Trustees in Land Lecture

INTRODUCTION

This chapter of the guide on land law deals with trustees of land (alternatively called “trustees in land”; there is no real difference and the phrases are interchangeable). It is intended to assist you as a one-stop guide to all of the relevant aspects of trustees when dealing with land. The first section deals with their appointment: it explains who may be appointed as a trustee of land, who may appoint them, the minimum and maximum number of trustees of land that may be appointed, cases involving a sole trustee and a purported sale, and the powers of beneficiaries regarding the appointment and removal of trustees.

The second section addresses the powers of the trustee, and the powers of the beneficiaries. As shall be seen, certain rights of either party - beneficiary or trustee - are checked by equivalent rights of the other party or by certain legal test, for example rights of occupation for beneficiaries are given limited breadth as a result of particular legal tests.

Section three addresses breaches of trust, meaning what happens if a trustee has breached their obligations as trustees of land. It examines what happens to attempted sales by a trustee where the trustee has failed to comply with certain requirements.

The fourth section of this chapter will examine the general principles and rules pertaining to trustees in bankruptcy. Finally, as with all of the other chapters in this guide, this chapter will include various cases in focus, and will conclude with a set of hands-on examples to help you better understand the principles which apply to trustees of land.

SECTION ONE: APPOINTMENT OF TRUSTEES

The first trustees may be named in the instrument creating the trust. Beneficiaries can direct the appointment of a new trustee under s.19 of the Trusts of Land and Appointment of Trustees Act (TOLATA) 1996. This section in TOLATA 1996 gives beneficiaries who are aged 18 or over, have capacity and are together absolutely entitled to the trust property the power to give a written direction naming a new trustee. The section applies where the trust instrument nominates no person to appoint new trustees. An attempted transfer of the legal estate to a minor alone leaves it vested in the transferor on trust for the minor or the intended beneficiaries. If the transfer is to a minor and an adult together, the legal estate vests in the adult on trust (TOLATA 1996, s.2(6), Schedule 1 para 1(1)(b) and (2)). An appointment of a minor as trustee is void (Law of Property Act 1925, s.20).

Wherever a trust intends to nominate a selection of persons as the trustees, the maximum number of trustees in land, acting for the purposes of the documentation as joint tenants of the land, shall be generally limited to four (Trustee Act 1925, s.34(2); Law of Property Act 1925, s.34(2)).  The reason for this cap is for ease of conveyancing purposes. A conveyance by trustees of land to a purchaser may overreach the beneficiaries’ equitable interests if the statutory requirements for payment of any capital money are met (Law of Property Act 1925, s.2(1)(ii)).

By restricting the number of trustees to four, it will be easier for dealings over the estate to take place with the consensus of all trustees. Trustees generally act unanimously unless the trust instrument or statute provides otherwise, meaning its management is, at first glance at least, simpler and easier than if a greater number of trustees were permitted. The cap also means that where a purchaser seeks to investigate title, it will be easier for the purchaser to investigate because the number of legal owners is limited. The cap does not limit the number of beneficiaries. Note that the limit of trustees to four does not apply for land vested in trustees for charitable, ecclesiastical, or public purposes (Trustee Act 1925, s.34(3)).

If a trust instrument purports to transfer the legal estate to more than four trustees, statute compels a vesting of the legal title by way of joint tenancy in the first four persons named who are able and willing to act. The others do not become beneficiaries simply because they were named as trustees (Trustee Act 1925, s.34(2)). Where land is conveyed to more than four adults in undivided shares, the first four hold the legal estate jointly on trust for all those entitled (Law of Property Act 1925, s.34(2)).

