal. Therefore, a Trust Deed must be notarized.
(See below, Deeds.)
So, when husband and wife make a Declaration of Trust, it is almost
always for the purpose of severance, that is, to create Tenancy in
Common.
With that basic information understood, the answers to the questions
are:
Number of trustees required.
The number of Trustees is normally determined by the number of
co-owners, which is to say, the Settlors name themselves as Trustees.
Thus, in the most frequently encountered situation, husband and wife
who already own property as Joint Tenants, the husband and wife will
be the Settlors of the Trust and will name themselves as the Trustees.
They will also name themselves as Beneficiaries of the Trust. As
Trustees, they will have the full management of the property, as they
did formerly, but they will now have separate interests as
Beneficiaries of the Trust.
In this particular case, the wife being the sole proprietor of the
property prior to the formation of the Trust, she could, if she so
desired, name herself alone as Trustee, or she could name herself and
her husband as Trustees. She could also name some other person. Upon
the death of one spouse, the surviving spouse would be the sole
Trustee of the Trust. Depending upon the provisions of the Trust,
however, the Trustee could name a new Trustee to replace the deceased
Trustee, or the Declaration of Trust itself could have been drafted to
include a Successor Trustee, in the event that the original Trustees
co-deceased. Upon the death of one spouse, the Trust essentially
becomes two Trusts, one containing the interest in the Trust assets
that belonged to the dead spouse and the other containing the interest
in the Trust assets belonging to the survivor. It would be the
obligation of the surviving Trustee to administer the terms of the
Trust. If the deceased spouse left a Will which disposed of that
spouse's interest in the Trust, then that Trust would cease to exist
when the Executor of the Estate probated the Will, leaving only the
Trust of the survivor. If the spouse Willed his or her interest to the
other spouse, then the survivor would have the whole interest in the
Trust assets. Otherwise, the survivor would have only the interest
that was created by the creation of the Trust.
Whatever the arrangement, there must be at least one Trustee for a
valid Trust.
Number of Witnesses required.
Unlike a Will, there is no requirement in law for witnesses to a
Declaration of Trust. Indeed, the fact that the Trust is created as a
Deed means that the instrument must be executed under seal, i.e.,
notarized, and the need for witnesses is obviated.
The need for witnesses to a Will is self-evident: to prevent fraud.
The Testator being dead, there is no assurance that the signature on
the Will has not been forged, unless there are witnesses to the
signing. A Declaration of Trust inter vivos means that the Settlors
can be called to testify that they have made the instrument. Their
ongoing participation in the administration of the Trust as Trustees
is evidence that the Trust Deed is a valid instrument. Lastly, as the
Trust Deed has been executed under seal, the formalities guarantee the
validity of the document. This is not to say that a Trust instrument
cannot be challenged. (See Law, below.) Fraud and mistake are two
grounds for potential challenge, although mistake is virtually
impossible to claim successfully. Ignorance of the terms of the Trust
is no help, the instrument having been signed anyway. Failure to
execute properly could be another ground for challenge.
Whether or not Registration at the Land Registry is mandatory.
The Law Commission
(LAW COM No 278)
SHARING HOMES
A Discussion Paper
(See Law, below.)
"2.43 The Land Registry now requires a declaration of trust where land
is to vest in persons as joint proprietors, whether on an application
for first registration, on a transfer of land with registered title,
or on an assent to vesting of land in persons entitled under a
deceased’s estate. The statutorily prescribed form requires the
intending proprietors to state whether they hold on trust for
themselves beneficially as joint tenants, as tenants in common or on
any other trusts."
Absent those stipulations, therefore, registration is not required,
only recommended.
Need for the wife to have received independent professional advice
before execution.
There is no requirement for adequate counsel. Forms are available
online or at legal stationers, and can be executed without legal
consultation. Naturally, due to the intricacies of the possible
consequences of any contract, competent advice would be helpful and is
urged.
REFERENCES
TITLE
Joint Ownership of Property
Trust Deed, Declaration of Trust
http://questbrook.co.uk/trust.htm
"Joint Ownership of Property
There are two different ways in which property can be owned jointly –
either ‘beneficial joint tenants’ or ‘tenants in common’. Both these
methods of ownership mean that the property is owned jointly but the
way this is viewed by the law is quite different."
[...]
"If the way in which you choose to own your property is tenants in
common then you should have a trust deed (sometimes called a
declaration of trust) which records the arrangement between the joint
owners."
[...]
"1.One way is to state that each party has a percentage share each
i.e. you might say that one person has a 30% share and the other has a
70% share and that if the property was sold then the money would be
divided in that way."
[...]
Sole Ownership
http://questbrook.co.uk/solename.htm
"Property held in sole name
Where the property is held in the sole name of one person then it is
possible for another person to have an interest in it. This would
commonly arise -
1. if a third party had provided some of the purchase price or paid
for improvements to the property, or 2. if there is a cohabitee -
whether married or not.
This type of arrangement works where everyone is in agreement and
there is no possibility of the none owning party wanting to realise
their share of the property before a sale. It is passive in nature
i.e. it gives no rights to enable the none owning party to force a
sale - merely says that as and when the property is sold an agreed
payment will be made to them."
[...]
