A trust of land arises where land is held by trustees for the benefit of beneficiaries who have equitable interests in the land. This is the standard arrangement when co-owners hold property: the legal title is held by trustees (usually the co-owners themselves as trustees) and the equitable interests are held by the beneficiaries (who are often the same people). Trusts of land replaced the old "trust for sale" regime under TOLATA 1996.
TOLATA 1996 came into force on 1 January 1997. It governs all trusts of land created on or after that date and applies to pre-1997 trusts of land and trusts for sale (with some transitional provisions). Key sections include: s.6 (overriding powers of trustees), s.11-12 (rights of beneficiaries), s.14 (applications to court), and s.15 (court powers on application).
The Act was designed to modernise the law of trusts of land. Under the old regime, trustees of land held land "on trust for sale" and had a duty to sell the land, with the power to postpone sale. TOLATA abolished this duty to sell: trustees now have the power to retain the land for the benefit of the beneficiaries. This was particularly important for family homes, where forced sale was often undesirable.
| Feature | Trust for Sale (pre-TOLATA) | Trust of Land (post-TOLATA) |
|---|---|---|
| Duty to sell | Yes - duty to sell, power to postpone | No - power to sell or retain (no duty) |
| Default position | Sale was the norm | Retention is equally valid |
| Beneficiaries' rights | Limited | Extended (right to info, occupation, court application) |
| Court jurisdiction | Limited | Broad (s.14 TOLATA) |
| Best interests of minor | No statutory duty | Must consider welfare of any minor (s.15 TOLATA) |
| Family home protection | Weaker | Stronger - courts reluctant to order sale of family home |
The shift from trust for sale to trust of land reflects a policy change: the family home is no longer seen primarily as an asset to be realised. Trustees can now keep the family home for the benefit of the beneficiaries (especially children) rather than being compelled to sell. This is a key SQE1 distinction.
Under s.6 TOLATA, trustees of land have all the powers of an absolute owner. This is an "overriding power" - it prevails over any restrictions in the trust instrument unless the trust instrument expressly provides otherwise. Trustees can sell, mortgage, lease, or otherwise deal with the land as they see fit, subject to their fiduciary duties and the rights of the beneficiaries.
The trustees of land may do all such things as are necessary or reasonable for the purposes of the trust, including: (a) selling or disposing of any part of the land; (b) purchasing other land; (c) making improvements; (d) granting leases; (e) raising money by mortgage or charge; (f) settling any disputes between beneficiaries.
Under s.11 TOLATA, trustees of land have a duty to consult the beneficiaries of full age and beneficially entitled to an interest in possession in the land, so far as is practicable, having regard to the beneficiaries' interests and knowledge. This means trustees should keep beneficiaries informed about significant decisions regarding the trust property. However, the duty to consult does not give beneficiaries a veto over trustees' decisions.
Under s.11 TOLATA, trustees must consult the beneficiaries so far as is practicable having regard to the beneficiaries' interests and knowledge. Where there is a dispute between beneficiaries who are entitled to occupy the property, the trustees must not exercise their power of sale, etc., except with the court's permission or in accordance with an order of the court (s.13 TOLATA).
Trustees must exercise their powers in the best interests of ALL the beneficiaries. They cannot favour one beneficiary over another. Where the beneficiaries have conflicting interests (e.g., one wants to sell and another wants to stay), the trustees must balance these interests carefully. If the trustees cannot resolve the dispute, either the trustees or a beneficiary can apply to court under s.14.
A beneficiary who is entitled to occupy the land has a right to occupy the land if and to the extent that the right is not excluded by the terms of the trust. However, this right is subject to the rights of the other beneficiaries and is subject to being regulated by the trustees. The trustees may regulate the occupation or exclude a beneficiary from occupation if it is in the best interests of the trust.
Under s.12, the trustees may impose reasonable conditions on the right to occupy. They may require a beneficiary to pay rent or contribute to expenses. They may also exclude a beneficiary from occupation if: (a) the beneficiary is unsuitable (e.g., causing damage); (b) the property is required for another beneficiary; or (c) the beneficiary's occupation would prejudice the interests of other beneficiaries. The trustees must act in the best interests of the trust as a whole.
A beneficiary in sole occupation who is also a trustee may be required to pay occupation rent to the other beneficiaries. However, the courts have held that a beneficiary-trustee in occupation is NOT automatically required to pay rent. The trustees have discretion whether to require rent, based on the circumstances. Where one co-owner remains in the property after separation, the court may award an occupation rent equivalent to half the market rent.
Any beneficiary of a trust of land, or the trustees, may apply to the court for an order under this section. The court may then make any order it thinks fit, including an order declaring the nature or extent of a person's interest, an order for the sale or partition of the land, or an order regulating the right to occupy.
Applications under s.14 can be made by: (1) any TRUSTEE of the trust of land; or (2) any BENEFICIARY under the trust. A beneficiary is any person with a beneficial interest in the land, whether as a tenant in common, life tenant, remainderman, or under a constructive or resulting trust. There is no requirement to exhaust all internal dispute resolution mechanisms before applying, though the court will expect parties to have attempted to resolve matters.
There is no statutory threshold test for making a s.14 application. A beneficiary does not need to show exceptional circumstances or that their application is "necessary." Any beneficiary may apply at any time. However, the court has discretion whether to make the order sought, and will consider all the circumstances of the case, particularly the factors listed in s.15.