Conversely, one trustee may hold the legal estate under a trust of land. However, there is a strand of legal policy, envisaged in the TOLATA 1996 and the Land Registration Act 2002, for the legal estate associated with a trust of land to be held by at least two trustees. This policy can be construed from various provisions. For example, where capital money arises, it must be paid to or applied at the direction of at least two trustees or a trust corporation for their conveyance to overreach the beneficial interests (Law of Property Act 1925, s.2(1)(ii), s.27(2)). Further, a sole trustee who is not a trust corporation cannot give a valid receipt for the proceeds of sale or other capital money which arises under a trust of land (Trustee Act 1925, s.14(2)(a)). The problem with this so-called ‘two trustee’ rule is that although it is intended to act as a safeguard, in certain scenarios it actually turns out to be ‘no safeguard at all’ (per Peter Gibson LJ, State Bank of India v Sood [1997] Ch 276, CA).

Key Points:

• The trustees were also beneficiaries of the trust in land. The court assumed the family members claiming beneficial interests were in actual occupation.
• The trustees had charged the property to the bank, thereby rendering the bank as a secured creditor over the land subject to the trust.
• When the bank sought possession, the beneficiaries could not rely on actual occupation to give their interests priority over the charge. Overreaching had already occurred when the charge was granted.

Given that these are scenarios involving multiple trustees, this discussion raises the question of what to do where there is a sole trustee in cases which have arisen by implication rather than by design; cases which have produced a resulting or constructive trust would fall into this category. The equitable ownership which arises in these cases need not be evidenced in writing (Law of Property Act 1925, s.53(2)). The trust in question is implied.

As a result, the legal owner of the land may be unaware that they are a trustee, and the need for another trustee may not have been envisaged. Unfortunately for a purchaser, they are still subject to the ‘two trustees’ rule: if purchaser A seeks to purchase land from its owner, B, but B is later found to be holding the land on resulting or constructive trust for C, then payment to B alone, if B is an individual, will not overreach C’s interest. A duly appointed second trustee can join in the sale (Trustee Act 1925, s.36(6)).

Where a trustee dies, wishes to retire, or is incapable of acting, among other cases, the person nominated to appoint new trustees may appoint a replacement in writing. In default, the surviving or continuing trustees or the personal representatives of the last such trustee may do so (Trustee Act 1925, s.36(1)). A court also has the power to appoint trustees as per s.41 of the Trustee Act 1925. The court may exercise this power whenever it is expedient to appoint a new trustee and it would otherwise be ‘inexpedient, difficult or impracticable’ for the appointment to take place without the court’s assistance.

An express declaration of trust of land must ordinarily be ‘manifested and proved’ by some writing signed by a person able to declare the trust, or by their will (Law of Property Act 1925, s.53(1)(b)). The signed writing can follow the declaration. Without such evidence, a ‘merely voluntary declaration of trust’ is ordinarily ‘unenforceable for want of writing’ (Gissing v Gissing [1971] AC 886, HL per Lord Diplock).

Beneficiaries’ powers of appointment and removal

Where all the beneficiaries are of full age and capacity and together absolutely entitled to the trust property, they can direct who is appointed where the trust instrument itself a) fails to nominate anyone to appoint new trustees and b) does not exclude the right of beneficiaries to appoint trustees (TOLATA 1996, ss.19(1), 21(5)). Beneficiaries also have powers of dismissal. So long as they are unanimous, the beneficiaries - provided they have attained majority and have capacity - can produce written directions for one or more of the trustees to retire from the trust, or that the current trustee(s) should appoint a designated person as an additional or replacement trustee (TOLATA 1996, ss. 19(2), 21(1) - (2)). If there are no trustees, the direction to appoint is given to the personal representative of the last trustee. Retirement under section 19(3) is by deed and requires reasonable protection for the retiring trustee’s rights. A trust corporation or at least two trustees must remain, and either a replacement must be appointed or the continuing trustees must consent by deed.