"One additional point though that needs to dealt with is some
protection of the interest of the one owning party. For example,
whatever the trust deed may say, what is to stop the legal owner of
the property from selling or mortgaging the property without telling
the other party? The answer to this is that in some way the none owing
party should register an entry at HM Land Registry against the title."
[...]
"The documents available on this site have been prepared for use in
England & Wales. They may not be valid if used in other areas."
Joint Ownership
http://questbrook.co.uk/joint.htm
[Legal Docs Direct - Assured Shorthold Tenancy Commercial Lease
Partnership Agreement, - UK] Joint Ownership - the methods
"Beneficial Joint Tenants
If a property is owned as beneficial joint tenants then this means
that the whole property and the proceeds of its sale belong to both
owners as one. They do not have separate shares each – they both own
the whole thing."
Tenants in Common
"This method of ownership still means that the property is owned
jointly however each joint owner has a distinct share. Those shares
can be either equal or unequal depending upon the agreement that is
reached between the owners. If the property is owned in this way and
one owner dies that the deceased owners share will pass in accordance
with the terms of that person will or under the rules of intestacy if
no will has been made. If a property is owned as tenants in common
that it would be prudent for there to be a separate deed setting out
those shares in the property and how the proceeds of sale would be
divided if the property was sold. Such a document is usually called a
'Trust Deed' or a 'Declaration of Trust'"
See the above page for helpful information about Land Registry.
KSB Law
Joint Ownership Of Assets
http://www.kingsfords.co.uk/articles/privateclient/privatecart8.html
"Married Couples
Usually a husband and wife own an asset jointly as Joint Tenants,
particularly the matrimonial home and the main bank account. This
means that, on death, the whole of the assets automatically passes to
the survivor
Sometimes a husband and wife may split the joint tenancy and hold an
asset as Tenants in Common for tax reasons. This can be most
advantageous to make the most of the tax exempt part of an
individual's estate on death for inheritance tax purposes. This is
worth considering where the joint assets are over the inheritance tax
limit. There can also be income tax advantages.
There can also be advantages in holding assets as Tenants in Common in
order for that asset to be gifted by Will to a beneficiary other than
the co-owner, e.g. if the co-owners have been married before and have
children from another marriage that they wish to benefit."
GUIDANCE NOTES ON JOINT OWNERSHIP
http://www.woodfordstauffer.co.uk/conveyancing/jointown.pdf
"JOINT TENANCY
The most distinctive feature of a joint tenancy is that when one of
the joint tenants dies, his or her interest passes automatically to
the surviving joint tenant(s). A joint tenant cannot, therefore, leave
his or her interest in the property by Will. Another important
characteristic is equality."
TENANCY IN COMMON
Under a tenancy in common, the interest of each of the joint owners is
treated as a separate piece of property. A tenant in common, unlike a
joint tenant, owns a separate "share" in the property, which can be
given away under his or her Will...It is preferable, however, to
execute a Declaration of Trust, stating expressly what the shares of
the tenants in common are to be.
[...]
"The basic choice is between a joint tenancy and a tenancy in common.
If you choose to hold the property as joint tenants, but later decide
to "sever" the joint tenancy, the effect would normally be that you
would then become tenants in common in equal shares. It is possible,
however, to declare at the outset that in the event of a severance
your interests will be in some other specified shares."
Jointly Owned Property:
Joint Tenants or Tenants in Common
http://www.ts-p.co.uk/personal/residential_property/is_joint_property.pdf
Trusts
http://www.scmil.com/Services/Trusts/Trusts.htm
Welcome to LegalScribe
The online source for Wills, Trusts, Power of Attorneys, and Living
Wills
Sample Revocable Trust
http://www.legalscribe.com/samplerevocabletrust.htm
TRUST LAW/PROPERTY LAW
Law of Property Act 1925
University of Wales
LA 36130 - Land Law, 2001-2002
IX Trusts and Homesharers
(See above.)
"Trust may arise
Expressly by the words of the conveyance or grant:
Impliedly
LPA 1925 s. 34
(1) An undivided share in land shall not be capable of being created
except as provided by the Settled Land Act 1925 or as hereinafter
mentioned.
(2) Where, after the commencement of this Act, land is expressed to be
conveyed to any persons in undivided shares and those persons are of
full age, the conveyance shall (notwithstanding anything to the
contrary in this Act) operate as if the land had been expressed to be
conveyed to the grantees, or, if there are more than four grantees, to
the four first named in the conveyance, as joint tenants in trust for
the persons interested in the land."
LPA 1925 Section 36(1)
Where a legal estate (not being settled land) is beneficially limited
to or held in trust for any persons as joint tenants, the same shall
be held in trust, in like manner as if the persons beneficially
entitled were tenants in common, but not so as to sever their joint
tenancy in equity."
ss.52-53
"LPA s.52
(1) All conveyances of land or of any interest therein are void for
the purpose of conveying or creating a legal estate unless made by
deed.
LPA s.53
(1) Subject to the provisions hereinafter contained with respect to
the creation of interests in land by parol--
(a) no interest in land can be created or disposed of except by
writing signed by the person creating or conveying the same, or by his
agent thereunto lawfully authorised in writing, or by will, or by
operation of law;
(b) a declaration of trust respecting any land or any interest therein
must be manifested and proved by some writing signed by some person
who is able to declare such trust or by his will;
(c) a disposition of an equitable interest or trust subsisting at the
time of the disposition, must be in writing signed by the person
disposing of the same, or by his agent thereunto lawfully authorised
in writing or by will.
