What protection is afforded to beneficial co-owners of property

March 22, 2018/in Land /Private Law Tutor

This article will discuss what protection is afforded to beneficial co-owners of property in situations where the trustees or third parties apply to a court for an order to sell land which is subject to a trust of land by reviewing recent provisions[1] that have been introduced to protect beneficial co-owners to see if it has restored balance. First this article will present the difference between the old Trust for sale and the new Trust of land and critically discussing the benefits brought by this change. Second this article will critically discuss how the introduction of the Trusts of Land and Appointment of Trustees Act (“TOLATA”) 1996 has extended the powers of trustees of land and provided greater protection to beneficial co-owners of property. Third this article will critically examine how the courts deal with requests for the sale of land in light of the introduction of the numerous provisions. Lastly this article will conclude its findings.

After 1925 in all concurrent interest, a Trust for sale was imposed.[2] As the name suggests is essentially an investment notion, meaning that the trustees were under a duty to sell the property unless they all agreed to postpone sale. The legal owners[3] held the property on trust as trustees for themselves and any additional number of equitable[4] owners.[5] The trust provided a purchaser with a protected legal title[6] irrespective of any undisclosed equitable interest, provided that the purchase money was paid to the legal co-owners. The drawback was the equitable owners in concurrent interests were at risk (in overreaching[7] transactions) when their rights were transformed from land into notional rights in money. The trustees could defraud the equitable owners.[8] A further aggravating factor was the doctrine of conversion, which notionally deemed a sale to have already taken place, due to the duty to sale under the trust.[9] Judges would treat interests as already being in money and not in land. This doctrine was applied very paradoxically[10] and unimaginatively. We can see this when we compare Cooper v. Critchley[11]with Irani Finance Ltd. v. Singh.[12] This was stigmatised by Lord Wilberforce as unrealistic.[13] Moreover the duty to sale often resulted in one of the co-owners who disputed the sale having to leave the property, under a court-ordered sale.

The Trust for sale operated for seventy years until it was changed by the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA), following a Law Commission Report.[14] TOLATA provides more power to trustees to deal with land. The wider powers of trustees in Trust of land are balanced by trustees considering the beneficiaries in two ways: the first is the ‘…trustees [should] have regard to the rights of the beneficiaries.'[15] Nevertheless s.6(5) TOLATA is vague in indicating what beneficial rights trustees should regard? It can be criticised by asking: what are these rights beneficiaries have, that they don’t have under trust law? Second the trustees must consult the beneficiaries concerned before taking any decision whatsoever relating to the land.[16] This extends to all new trusts, but the trust instrument can exclude it.[17] Nevertheless, a consultation requirement (in the form of a Restriction) placed on the register can protect the equitable co-owners in the eventuality of a trustee overreaching without the beneficiaries consent. However, this consultation procedure does not differ from its repealed predecessor s.26(3)[18] which has been criticised by the Law Commission as weak.[19]

Trustees also have the power to jointly, delegate powers to a beneficial owner,[20] although the beneficiary to whom delegation can be made cannot give a valid receipt for capital money and thus cannot overreach.[21] This replaces the power of delegation given to trustees for sale under the old regime.[22] Under the Trust for sale co-owners had a prima facie right to occupy the whole land. In successive interests under the Trust for sale it was really at the trustee discretion whether a life owner or any other beneficiary was allowed to occupy or not. They did not have the right to occupy. This has been considerably changed by s.12. Beneficiaries have the right to occupy land but only provided the purpose of the trust includes occupation of that class of beneficiary.[23] Moreover, there must be ‘available and suitable’ land held by the trustees for occupation.[24] Furthermore, s.12 appears to statutorily empower the trustee to purchase land from the money in the trust for the ‘purpose’ of a beneficiary’s occupation.[25] Where several beneficiaries have the right under s.12 to occupy trust property, the trustees are given powers[26] to exclude or restrict such rights in relation to some of the beneficiaries, but not to prevent all the beneficiaries from occupying the land. A beneficiary who is permitted to occupy at the expense of another co-owner may be made subject to an obligation to pay compensation to a non-possessing co-owner[27] or forgo some benefit or payment.[28] In the case of co-ownership a deadlock in the rights of occupation and exclusion can arise. Hence, the court’s assistance under s.14 application will be needed which produces the danger of the old s.30[29] harshness creeping back.[30]

Section 14[31] provides that any person can make applications for a variety of orders with an interest in the land. While s.15 provides guidance to the court in what matters need to be considered in determining applications. The Law Commission originally proposed six factors.[32] This was reduced to four by TOLATA.[33] If there is a dispute between co-owners these factors are particularly relevant. Under the old Trust for sale it was open to any person interested in the property, (creditors/banks) to bring an order for the sale of that property under s.30.[34] The new procedure will not be applicable to cases of a trustee in bankruptcy; they are in a different position[35]which is not affected by the 1996 legislation.[36]