SECTION TWO: POWERS OF TRUSTEE

The powers of trustees of land are many and varied. The powers can be summarised as below. Trustees have the power to:

1. Sell, lease or charge the legal estate in the trust land, exercising the powers of an absolute owner for the purposes of their functions as trustees (TOLATA 1996, s.6(1));
2. Acquire freehold or leasehold land in any part of the UK as per the Trustee Act 2000 s.8, whether or not that property is occupied by a trust beneficiary (TOLATA 1996, s.6(3)), subject to which the trustee must exercise a duty of care when exercising such a power unless and to the extent that the trust instrument indicates that the duty is not meant to apply (Trustee Act 2000, s.2, Schedule 1, paras 2 and 7);
3. Partition the trust land between beneficiaries of full age where they are absolutely entitled in undivided shares. Each must consent before the partition is given effect. For an absolutely vested minor’s share the trustees may act for the minor (TOLATA 1996, s.7(1)–(5));
4. Exclude or restrict the occupation right of one or more (but not all) of the beneficiaries entitled to occupy under section 12 (TOLATA 1996, s.13(1));
5. Apply for a court order resolving disputes over the trust land (TOLATA 1996, s.14(1)); and
6. Delegate by a power of attorney given jointly by all the trustees any of their functions relating to the land to any one (or some, or all) of the beneficiaries of full age where they are entitled to an interest in possession in the trust land (TOLATA 1996, s.9(1)) - the duty of care mentioned above at b) will apply to their decision whether to delegate, and to their responsibility, where the delegation is revocable, to keep it under review and intervene where necessary (TOLATA 1996 s.9A (1) - (5) as inserted by the Trustee Act 2000, s.40(1), Schedule 2, paragraph 47).

With all that being said, these powers cannot be exercised indiscriminately. The disposition creating the trust may restrict the powers in sections 6 and 7 or require consent to their exercise (s.8). The duty of care under the Trustee Act 2000 applies when exercising section 6 powers (s.6(9)). In exercising their powers under section 6 the trustees must have regard to the rights of the beneficiaries (TOLATA 1996, s.6(5)). So where the trustees are selling the land subject to the trust, they have a duty to the beneficiaries to obtain the best price which is reasonably attainable. Further, where section 11 applies, trustees exercising functions relating to the land must, so far as practicable, consult the adult beneficiaries entitled to an interest in possession and, so far as is consistent with the ‘general interest of the trust’, give effect to the wishes of those beneficiaries or, in case of dispute, the majority by value of their combined interests (TOLATA 1996, s.11(1)). The trust instrument can exclude this duty. Exceptions also cover pre-commencement wills, earlier trusts created by disposition unless brought within the duty by deed, and conveyances under section 6(2) (s.11(2)–(3)).

Rights of beneficiaries as against the trustees

Trustees of land do not, as we have seen, have an unfettered discretion in the exercise of their powers. A beneficiary’s equitable ownership may carry a right to occupy. Actual occupation may protect an existing beneficial interest against a purchaser, but cannot preserve its priority over a mortgage which overreaches it (Bull v Bull [1955] 1 QB 234, CA; Williams & Glyn’s Bank Ltd v Boland [1981] AC 487, HL; City of London Building Society v Flegg [1988] AC 54, HL). TOLATA 1996, s.12(1) confers a right to occupy, subject to the conditions below, on beneficiaries who are ‘beneficially entitled to an interest in possession’ of the trust land.

Right of Occupation

That being said, the right to occupy under s.12(1) of TOLATA 1996 is subject to certain limitations and exemptions, such as:

1. The purposes of the trust must include making the land available for occupation by that beneficiary, a class which includes them or beneficiaries generally, or the trustees must hold the land so as to be available for that occupation (s.12(1)(a)–(b));
2. If the premises are ‘unavailable or unsuitable’ for occupation by the beneficiary, they may not occupy it (s.12(2)). If for example the beneficiary seeks to occupy a house, and its facilities are disproportionate to the beneficiary’s needs, it may be deemed unsuitable (Chan Pui Chun v Leung Kam Ho [2002] EWCA Civ 1075);
3. The trustee(s) may exercise a right to exclude or restrict some (but, crucially, not all) of the beneficiaries regarding their rights of occupation of the property. The reason is it is limited is because being able to exclude all beneficiaries would ‘make no sense’ (Rodway v Landy [2001] EWCA Civ 471 per Peter Gibson LJ).