(2) This Section does not affect the creation or operation of
resulting, implied or constructive trusts."
The Law Commission
(LAW COM No 278)
SHARING HOMES
A Discussion Paper
http://www.lawcom.gov.uk/files/lc278.pdf
"1.13 Where legal title to the home is held jointly by the persons who
are sharing it, it is unlikely that there will be significant problems
defining their interests in the circumstances we have outlined above.
In particular, where title to land is registered in the names of two
or more proprietors, it is now required that the proprietors make an
express declaration of their beneficial entitlement. Once such a
declaration has been made, it will be binding on the parties and
conclusive of their respective interests in the land save in highly
exceptional circumstances.
1.14 This requirement has proved to be extremely valuable, as there is
considerable reluctance among those seeking to purchase property
together to enter into a legally binding agreement which would govern
the parties’ future relationship. Some will not have the benefit of
legal advice, or sadly some who have legal advice will not be informed
of the desirability of this course of action."
[...]
"(1) An express trust is created where a person either expressly
declares that he or she holds property on trust for another or
transfers the property to another expressly subject to a trust. While
no particular words are required to create a trust, it is usually very
clear that a trust has been created."
[...]
"TRUSTS OF LAND
2.4 The trust is a device providing for the division of ownership of
property into two components: legal title and beneficial ownership.
In the case of land, legal title can be definitively ascertained
(where title registration has been effected) by reference to the land
register. Those persons who hold the legal title ("the registered
proprietors") are the trustees of the land. There cannot be more than
four. They are given wide powers, to sell, to lease, or to mortgage
the land.
2.5 The law imposes strict fiduciary duties on trustees. In
particular, the trustees are not permitted to benefit from the
exercise of their powers - not, at least, in their capacity as
trustees. The benefits of the trust must be deflected to the
beneficiaries:
(1) if land is sold, the proceeds of sale must be divided between the
beneficiaries in accordance with their respective beneficial
interests.
(2) if land is leased, the rental income must likewise be divided
between the beneficiaries."
[...]
"2.7 Where land is jointly owned, it is likely that the persons who
are sharing, or at least some of them, are both trustees and
beneficiaries. While they cannot benefit from the trust in their
capacity as trustees, they can take the benefits to which they are
entitled as beneficiaries. Despite the apparent artificiality of the
exercise the same rules are to apply as when the identity of the
individuals who are trustees and beneficiaries is different. Again,
the beneficial interests dictate the shares of each person in the
property which the home represents.
Example 2.
2.8 E and F have had title transferred to them. There is an express
trust declaring that they hold the land for the benefit of E (who put
up more capital towards the purchase) as to two-thirds and F as to
one-third. When they sell the house for £300,000, E is entitled to
£200,000 and F is entitled to £100,000. Any rental income would be
divided in the same proportions."
[...]
"Legal and beneficial ownership of the shared home
2.10 It now appears to be the position that legal or beneficial
co-ownership of land will always take effect behind a trust.
While statute has not made express provision to that effect, the House
of Lords has accepted that a trust should be implied in all cases of
co-ownership.
2.11 Co-owners of land can be either joint tenants or tenants in
common. The legal estate can only be held as joint tenants. Beneficial
ownership can either take the form of a joint tenancy or a tenancy in
common.
Legal title - joint tenancy
2.12 Where land is conveyed to two or more persons they will take the
legal estate as joint tenants. Since 1925, joint tenancy has been the
only form of co-ownership recognised at law.
There is a statutory limit of four co-owners at law, and where an
attempt is made to convey into more than four names, only the first
four named will be the joint tenants. They will then hold the legal
estate on trust for themselves and any other co-owners whose names do
not appear on the title.
2.13 The most important element of joint tenancy is the right of
survivorship. On the death of one joint tenant, his or her interest
passes to the remaining joint tenant or joint tenants. Survivorship
operates as a highly convenient means of ensuring a transmission of
the property without the necessity of making a will. Indeed, a joint
tenancy cannot pass by will or on intestacy, as it does not form part
of the deceased’s estate."
(See Transfer of Land: Trusts of Land (1989) Law Com No 181.
For full discussion, see Megarry & Wade - The Law of Real Property,
(6th ed 2000) paras 9-
051 et seq.
See Law of Property Act 1925, s 36(1); Settled Land Act 1925, s 34(1).
"Since [the Law of Property Act 1925]..., undivided shares in land can
only take effect in equity, behind a trust for sale upon which the
legal owner is to hold the land": Williams & Glyn’s Bank Ltd v Boland
[1981] AC 487, 503, per Lord Wilberforce. See also City of London
Building Society v Flegg [1988] AC 54, 77, per Lord Oliver of
Aylmerton.
Law of Property Act 1925, ss 1(6), 34(1), 36(2); Settled Land Act
1925, s 36(4).)
"2.14 The right of survivorship is "ideal for trustees".
The trust property, in this case the home, will pass automatically to
the surviving trustee (or trustees) who has then the appropriate power
to deal with it. There is no need for the surviving trustee or
trustees to have recourse to the personal representatives of the
deceased trustee. They will, of course, continue to be bound by the
obligations imposed on them by the trust of land.