Under the old law the archetypical co-owners were the husband and wife, who would agree to postpone a sale under a Trust for sale because the purchase would be of a family home. If relations broke down and an agreement to postpone the sale was not wanted by one of the co-owning parties, or a creditor wanted a sale then under the old scheme an application could be made to the court to order a sale.[37] However, if the person resisting the sale could prove that the parties had agreed on a collateral purpose,[38] when the corresponding trust was made, the court would not order the sale.[39] A continuing collateral purpose could be shown through the needs of dependent children which would defer a sale.[40]

Under the new scheme, some provisions take into account the courts’ developed positions under the old s.30.[41] Today the court is expected to have regard to: (a) the intentions of the settlor,[42] (b) purposes for which property is held,[43] (c) the interests of any minors[44] (d) and the interest of any secured creditor.[45] There is also a provision in s.15 that the court must have regard to the circumstances and wishes of the beneficiaries who are entitled to occupy the land.[46] These will no longer be considered in the context of a Trust for sale with a presumption to sell as in Re Mayo.[47] This should lead to a greater disposition not to order an immediate sale. The factors in s.15 are not prioritised. When the court is faced with an application for sale, does it take regard to the jurisprudence it has built up over a long period in application for sale, or does it rely on the factors in s.15? It is argued the new rules will be meaningless without the court taking substance from the previous developed positions. Thus it is important to observe how the court is interpreting s.15 in post 1996 cases.

In Mortgage Corporation v. Shaire.[48] Neuberger J.’s specific question was: did s.15 modify the law from how it had been developed in Citro[49] and Byrne[50]? He advanced eight reasons as to why s.15 has changed the law. Although they can be criticized for not embracing the true meaning of s.15 along with the Law commission proposals,[51] they nevertheless appear to fundamentally change the courts approach in deciding whether a beneficiary or creditors interests should prevail. [52] His approach has been praised for blowing away ‘the remnants of the harshness for families'[53] caused by s.30.[54]

However in Bank of Ireland Home Mortgages Ltd v. Bell[55] it was suggested, the departure of one of the co-owners brings the purpose of providing a family home to an end, with the result that the interests of the children will be a small consideration against sale. In reaching the decision to order the sale the court restricted the weight[56] that was to be given to the factors in s.15. Peter Gibson L.J. declared the collateral purpose of a family home ‘ceased to be operative once Mr. Bell left the property.'[57] This has been described as ‘contentious'[58] considering there was a dependent child aged five.

The factors drafted in s.15 collapse the welcomed positions developed by the courts under old authority.[59] If the decision in Bell prevails the likelihood is that a sale will be ordered notwithstanding the obliteration of the duty to sell under the Trust for sale. Probert has described this case as changing the direction of the wind therefore it has ‘blown us back to where we started.'[60] Whether automatic sales will be ordered under s.14 remains to be determined and will depend on the correct judicial application of old authority with s.15 factors.

The Law Commission published the Law Commission Report[61] which recommends the Land Registration Act (LRA) 2002. The Land registration Act 2002, fundamentally replaces the 1925 Act. The new legislation tackled much that was imprecise, cumbersome, perplexing, and problematic with the 1925 system. Many of LRA 2002 provisions deal with procedural matters that, while valuable, establish no new principle in providing protection to third party beneficiary when a sale is sought. One possible avenue of protection has been through minor interests.

This is a vital tool in protecting interests of beneficiaries behind a trust. This enables a beneficiary behind the legal curtain to make new purchaser aware of his/her existence. The LRA 2002 now has only two means of registering ‘minor interests’. It introduced the new form of restriction, which performs the functions of the previous restriction and inhibition. The criticism of this system is that the first in time prevails, irrespective of whether either is registered as seen in the case of Barclays Bank v Taylor[62], the LRA 2002 provides that the priority of competing minor interests should remain essentially unchanged because electronic conveyancing will ensure that creation and registration occur at the same time.

This begs the question of whether beneficial co-owner’s interests are better protected by the recent changes of TOLATA. What can be said for sure is the Trust of land is certainly a more satisfactory device for holding co-owned land. This article has demonstrated there is no longer the duty to sell a property, but because the most common type of co-owners are co-habiting couples whose rights are identical all the right and provisions of the Trust of land stalemate. It has been argued the consultation rights given to beneficiaries are of limited use and its provisions somewhat toothless. It has been shown where one co-owner has surrendered his right to a creditor; the new regime can have the effect of ordering a sale over interests of the family. This is somewhat of a step backwards from the old law. TOLATA along with the Trust of land are new concepts with little case law. Whether it is satisfactory trust for co-ownership, will depended on whether its provisions and the Act, which creates it, are read in the light of previous judicial decisions on Trust for sale.