In regards to c), there are constraints and further dimensions on how and when the trustee may exercise this power:

1. The trustees cannot act unreasonably in the exercise of their discretion to exclude or restrict the right of occupation (TOLATA 1996, s.13(1) - (2)). In exercising this power, trustees must have regard to the intentions of the person who created the trust, the purposes for which the land is held and the circumstances and wishes of each beneficiary entitled to occupy under section 12, including any who would be entitled but for an earlier exercise of these powers (TOLATA 1996, s.13(4)).
2. The trustees may impose reasonable conditions on occupation, including payment of outgoings or expenses (TOLATA 1996, s.13(3), (5) - (6)). Where a beneficiary’s entitlement to occupy has been excluded or restricted, the trustees can require an occupying beneficiary to pay compensation to that beneficiary (TOLATA 1996, s.13(6)(a)).
3. Where the building can be physically partitioned, the trustees’ discretion is wide enough to allow them to designate different parts of the building to be occupied by the various beneficiaries respectively (Rodway v Landy per Peter Gibson LJ).
4. Where any person is already in occupation, the trustees cannot use these powers to prevent them from continuing to occupy, or in a way likely to make them cease to occupy, without their consent or the court’s approval (TOLATA 1996, s. 13(7)).

Other powers of beneficiaries relating to trustees

1. Right to be consulted: The adult beneficiaries with interests in possession have the qualified right to be consulted described above (TOLATA 1996, s.11(1)). However, this right is not absolute and binding: the trustees must act in the general interest of the trust. A joint tenant who serves notice to quit a periodic tenancy acts personally, so the trustees’ duty to consult does not apply to that notice (Notting Hill Housing Trust v Brackley [2001] EWCA Civ 601 per Peter Gibson LJ). According to case law, there is a limited degree of control that a beneficiary can exercise against a trustee before completion if a trustee is attempting to complete a sale without the consultation required. The beneficiary may seek an injunction (Waller v Waller [1967] 1 WLR 451, ChD).
2. Right to require that consent be obtained: The creator of an express trust can choose to impose a requirement that certain, specified acts on the part of the trustees, for example efforts towards a sale, must be subject to a right of consent on the part of the beneficiary or some other person (usually, it will be one of the trust beneficiaries). Where more than two consents are required, two suffice in favour of a purchaser, except for charitable, ecclesiastical or public trusts (TOLATA 1996, s.10(1)–(2)). A requirement for consent can be protected by a ‘restriction’ entry in the land registry for the particular estate (Land Registration Act 2002, s.40(2) and (3)(b)).
3. Right to apply for a court order: Any beneficiary with an interest in the trust property may apply under TOLATA 1996 to the court for an order. The order can be means of settling many types of dispute in relation to the trust land (TOLATA 1996, s.14(1)).
4. Right to an appropriate interest in the proceeds of capital: Where a sale overreaches the beneficial interests, they attach to the proceeds of sale on the terms of the trust. If the disposition of the legal estate takes the form of a mortgage charge, the trust beneficiaries’ equitable interests are deflected on to the equity of redemption, which is the trustees’ remaining interest subject to the mortgage. The rights of the beneficiaries are, as a result, attached to the now-encumbered legal estate (City of London Building Society v Flegg; State Bank of India v Sood [1997] per Peter Gibson LJ). Any capital money raised on the security of the trust land must also be dealt with in accordance with the trust.

SECTION THREE: BREACHES OF TRUST

Registered Land

When the disponee takes the legal title of a registered estate, they are not hindered by any limitation of the disponor’s powers where that limitation is not indicated by some entry in the disponor’s register of title or imposed by or under the Land Registration Act (LRA) 2002 (LRA 2002, s.26). This can mean the disponee’s title is unlikely to be affected even where the disponor has been part of a breach of trust. The disponee’s title is insulated from the disponor’s breach of trust because there is a public policy concern for protecting the interests of innocent purchasers.