2.15 As the legal estate can only be held on joint tenancy, it is not
possible for joint tenants to "sever" their interests in the legal
estate and convert them into tenancy in common.
Beneficial ownership - joint tenancy or tenancy in common
2.16 Beneficial ownership may be as joint tenants or tenants in
common. If they are joint tenants, the right of survivorship applies
on death so that the interest of the deceased will pass automatically
to the surviving joint tenant or joint tenants. The beneficial
interest of the deceased will thereby cease and any purported
testamentary disposition will be ineffective. This has potentially
serious consequences for the relatives of the deceased who may have
expected to benefit from the deceased’s interest in the shared home on
their death. For this reason, many persons sharing homes may prefer to
hold the property beneficially as tenants in common.
2.17 If the persons sharing the home are tenants in common, they are
said to hold the land "in undivided shares", each having a distinct
share in the property which is (as yet) not divided among the tenants.
No tenant in common has a particular "right" to any particular
physical "part" of the land. In the event of the property being sold
by the trustees, the proceeds of sale will be divided among the
tenants in common in accordance with their respective shares in the
equity.
THE RIGHT OF SEVERANCE
2.18 Severance is the process whereby a joint tenancy is converted
into a tenancy in common. It can only be effected with regard to the
beneficial ownership, as it is not possible for there to be a tenancy
in common of a legal estate. The effect of severance is to confer on
the person whose interest is severed a "share" quantified according to
the number of joint tenants immediately prior to the severance taking
place. Thus, if two persons have held their home as joint tenants
beneficially, on severance they will each obtain a half-share. They
cannot claim a larger share by reference to the contributions they
might have made respectively to the property.
2.19 The methods by which severance can take place are as follows:
(1) in the same manner as a joint tenancy of personalty could have
been severed prior to 1926, that is to say
(a) by an act of any of the persons interested "operating upon his own
share";
(b) by mutual agreement;
(c) "by any course of dealing sufficient to intimate that the
interests of all were mutually treated as constituting a tenancy in
common";
(2) by notice in writing to the other joint tenants;
(3) by the act of a third party;
(4) by the acquisition of another estate in the land;
(5) by homicide."
"GOODMAN V GALLANT
2.20 An important decision, which emphasises the significance of an
express declaration of beneficial entitlement and the limited effect
of severance, is Goodman v Gallant.
In 1978, Mrs Goodman and Mr Gallant, who were living together,
purchased a property (Mrs Goodman’s former matrimonial home). In the
conveyance, they declared that they held the property "upon trust for
themselves as joint tenants". In 1983, by which time the couple had
separated, Mrs Goodman served a written notice of severance on Mr
Gallant. This was followed by an application to court seeking a
declaration as to their respective interests. Mrs Gallant claimed that
as she had paid three-quarters of the purchase price of the property,
she should now be entitled to three-quarters of the beneficial
interest in the house.
2.21 The Court of Appeal held that Mrs Goodman could not go behind the
express declaration of trust. On severance of the beneficial joint
tenancy, the parties would thereafter hold as beneficial tenants in
common in two equal shares. Mrs Goodman was bound by the terms of the
trust to which she was a party. She could not claim an enhanced
beneficial interest on the basis of her financial contribution to the
purchase of the land having been greater than Mr Gallant’s.
2.22 We support the robust approach of the court in Goodman v Gallant.
We believe that those sharing homes should be given every
encouragement to stipulate expressly for their beneficial entitlement.
If that is to be the case, it is essential that courts strictly
enforce declarations of trust which have been freely and fairly made
by the parties.
Resolution of disputes between trustees and beneficiaries 2.23
Sections 14 and 15 of the Trusts of Land and Appointment of Trustees
Act 1996 provide a ready means for the resolution of disputes
concerning trusts of land. Any person who is a trustee of land, or who
has an interest in any property which is subject to a trust of land or
the proceeds of sale of land, may apply to the court for an order to
regulate the exercise by the trustees of any of their functions.
Alternatively, they may seek a declaration as to the nature or extent
of a person’s interest in property subject to the trust.
In response to such an application, the court has a discretion to make
such order as it thinks fit. This may include an order that the
trustees sell the property and distribute the proceeds as directed.
2.24 In exercising this statutory jurisdiction, the court is obliged
to have regard to:
(1) the intentions, if any, of the person(s) who created the trust;
(2) the purposes for which the property subject to the trust is held;
(3) the welfare of any minor who occupies or might reasonably be
expected to occupy any land subject to the trust as his home; and
(4) the interests of any secured creditor of any beneficiary.
2.25 Although section 14 replaced the jurisdiction vested in the court
pursuant to section 30 of the Law of Property Act 1925, the principles
to be applied are not the same. In cases under section 30, the normal
rule was that, save in exceptional circumstances, the wishes of the
person wanting a sale would prevail. The interests of children and
families in occupation were treated as secondary. However, the
replacement of trusts for sale with the "less arcane and simpler"
trusts of land presaged a change in the treatment of applications by
the court. It has been held that section 15 changed the law and that
the court has greater flexibility as a consequence. As a result, the
authorities on section 30 have now to be treated with caution and in
many cases they are unlikely to be of great assistance.