In determining whether to make an order and what order to make, the court must consider: (a) the intentions of the person who created the trust; (b) the purposes for which the land is held; (c) the welfare of any minor who occupies or might reasonably be expected to occupy the land as his home; (d) the interests of any secured creditor; (e) the circumstances and wishes of each beneficiary.
| Factor | What the Court Considers |
|---|---|
| Intentions of settlor | The original purpose of the trust and what the creator intended |
| Purposes of the trust | Why the land is held - e.g., as a family home, investment, business |
| Welfare of any minor | The best interests of any child who lives in or may live in the property |
| Interests of secured creditors | Mortgage lenders and other secured creditors with charges on the land |
| Circumstances and wishes of beneficiaries | Each beneficiary's needs, financial position, housing needs, and wishes |
The welfare of any minor who occupies or might reasonably be expected to occupy the property as their home is a MANDATORY consideration. This does NOT mean the court must always refuse to order sale where a child lives in the property. It means the court must weigh this factor in the balance. In practice, the courts are reluctant to order sale of a family home while minor children are living there, especially if the children are in education and the parent with care has nowhere else to go.
The court must also consider the interests of secured creditors (mortgage lenders). If the property is in arrears and the lender is seeking possession, the court cannot simply refuse to order sale to protect the occupants. The creditor's right to enforce their security is a significant factor. However, the court may defer sale until a suitable time (e.g., until children finish their education) if this is consistent with the creditor's interests.
The most common order under s.14 is an order for sale. Where co-owners cannot agree on the future of the property and one wishes to realise their share, the court will normally order sale. The court may impose CONDITIONS on the sale: deferring the sale to a specific date (e.g., until children reach 18), setting a reserve price, or requiring the occupying co-owner to be given the opportunity to purchase the other's share first.
The court may defer sale for a specified period. This is common where: (a) minor children are living in the property and it is their home; (b) the housing market is unfavourable; (c) one co-owner needs time to arrange alternative accommodation; or (d) the property is undergoing improvements. During the deferral period, the occupying co-owner may be required to pay occupation rent to the non-occupying co-owner.
The court may facilitate a buy-out where one co-owner purchases the other's share. This avoids the disruption and expense of a sale on the open market. The court may order that the occupying co-owner has the first option to buy the non-occupying co-owner's share at market value, determined by a joint valuer. The buy-out must be completed within a specified timeframe.
The court may regulate the right to occupy under s.14. It may: (a) confirm a co-owner's right to occupy; (b) exclude a co-owner from occupation; (c) impose conditions on occupation (e.g., payment of rent or expenses); or (d) vary the terms of occupation. Occupation orders under TOLATA are different from non-molestation and occupation orders under the Family Law Act 1996, which deal with domestic abuse.
[2001] Ch 743
A woman purchased a property in her sole name. Her partner lived with her and contributed to mortgage payments. After separation, the woman defaulted on the mortgage. The mortgagee sought possession. The question was whether the court could refuse an order for sale under s.15 TOLATA.
The court could refuse an order for sale in appropriate circumstances. The factors in s.15 are NOT a checklist - they are matters to which the court must have regard. The court has a broad discretion and is not obliged to order sale simply because one party wants it. However, the creditor's interests are a significant factor.
The court has broad discretion under s.15 TOLATA and is not obliged to order sale. The s.15 factors are not a rigid checklist - the court weighs all relevant circumstances. The creditor's interests are important but not determinative.
[2014] EWCA Civ 1410
The claimant and her late husband had purchased a property as joint tenants. After the husband's death, the claimant continued living in the property with her children. The deceased's son (from a previous relationship) became entitled to the father's share by survivorship and sought an order for sale under s.14 TOLATA.
The Court of Appeal held that the first-instance judge had not properly balanced the s.15 factors. The welfare of the children was an important factor but had to be weighed against the son's interest in realising his share. The case was remitted for reconsideration.
All s.15 factors must be properly weighed and balanced. The welfare of minor children is important but not decisive. The court must consider all beneficiaries' interests, including the financial interest of a beneficiary who is not in occupation.
[2018] EWCA Civ 106
A father transferred property to his son and daughter-in-law as joint tenants. After the son died, the father claimed a beneficial interest under a resulting trust (he had provided the purchase money). The daughter-in-law argued there was no trust.
The court confirmed that where the legal title is transferred to two people but the purchase money comes from a third party, a resulting trust arises in favour of the person who provided the purchase money. This applies even to family members.
A resulting trust arises where purchase money is provided by a person who is not the registered proprietor, even in family situations. The presumption of resulting trust applies unless there is clear evidence of a gift.
TOLATA applications are often made in the context of family breakdown. It is important to distinguish between TOLATA applications and family law remedies: (1) TOLATA s.14 is available to ANY beneficiary, whether married, unmarried, or related; (2) married couples may also have access to remedies under the Matrimonial Causes Act 1973 (MCA 1973); (3) Schedule 1 Children Act 1989 provides for housing needs of children; (4) the Family Law Act 1996 provides non-molestation and occupation orders for victims of domestic abuse.
Under Schedule 1 Children Act 1989, a parent can apply for financial provision for a child, including a settlement of property order. This allows the court to order that a property (or a share in a property) be settled for the benefit of a child until the child reaches 18 (or ceases full-time education). This is separate from TOLATA and is used where a parent needs housing for a child after separation from the other parent.
TOLATA s.14 is used where the applicant is a BENEFICIARY of the property and wants to enforce their beneficial interest (e.g., order for sale, declaration of shares). Schedule 1 Children Act 1989 is used where a parent needs HOUSING for a child but may not have a beneficial interest in the property. The two remedies are not mutually exclusive but serve different purposes. TOLATA focuses on property rights; Schedule 1 focuses on the child's welfare.