That said, the disponee, whilst receiving a good legal title, may yet be compromised by equitable interests that rank as ‘overriding’ (Williams & Glyn’s Bank Ltd v Boland [1981] A.C. 487). For a registered disposition for value, an interest that has not been overreached may bind through actual occupation, subject to the exceptions in Schedule 3 paragraph 2 (LRA 2002, s.29). Section 26(3) preserves the distinction between validity of title and lawfulness of the disposition. Knowing receipt requires beneficial receipt of trust property subject to a continuing equitable interest and knowledge making retention unconscionable (Byers v Saudi National Bank [2023] UKSC 51).

Unregistered Land

The consequences which flow from a breach of trust of land, when the land is unregistered, are similar to those of breaches of trust of registered land. A purchaser need not check compliance with sections 6(5), 7(3) or 11(1). If trustees contravene section 6(6) or (8), the conveyance is not invalidated where the purchaser has no actual notice of the contravention. A limitation imposed under section 8 does not invalidate a conveyance to a purchaser without actual notice of the limitation. The trustees must take reasonable steps to bring it to the purchaser’s notice. The latter two protections do not apply to charitable, ecclesiastical or public trusts (TOLATA 1996, s.16(1) - (3), (6)).

As a result of this rule, it appears that if a trustee of land fails to secure the required consent to the conveyance, even if it is illicit on their part (TOLATA 1996, s.8(2)), this would not invalidate the transaction with the purchaser, so long as the purchaser does not have ‘actual notice’ of the requirement for consent. Therefore, the purchaser would be able to overreach beneficial interests in the land as per the Law of Property Act 1925, s.2(1)(ii), so long as the preconditions for statutory overreaching are satisfied.

A single individual trustee cannot give a valid receipt for the capital money arising on a sale (Trustee Act 1925, s.14(2)(a)). A transfer by that trustee may pass the legal estate, but payment to that trustee alone does not overreach the equitable interests, whether the land is registered or unregistered. In unregistered land a purchaser for value of the legal estate may be bound by a beneficial interest of which they have actual, constructive or imputed notice. A purchaser must make reasonable inspections and enquiries. The suggestion in Caunce v Caunce [1969] 1 WLR 286, ChD that a wife’s occupation need not prompt enquiry was disapproved in Boland. See also Kingsnorth Finance Co Ltd v Tizard [1986] 1 WLR 783, ChD.

Judicial resolution of disputes over trust land

TOLATA 1996 provides various methods of resolution to disputes that arise in relation to trusts of land. As we have seen, trustees have (and beneficiaries may also have) the power to ask a court to resolve such disputes. What is also worth mentioning is that other parties with this power include chargee or mortgagees and trustees in bankruptcy (of which more below in Section Four).

The court has the power to make any order which it thinks fit when considering how the trustees have exercised their powers (or have omitted from doing so), and can make any order to make a declaration regarding the ‘nature or extent’ of any given person’s interest in the trust land and/or its proceeds (TOLATA 1996, ss.14(2), 17(2)). Under section 14 the court cannot appoint or remove a trustee, or vary the amount (the “quantum”) of any beneficial entitlement under the trust (Mortgage Corporation v Shaire [2001] Ch 743, ChD). It can direct a sale of the land giving a beneficiary the first opportunity to buy at a valuation, but cannot compel one beneficiary to transfer their beneficial share to another (Bagum v Hafiz [2015] EWCA Civ 801).

The types of disputes which a court may consider are:

• Disputes relating to the trustee’s allocation between the beneficiaries of their right to occupy;
• Whether a trustee can be excused from having to consult the beneficiaries or from having to obtain the requisite consent from the beneficiaries as provided for by the trust instrument;
• Disagreements between the trustees as to whether to sell the land;
• Attempts by one or more of the beneficiaries to either prevent or compel a sale by the trustees; and
• Applications by creditors for the sale of the trust land.