2.26 There is one very important restriction on the court’s powers
under section 14. It can declare existing rights. But it cannot adjust
or vary them. It is a statutory jurisdiction which is much more
limited than that exercisable on divorce pursuant to the Matrimonial
Causes Act 1973. However, the court does have considerable scope in
terms of the order which it decides to make. The early signs are that
the courts will use their statutory power with greater imagination
than was perhaps the case under section 30. Where, however, a creditor
is not receiving proper recompense for being kept out of his money,
this is a powerful consideration in favour of ordering a sale."
[...]
"Occupation of the shared home
2.32 Rights of occupation in the shared home may arise:
(1) where the person has a beneficial interest under a trust of land;
and/or
(2) where the person has "matrimonial home rights" pursuant to Part IV
of the Family Law Act 1996.
2.33 Where a person who is sharing the home with its legal owner has
no beneficial interest under a trust of land (and has not been granted
exclusive possession of any part of it), they are likely to be no more
than a licensee. Unless they can claim "matrimonial home rights", they
will have no effective security in the home. Where a person has an
interest under a trust of land
2.34 Where a person is a beneficiary under a trust of land, their
right to occupy the property held on trust seems now to be derived
largely, if not exclusively, from statute. The Trusts of Land and
Appointment of Trustees Act 1996 confers on a "beneficiary who is
beneficially entitled to an interest in possession in land subject to
a trust of land" a right to occupy the land at any time.The
rightapplies only if at that time:
(1) the purposes of the trust include making the land available for
his occupation; or
(2) the land is held by the trustees so as to be so available.
2.35 There is no right of occupation if the land is not available (as
where it has been let) or if it is unsuitable for occupation by the
beneficiary (as where the property is not of a residential character,
or is not fit for habitation).
2.36 The right of occupation is subject to the power that is given to
the trustees to exclude or restrict the right in certain
circumstances. First, trustees of land have a power to impose
reasonable conditions on any beneficiary in relation to his occupation
under the statutory power outlined above.
Secondly, the trustees are given the power to exclude or restrict the
entitlement to occupy under the Trusts of Land and Appointment of
Trustees Act 1996, s 13(3). These include conditions requiring the
beneficiary to pay any outgoings or expenses in respect of the land,
and to assume any other obligations in relation to the land or to any
activity which either is or is proposed to be conducted on the
premises: ibid, s 13(5). The statutory power has been interpreted
broadly so that trustees may divide a building subject to a trust of
land between those beneficiaries who are entitled to occupy and also
require the beneficiaries to share the costs of the works effecting
the division: Rodway v Landy [2001] Ch 703, 715. statutory power.
Thirdly, although the Act does not set out all of the factors to which
the trustees are to have regard when exercising their powers, it does
specify the intentions of the person who created the trust, the
purposes for which the land is held, and the circumstances and wishes
of each of the beneficiaries who are entitled to occupy the land under
the statute, or would have been if he or she had not been excluded by
the trustees when they had exercised their powers on a previous
occasion.
Fourthly, where one or more beneficiaries have been excluded or
restricted by the trustees in exercise of their powers, the Act
specifies conditions which they may impose on the beneficiary in
occupation.
Finally, the Act severely restricts the circumstances in which
trustees may exclude any person who is already in occupation of the
land, whether or not that person occupies by virtue of an entitlement
under the Act. This safeguard protects not only a beneficiary but, for
example, that beneficiary’s spouse, partner or child. Matrimonial home
rights
2.37 The refusal of the House of Lords to recognise that a spouse who
had no beneficial interest in the matrimonial home could assert a
right to occupy the property against purchasers or mortgagees of the
legal estate led to the enactment of the first Matrimonial Homes Act
in 1967. This measure, and its successors, put the "deserted wife’s
equity" on a statutory footing and provided registration machinery
whereby the spouse could assert their rights against third parties. It
should be noted, however, that since 1967 there has been a highly
significant change of practice in that most spouses have the legal
title to their
home vested in their joint names and both enjoy rights of occupation
under the trust of land. The statutory rights have therefore decreased
in importance.
Orders regulating occupation of the shared home
2.38 If a dispute arises between co-owners as to the right to occupy,
it may be resolved by the trustees exercising their statutory powers
or by the court pursuant to section 14 of the Trusts of Land and
Appointment of Trustees Act 1996 or Part IV of the Family Law Act
1996.
2.39 Section 14 of the Trusts of Land and Appointment of Trustees Act
1996 applies where there is a trust of land. Any person who is a
trustee, or who has an interest in property which is subject to the
trust of the land or its proceeds of sale, may make the application.
Part IV of the Family Law Act 1996, which was enacted principally to
provide protection from domestic violence, applies only in relation to
dwelling-houses but is not restricted to cases where there is a trust.
Part IV is much more detailed than section 14, and it has been
judicially suggested that where both jurisdictions are available to
the court, it should approach the matter primarily in the context of
the former. The jurisdiction of the court under Part IV is wide. The
court may regulate occupation by means of a variety of orders. In
broad terms, those who are entitled to occupy (including those with
matrimonial home rights) are in the strongest position, but
substantial protection is also conferred on those who have no
entitlement as such but who have been married to, or have been
cohabiting with, an entitled person (and even a non-entitled person)."