L. Clements, ‘The Changing Face of Trusts’, [1998] 61 Modern Law Review 56

N. Gravells, ‘Co-ownership, severance and purchasers – the Law of Property (Joint Tenants) Act 1964 on trial?’ (2000) Conveyancer 461

N. Hopkins, ‘The Trusts of Land and Appointment of Trustees Act 1996’, [1996] 60 Conveyancer 411, especially pp 418-422

Jones & Palmer, ‘The Trusts of Land and Appointment of Trustees Act 1996’, [1997] 1 Web Journal of Current Legal Issues

S. Pascoe, ‘S. 15 TOLATA 1996 – a change in the law?’, (2000) Conveyancer 315

M. Percival, ‘Severance by written notice – a matter of delivery?’, (1999) Conveyancer 60

J. Ross Martyn, ‘Co-owners and their entitlement to occupy their land before and after TOLATA 1996’, (1997) Conveyancer 254

M. Oldman, ‘Balancing commercial and family interests under TOLATA 1996, s.15.’, (2001) 60 Cambridge Law Journal 43-45

R. Probert, ‘Creditors and section 15 of the Trusts of Land and Appointment of Trustees Act

1996: first among equals?’, (2002) Conveyancer 61-67

M.P. Thompson, ‘Secured creditors and sales’, (2000) Conveyancer 329

[1] Trusts of Land and Appointment of Trustees Act (TLATA) 1996 and Land Registration Act 2002

[2] s.34(2) and 36(1) Law of Property Act 1925

[3] The legal title of land is statutorily conveyed to co-owners as joint-tenants, s 34 and 36 Law of Property Act 1925

[4] Equitable owners are tenants in common, each tenant is regarded as separate owners having ‘an undivided share in land’

[5] Law of Property Act 1925, s.34 (2)

[6] Fee simple absolute in possession

[7] s.2 Law of Property Act 1925, and illustrated by City of London Building Society v. Flegg [1988] A.C. 54

[8] City of London Building Society v. Flegg [1988] A.C. 54

[9] Harman v. Glencross [1986] 1 All E.R. 545, 555 per Balcombe L.J.

[10] Irani Finance Ltd. v. Singh [1974] 1 Ch. 59

[11] [1955] Ch. 431, 439

[12] [1974] 1 Ch. 59

[13] Williams & Glyn’s Bank Ltd. v. Boland [1981] A.C. 487, 507 per Lord Wilberforce

[14] Transferring Land: Trust of Land, (H.C. 391) Law Com. No. 181 (1989)

[15] s.6(5) Ibid.

[16] s.11 TLATA 1996

[17] s.11(2) TLATA 1996

[18] Law of Property Act 1925

[19] Law Commission Consultation Paper No.94, para 3.12

[20] s.9, Ibid.

[21] s.9(7) Ibid.

[22] s.29, Law of property Act 1925

[23] s.12 (1) (a) Ibid.

[24] s.12 (1) (b) Ibid.

[25] Law Com no. 181, para13. 3

[26] s.13 (1) TLATA 1996

[27] s.13(6)(a) Ibid.

[28] s.13(6)(b) TLATA 1996 adopts a similar position to that of Dennis v. McDonald, [1982] Fam. 63

[29] Law of property Act 1925

[30] Clements, L. M., The Changing Face of the Trusts: The Trust of Land and Appointment of Trustees Act 1996, [1998] 61 Modern Law Review, 56-67, p. 61

[31] TLATA 1996

[32] See para. 12.10 of Law Com. No. 181.

[33] s.15(1) TLATA 1996

[34] Law of Property Act 1925

[35] Governed by s.335 – 336 Insolvency Act of 1986

[36] s.15(4) TLATA 1996

[37] s. 30 of the Law of Property Act 1925, illustrated in Jones v. Challenger [1961] 1QB 176

[38] Which was capable of continuing.

[39] Re Buchanan-Wollaston’s Conveyance [1939] Ch 738

[40] Re Evers’ Trust [1980] WLR 1338

[41] Law of property Act 1925

[42] s.15(1)(a) TLATA 1996

[43] s.15(1)(b) Ibid.

[44] s.15(1)(c) Ibid.

[45] s.15(1)(d) Ibid.

[46] s.15(3) Ibid.

[47] [1943] Ch 302,

[48] [2001] Ch 743

[49] [1991] Ch. 142; [1990] 3 All E.R. 952. The earlier cases are discussed in Re Citro: Re Bailey [1977] 2 All E.R. 26 and Re Lowrie [1981] 3 All E.R. 353.

[50] [1991] 23 H.L.R. 472

[51] Pascoe, S., ‘s. 15 TLATA 1996 – a change in the law?’, [2000] Conveyancer 315 (Westlaw)

[52] Gardner, Chargees and Family Property [2001] 1 web JCL1 at http://webjcli.ncl.ac.uk/2001/issue1/gardner1.html

[53] Pascoe, S., ‘s. 15 TLATA 1996 – a change in the law?’, [2000] Conveyancer 315 (Westlaw)

[54] Law of Property Act 1925

[55] [2001] 2 F.L.R. 809

[56] This could be because the welfare of minors is drafted as a consideration and grouped equally with creditors interests. s.15(1)(c) and (d) TLATA 1996

[57] [2001] 2 F.L.R. 809 at p. 815

[58] Probert, R., ‘Creditors and section 15 of the Trusts of Land and Appointment of Trustees Act1996: first among equals?’, [2002] Conveyancer 61-67

[59] Re Evers’ Trust [1980] WLR 1338

[60] Probert, R., Op cit.

[61] No 271 (Land Registration for the Twenty-First Century: A Conveyancing Revolution),

[62] (1973)


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