There are a range of criteria that a court will consider when addressing any of the above disputes. Except where the bankruptcy provisions below apply, those criteria include the following (TOLATA 1996, s.15(1)):

1. The intentions of the person(s) who created the trust;
2. The purposes for which the trust land is held (e.g. occupancy or to provide maximum returns to the beneficiaries);
3. The welfare of any minor who occupies, or who might reasonably be expected to occupy, the trust land as their home; and
4. The interests of any secured creditor of any of the beneficiaries.

Where the court is looking to determine questions on the trustee’s allocation of the beneficiaries and their right to occupy, the court must (as opposed to may) have regard to not only the criteria set out above but also to ‘the circumstances and wishes of each of the beneficiaries’, where those beneficiaries are those who would normally be entitled to occupy the land (TOLATA 1996, s.15(2)). On other applications, apart from those relating to section 6(2), the court must also consider the circumstances and wishes of the adult beneficiaries entitled in possession or, if they disagree, of the majority by value. It may also consider the minority’s circumstances and wishes (s.15(3), Savage v Savage [2024] EWCA Civ 49).

General principles regarding disputes over sale

Where a court is considering questions of whether or not the trust land is to be sold, the criteria set out above have been described as a ‘consolidation and rationalisation’ of the jurisprudence developed under the Law of Property Act 1925, s.30 (A v B (1997) unreported, Fam Div per Cazalet J) and those earlier principles can still assist. The court exercises its discretion under sections 14 and 15. There is no general presumption of sale. It is understood that all parties are likely to have reasonable concerns - retaining a place to live, versus maximising the value of the trust, in effect deciding what is in the interests of the beneficiaries. It therefore falls to the court to adjudicate the matter and decide what is the ‘right and proper’ response in equity (Re Buchanan-Wollaston’s Conveyance [1939] Ch 738 per Sir Wilfrid Greene MR).

One consideration in resolving disputes of sale is the ‘collateral purpose’: if the purpose of the trust is still capable of being fulfilled at the time of the intended sale, that may weigh against ordering a sale of the trust property (Jones v Challenger [1961] 1 QB 176 per Devlin LJ). For example, if a house purchased as a family home is to be sold, and the family relationships have been irretrievably broken, it may be argued that the collateral purpose of the trust (i.e. housing the family) no longer applies. But the welfare of minor children must be considered (TOLATA 1996 s.15(1)(c)) and thus their continued need for a home to occupy, particularly the place which the children recognise to be their family home, may mean the collateral purpose still subsists (Williams (JW) v Williams (MA) [1976] Ch 278, CA).

Key Points:

• The land was purchased between several individuals for an express purpose.
• This purpose stood as the ‘collateral purpose.’
• Given the purpose for which the land was purchased, no-one could attempt to sell the land without a vote of the co-owners.
• When one of the individuals sought a sale against the wishes of the others, the court refused the order because the collateral purpose subsisted.

SECTION FOUR: TRUSTEES-IN-BANKRUPTCY

On a bankruptcy order the official receiver normally becomes trustee of the bankrupt’s estate. The bankrupt’s beneficial interest in a co-owned home vests in the trustee. Property held on trust for others is excluded (Insolvency Act 1986, ss.283(3)(a), 291A, 306). Where the trustee seeks an order for sale under section 14, TOLATA 1996, s.15 does not apply. The bankruptcy court applies section 335A of the Insolvency Act 1986 instead (TOLATA 1996, s.15(4)).