[...]
"2.43 The Land Registry now requires a declaration of trust where land
is to vest in persons as joint proprietors, whether on an application
for first registration, on a transfer of land with registered title,
or on an assent to vesting of land in persons entitled under a
deceased’s estate. The statutorily prescribed form requires the
intending proprietors to state whether they hold on trust for
themselves beneficially as joint tenants, as tenants in common or on
any other trusts."
"Land Registration Rules 1925, rr 19(1), 98, Sched 1, as inserted by
Land Registration
Rules 1997, r 2(2)."
[...]
"EXPRESS TRUSTS
2.48 A declaration of trust is conclusive of the beneficial
entitlements of those who are parties to the relevant transaction,
save where:
(1) the trust is set aside on the ground of fraud or mistake or is
later rectified; or
(2) the parties did not assent to the terms of the declaration.
Construing the declaration
2.49 The true meaning of any declaration of trust is a matter of
construction. The forms of words most usually encountered are
considered below.
(1) The legal estate may be held by A and B on trust "for themselves
as joint tenants beneficially". In such a case, A and B will hold as
joint tenants in equity. In the event of that joint tenancy being
severed, A and B will hold the legal estate on trust for themselves as
tenants in common in equal shares.
(2) A declaration "that the transferees are entitled to the land for
their own benefit and that the survivor of them can give a valid
receipt for capital moneys arising on a disposition of land" has been
held to be conclusive evidence of the parties’ intention to hold as
joint tenants beneficially. Where, however, there is no reference to
the parties being entitled to the land "for their own benefit", the
remaining words are not conclusive and in themselves comprise neither
an express declaration of beneficial joint entitlement.
(3) Where the legal estate is declared to be held on trust for the
persons entitled as tenants in common in equal (or otherwise expressly
stipulated) shares, that will be conclusive of their respective
beneficial entitlement.
(4) Where a transfer or conveyance of the legal estate into joint
names is declared to be upon trust "for themselves as beneficial joint
tenants in common in equal shares", the parties will be treated as
tenants in common beneficially. The ambiguity of the declaration is
resolved in such a way that survivorship does not apply unless that is
the clearly expressed intention of the parties."
"("Fraud" would appear to include "actual" undue influence: see CIBC
Mortgages Plc v Pitt [1994] 1 AC 200, 209, per Lord Browne-Wilkinson.
"Mistake" is difficult to establish, and will not enable parties who
have failed to read the relevant documents and have signed them
nevertheless to contend that they are not bound by their contents:
Pink v Lawrence (1978) 36 P & CR 98. Wilson v Wilson [1963] 1 WLR 601;
Bedson v Bedson [1965] 2 QB 666; Pettitt v Pettitt[1970] AC 777, 813,
per Lord Upjohn; Re John’s Assignment Trusts [1970] 1 WLR 955;Leake v
Bruzzi [1974] 1 WLR 1528; Pink v Lawrence above; Goodman v Gallant
[1986] Fam 106.
Goodman v Gallant above. See para 2.20 above.
Re Gorman (A Bankrupt)[1990] 1 WLR 616, 621, 623 - 624, per Vinelott
J. tenancy nor a statement indicating equal entitlement as tenants in
common.)"
"2.50 An express declaration is not conclusive of beneficial
entitlement in so far as those who were not parties to the transaction
are concerned. It cannot bind those who are not privy to the trust.
Thus where a house was transferred into the names of A and B for
themselves as beneficial joint tenants, B’s parents, who had
contributed more than half the purchase price, were still able to
assert an interest by virtue of resulting trust.
2.51 An express declaration is not conclusive where it has not been
executed. However, such a document may well assist the court in
determining what the intentions of the parties were at the time of
acquisition of the shared home, and may therefore be of significant
evidential weight where a party is making a claim of entitlement
pursuant to an implied, resulting or constructive trust."
LAW263 Equity
LAW264 Trusts
2002-2003
The Creation and the Constitution of a Trust [7 lectures]
http://atlantis.ncl.ac.uk/modules/LAW263/lecture%20handouts/HANDOUT2.rtf
A GUIDE TO BERMUDA TRUSTS
http://www.mjm.bm/Documents/Guide%20to%20Bermuda%20Trusts.pdf
A GUIDE TO TRUSTS IN GUERNSEY
http://www.bachmanngroup.com/trustcompany/guernseytrusts.doc
Trusts and Estates
http://www.unc.edu/student/orgs/blsa/documents/Outlines/TrustEstates2.doc
THE ESSENCE OF EQUITY AND THE TRUST CASES AND STATUTES
http://www.spr-law.com/site/casetrust1.pdf
DEEDS
226-224-1
THE LAW COMMISSION
THE EXECUTION OF DEEDS AND DOCUMENTS
BY OR ON BEHALF OF BODIES CORPORATE
http://www.lawcom.gov.uk/files/cp143.pdf
(See also Transfer of Land: Formalities for Deeds and Escrows (1985)
Working Paper No 93; Deeds and Escrows (1987) Law Com No 163.)
"Definition of a deed
2.6 A deed may be defined as a written instrument which is executed
with the necessary formality, and by which an interest, right, or
property passes or is confirmed, or an obligation binding on some
person is created or confirmed.