When the trustee-in-bankruptcy seeks an order for sale, the matter is decided by the bankruptcy court, and in that instance the court is directed to make such order as it thinks ‘just and reasonable.’ The court must have regard to the interests of the bankrupt’s creditors and all the circumstances other than the bankrupt’s needs. Where the land includes a dwelling which is or has been the home of the bankrupt or their spouse, civil partner, former spouse or former civil partner, the family factors below also apply (as per Insolvency Act 1986, s.335A (2)):

1. The conduct of the bankrupt’s (former) spouse or civil partner, so far as that conduct caused or contributed to the bankruptcy;
2. The needs and the financial resources of the bankrupt’s (former) spouse or civil partner;
3. The needs of any children; and
4. All the circumstances of the case other than the needs of the bankrupt.

For a dwelling that was the sole or principal residence of the bankrupt or their current or former spouse or civil partner at bankruptcy, the trustee normally has three years from the bankruptcy to realise the interest, apply for sale, possession or a charge, or reach the agreement specified in section 283A. Otherwise the interest revests in the bankrupt. Late disclosure can delay the start of that period and the court can extend it. Section 313A also requires dismissal of a trustee’s application for sale of a qualifying home where the value of the bankrupt’s interest falls below the prescribed minimum.

Where the application for the order for sale is made after the end of one year beginning with the first vesting of the bankrupt’s estate in a trustee, the court must assume, unless the circumstances of the case are ‘exceptional’, that ‘the interests of the bankrupt’s creditors outweigh all other considerations’ (Insolvency Act 1986, s.335A (3)). The ordinary hardship of losing a family home is insufficient. The effect of severe illness on a family member may be exceptional, depending on the evidence (Claughton v Charalambous [1999] 1 FLR 740, ChD; Donohoe v Ingram [2006] EWHC 282 (Ch)). If circumstances are exceptional the court weighs the competing interests and may postpone sale. In Nicholls v Lan [2007] 1 FLR 744 the order provided for marketing no earlier than 18 months from the order unless the parties agreed otherwise.

Key Points:

• The debt arose from a loan towards the purchase. The forgery affected the bank’s security.
• The debt at the time the case was heard was significantly high and continued to grow.
• The son’s age at trial meant his welfare carried little weight. The bank’s interest outweighed the reasons for refusing a sale.
• Given the continually growing size of the debt, it was apparent that the absentee debtor husband would not service the debt, and therefore unless it had the property sold the equitable chargee had no recourse.

TRUSTEES OF LAND: HANDS-ON EXAMPLES

The sections set out above discuss various parts of the law for trustees of land. Those areas include the appointment of trustees, the powers trustees wield and how those powers are managed, and what happens where there is a breach of trust by the trustees. The following questions are designed to test your knowledge on these most important aspects of trustees of land. The answers to the questions can be found at the bottom of the page, however you are encouraged to attempt to answer the questions first based on your own recall or notes of the topic before looking at the answers.

Always think about the facts, the relevant statutory provision, the cases that interpret that provision, and what the outcome will be based on how those principles and cases apply to the question. As you may have gathered, the TOLATA 1996 is especially important, not least where it grants powers to trustees over their beneficiaries and the land, so be sure to highlight provisions from that Act and have it to hand when you are dealing with questions relating to trusts of land. Although you would not be expected to give the full citations of cases you cite (just the names of the parties and the year is usually sufficient, the name of the judge giving the ratio is even better!), you will be expected to accurately cite the relevant sections and subsections of the TOLATA 1996 and other legislation. Simply reciting the name of the statute in your exam without the corresponding section and subsection will not be sufficient.

Q1. Amalgamated Properties Ltd is hoping to purchase Blackacre from Bert. Bert assures them that he is the sole legal owner of the property, and the land searches appear to bear out this assertion. However, Amalgamated Properties Ltd are subsequently contacted by Cheryl, who informs Amalgamated that she is actually the beneficial owner and occupant of the land, and tells Amalgamated that they cannot purchase the property. Amalgamated do some further investigation, and found out that Bert is indeed a sole trustee of the property, and Cheryl has the beneficial interest. There is no one else holding the land on trust. Amalgamated ask you if they can nevertheless overreach her interest.