The principal features of a deed
2.7 The principal features of a deed are that:-(
a) It must comply with certain formalities, which we consider in
detail in Part III. The need for such additional formalities explains
why a deed is regarded as being in "solemn form".
(b) It must also perform one of the functions mentioned in paragraph
2.6 above. For example a share certificate is not a deed, even if
sealed by a company, as it is no more than evidence of ownership of
the relevant shares.
Whether a document performs one of these functions has been treated as
being principally a matter of intention, although this may now need to
be seen in the light of the new requirement (explained in Part III)
that the intention to create a deed must be clear from the face of the
instrument.
(c) Certain transactions are only fully effective if carried out by
deed. We explain this further below.
(d) Quite apart from this, a deed has certain effects which
distinguish it from an instrument which has been entered into under
hand. We turn to this next.
Effect of a deed
Consideration
2.8 One important difference between a deed and an instrument in
simple form concerns the need for consideration. The general rule is
that a promise made without valuable consideration is not enforceable.
However, when a promise is made by deed, it is known as a specialty,
and may generally be enforced despite any lack of consideration. The
courts will not, however, usually order specific performance of a
voluntary covenant (as opposed to damages for breach), even if it is
made by deed. That is because equity will not assist a volunteer.
Limitation period - specialties
2.9 The limitation period within which proceedings may be brought also
differs. In the case of an action brought on a simple contract the
period is six years from the date on which the cause of action
accrued. However, in the case of a specialty the equivalent period is
twelve years.
2.10 The word "specialty" has been used in a number of different
senses. Sometimes it has been taken to mean an obligation under seal
securing a debt, or a debt due from the Crown or arising from statute.
In practice it has more frequently been taken to include "any contract
entered into under seal", or "any obligation entered into by deed
under seal". We have mentioned above that an examination of whether
and if so how these concepts have been affected by the reforms made in
1989 seems overdue, and we return to this in Part XI.
Other legal effects
242.11 Further differences between deeds and other documents include
the following:
(a) As a general rule the maker of a deed is estopped from claiming
that the contents of a deed did not correctly express the maker’s
intentions, or that there are reasons why the deed should not take
effect.
(b) There is a general rule of interpretation that where a doubt
arises on the construction of a deed, it should be construed most
strongly against its maker, and in favour of the grantee or
covenantee.
(c) The use of a deed may also trigger certain statutory consequences.
For example the appointment or retirement of a trustee by deed will
give effect to the provisions set out in section of the Trustee Act
1925, including the vesting of the trust property in the new trustee
without the need for a separate conveyance.
When a deed is necessary
2.12 Although a deed is now only necessary for certain transactions,
they are important ones. In particular, a deed is required for the
conveyance of land or of any interest in land. Unless made by deed,
such a conveyance is void for the purpose of conveying or creating a
legal estate. This means that, with certain exceptions, all
conveyances, transfers, mortgages, charges, leases and surrenders of a
legal estate or interest in land must be made by deed. The grant of a
power of attorney must also be by deed."
[...]
"The purpose of formalities for the execution of deeds
2.17 Most legal systems have formal requirements for certain types of
transactions, and English law is no exception. However the policy
reasons for these requirements are seldom articulated in the case law.
2.18 We have previously analysed the formal requirements for deeds as
serving the following (overlapping) purposes :-
(a) Evidential: providing evidence that the maker did enter into the
transaction, and so of authenticity, to other parties and to bodies
such as the courts and the Land Registry. Hence the fact that the
company seal has been affixed to a deed and attested by the secretary
and a director serves the purpose of providing evidence of the
company’s intention to enter into the transaction.
(b) Cautionary: requiring the maker of a deed to pause and give due
consideration to the transaction. This may be less important in the
case of a company making a commercial transaction than for an
individual. Formality requirements do, however, serve what might be
called a "managerial purpose" where the maker of a deed is a company
or other corporation. The need to use the company seal, and/or for the
signature of two officers, gives the company an element of control
over the way in which it executes deeds, and hence takes on certain
obligations.
(c) Labelling: making it apparent to third parties what kind of
document it is, and what its effect is to be."
[...]
"(Transfer of Land: Formalities for Deeds and Escrows (1985) Working
Paper No 93, paras 3.1 - 3.2. See also Transfer of Land: Formalities
for Contracts for Sale etc of Land (1987) Law Com No 164, paras 2.1 -
2.13.
The requirement that a deed must be in writing also provides evidence
of its contents, but that is not relevant to the issue of the manner
of execution.
As to the importance attached by the common law to the affixing of a
seal as evidence of an intention to be bound see above, para 2.8 n
15.)"
[...]
"The present requirements
3.2 At common law, the only formal requirements for a deed were
writing on paper or parchment, sealing, and delivery. Following the
Law of Property (Miscellaneous 1 Provisions) Act 1989, there are now
four formal requirements for a deed (whether executed by a corporation
or an individual). These are a combination of common law and statute,
and may be summarized as follows:
(a) First, a deed must be in writing, but may be on any substance.
This is a common law requirement, although modified by statute.
(b) Secondly, section 1(2)(a) of the Law of Property (Miscellaneous
Provisions) Act 1989 provides that an instrument is not a deed unless
it makes it clear on the face of the instrument that the person making
it or, as the case may be, the parties to it intend it to be a deed
(whether by describing itself as a deed or expressing itself to be
executed or signed as a deed or otherwise). This "face-value"
requirement was new in 1989.
(c) Thirdly, section 1(2)(b) of the 1989 Act provides that the
instrument must be validly executed as a deed by the person making it
or, as the case may be, by one or more of the parties to it.
(d) Fourthly, a deed must be delivered. This is again a common law 5
requirement. There is little more to be said about the first
requirement for present purposes.
The "face-value" requirement
3.3 The second requirement, that the document must make it clear on
its face that it is intended to be a deed, seems simple enough. The
purpose is to make a clear distinction between deeds and other
instruments now that deeds may be executed without the use of a seal.
The position will be evident if the document is headed or begins with
words such as "this deed", or states that it is "executed as a deed".
There is, however, uncertainty whether it is sufficient if the
document merely describes itself as a type of document which must be
in the form of a deed (for example if it commences "this lease"), or
is executed under seal without otherwise describing itself as a deed.
We discuss this further in Part XI.
Who must execute a deed
3.4 The second and third requirements (both of which are contained in
the 1989 Act) also need to be seen in the context of the general rules
establishing who may benefit under a deed, and who must execute a
deed. At common law, a person could not take an immediate benefit
under a deed inter partes (that is a deed which expressly states that
it is made between two or more named parties) or sue on a covenant
contained in it unless named as a party to it, and that remains the
general rule. As an exception, by statute a person may take an
interest in land or other property, or the benefit of any condition,
right of entry, covenant or agreement over or respecting land or other
property even though not named as a party to the conveyance or other
instrument. However, once a party has executed a deed, it will
generally take effect against that party in favour of the other named
parties even though it has not been executed by those other parties,
unless it was delivered subject to a condition that all such parties
must execute it, or it would be inequitable to enforce it. Hence it is
common for a deed to be drawn up between two or more named parties,
but with the intention that one or more of them will not execute it.
It follows that if one party signs an instrument described as a "deed"
under hand, that will not in itself prevent them enforcing the
document against another party which has executed it as a deed.
Finally, where a person named in a deed has, without executing the
deed, accepted some benefit under it, that person must give effect to
all the conditions on which the benefit was expressed by the deed to
be conferred, and so must perform all the covenants and stipulations
on their part contained in the deed.
3.5 It is true that the second formal requirement for a deed given
above, and contained in section 1(2)(a) of the 1989 Act, is that it
must be clear that the instrument was intended to be a deed "by the
parties to it", which might suggest that all parties to a deed must
now execute it. However, the intention is to be shown "on the face of
the instrument", and this can be achieved by the wording of the
document (for example by describing itself as a deed). The parties’
intention can therefore be shown without requiring all of them to
execute the document. Moreover, this is implicit in the third
requirement (execution as a deed, contained in section 1(2)(b) of the
1989 Act), which expressly recognises that where there are two or more
parties to a deed they need not all execute it, since execution may be
by "one or more of the parties to it". It is clear that the common law
position outlined in the previous paragraph has not therefore been
affected by the requirements added by the 1989 Act. This means that
the practice of preparing a deed and one or more counterpart deeds (so
that each party executes one or more of the counterparts but no one
document is necessarily executed by all the parties) is also
unaffected.
Execution "as a deed"
3.6 It will be noted that the third requirement is not simply for
execution, but for execution as a deed. The intention is again to
emphasise the distinction between deeds and other instruments. An
individual now executes a deed by signing the instrument in the
presence of a witness, who attests the signature, and by delivery of
the instrument as a deed. The former requirement for sealing has been
abolished, but attestation is nowmandatory. In the next Part, we turn
to the ways in which an instrument is executed as a deed by a
corporation. The final formal requirement for a deed - namely delivery
-is dealt with separately in Part VI."
Trusts of Land and Appointment of Trustees Act 1996
http://www.hmso.gov.uk/acts/acts1996/96047--a.htm#6
Trusts of Land and Appointment of Trustees Act 1996
http://www.number7.demon.co.uk/acts/trusts/land/indexes/toc.htm
HM Land Registry - Online Publications
http://www.landreg.gov.uk/publications/default.asp?fl=1&pubtype=1
Explanatory Leaflet 1
Registering title to land -the
characteristics and advantages
Edition date: May 2002
http://www.landreg.gov.uk/publications/el/el001.pdf
Explanatory Leaflet 4
Protecting Matrimonial Home Rights
under the Family Law Act 1996
Edition date : April 2002
http://www.landreg.gov.uk/publications/el/el004.pdf
TAX ADVANTAGES
ADVANCED INSTRUCTION MANUAL
VOLUME 1
http://www.inlandrevenue.gov.uk/manuals/ctmmanual/iht_aim_volume1.pdf
"A.66 Land - express
trusts (England & Wales))
Where the property concerned is land, an express trust is conclusive
evidence of the beneficial interests subject to the exceptions listed
below. The common form of conveyance to two or more persons as
beneficial joint tenants is an example of a conclusive express trust.
The exceptions are:
- fraud or mistake
- modification by a subsequent agreement (see A.63) and
- where the interests of spouses are affected by s.37 of the
Matrimonial Proceedings and Property Act 1970. In view of the s.18
exemption for transfers between spouses, this exception is of limited
interest."
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