Q2. You are appointed as trustee of a trust of land, which includes as its beneficiaries Fanny, Gareth and Helen. The trust instrument requires you to consult with all of the beneficiaries before exercising your powers. Helen begins to cause problems for Fanny and Gareth by continually taking up space with ever-more elaborate gym equipment, and Fanny and Gareth ask you if you can do anything about the situation. Further: what if you took action without consulting Helen?

Q3. Julia nominates Kevin as her trustee to execute the trust over Greenacre, transferring the estate to Hannah. After Julia passes away, Kevin falls into a coma and his doctors conclude that he will not be coming out of his coma for a significant period of time. Leonard, aged 15, wants to move into Greenacre as a matter of urgency. He comes to you for legal advice, asking if he can put himself forward as trustee, alternatively if the court can nominate one for him.

Q4. Mike forges the signature of his wife, Noreen, on a mortgage document with the bank Oweusmoney plc. After Mike is declared bankrupt, he absconds from the property, leaving Noreen alone with their children. Mike cannot be traced. The debt to Oweusmoney plc goes unpaid, and the debt continues to increase. The official receiver becomes trustee-in-bankruptcy on the making of the bankruptcy order. Fourteen months pass, at which point the trustee-in-bankruptcy makes an application for the property to be sold. Noreen is worried because she has recently fallen extremely ill, and her diagnosis is said to be terminal. Advise Noreen.

A1. The clue here lies in the fact that Bert is said to be the sole and only trustee. If the purchase money is paid to Bert alone, Cheryl’s beneficial interest will not be overreached. If a second trustee is validly appointed and joins in the authorised sale, payment to both trustees can overreach her interest even though she occupies the land and Amalgamated knows of her claim. Her interest then attaches to the proceeds. Any restriction on the register or requirement for consent must also be addressed. If Cheryl is an adult with capacity and is solely and absolutely entitled, she can direct Bert to transfer the land to her (Saunders v Vautier (1841) 4 Beav 115).

A2. This is to do with the powers of trustees. If the beneficiaries are entitled to occupy under section 12, you can impose reasonable conditions on the use of shared space, including where Helen keeps her equipment. Consult all three as the instrument requires, consider the purposes of the trust and their circumstances and wishes, and consider a restriction before exclusion. Without Helen’s consent or the court’s approval you cannot exercise the power so as to prevent, or be likely to prevent, her continuing in occupation. Failure to consult would be a breach. Helen could seek relief under section 14, but compensation does not follow automatically.

A3. This deals with the appointment of trustees, and the circumstances in which the beneficiary can put themselves forward as trustee or where the court can nominate a trustee on the beneficiary’s behalf. Leonard cannot be appointed trustee at 15 (Law of Property Act 1925, s.20), or give a direction under section 19 of TOLATA 1996. Kevin’s incapacity may allow a replacement to be appointed under section 36 of the Trustee Act 1925. If no one is entitled, willing and able to do so, and the beneficiaries are all adults with capacity and together absolutely entitled, section 20 of TOLATA 1996 provides a further route. Otherwise the court can appoint a replacement under section 41 of the Trustee Act 1925 if appointment is expedient and doing so without the court would be inexpedient, difficult or impracticable. If Leonard has a beneficial interest, he may apply under section 58, ordinarily through a litigation friend. Wanting to live at Greenacre gives him no entitlement by itself. His right to occupy depends on the terms on which Hannah holds the land and on sections 12 and 13.

A4. Unlike Bank of Ireland v Bell, the application is by the trustee in bankruptcy. The forgery does not of itself charge Noreen’s beneficial share. Only Mike’s beneficial interest vests in the trustee, subject to any valid security. Fourteen months have passed since first vesting, so section 335A(3) applies. The court must assume the creditors’ interests outweigh all other considerations unless there are exceptional circumstances. Noreen can put forward medical evidence of her prognosis, the effect of a move, and the needs of the children. Her terminal illness could justify postponement. If the circumstances are exceptional the court must decide what order is just and reasonable on the evidence.

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