Trusts of Land and Appointment of Trustees Act 1996

The Trusts of Land and Appointment of Trustees Act (TLATA) 1996 is the act which abolished the doctrine of conversion (a doctrine in the law of real property, according to which the purchaser of real property becomes the equitable owner of title to the property when they sign a contract to purchase the land at a later date) and amended the law about the appointment and retirement of trustees.

1. Why was it introduced? (Political/Sociological Context)

TLATA 1996 was introduced to address the problems which arose in separation cases when partners disagreed as to when to sell a property. This often led to spouses and children becoming homeless. The issue arose because part of the Law of Property Act 1925, dealing with trusts made it hard to establish a trust without it being covered by the Settled Land Act 1925. Under this Act, co-owners of property were considered to have beneficial interests in the proceeds of sale, not in the land. This interpretation did not reflect the reality that most co-ownership of property was for the purposes of providing a home, not for the purposes of investment. It was recognised that the occupier of property may have an attachment to a specific piece of land that cannot be properly compensated for by payment of money, especially if their real concern was the enjoyment of the land itself.

2. What was the aim of the Act? (Legal Context)

In its Report No. 181, the Law Commission reviewed the law on trusts at the time. Through TLATA 1996, it attempted to remedy a number of flaws in the law.

Firstly, the dual system of settlements and trusts for sale was deemed inappropriate because successive interests in land created a settlement under the Settled Land Act 1925 if trust for sale was not expressly imposed, which led to the creation of inadvertent settlements.

Secondly, TLATA targeted the difficulties that existed in relation to settled land, such as the complexity of the system, the inadequate protection for purchasers in cases where life tenants made unauthorised dispositions and the conflict of interest in the position of tenants for life as beneficiaries and a trustees for the other beneficiaries. In practice, the system allowed tenants for life to give preference to their own interests.

Thirdly, TLATA was an attempt to deal with some problems in relation to the trusts for sale, e.g. the obligation of trustees to sell was inconsistent with the expectations of the trustees and the beneficiaries and the application of the doctrine of conversion had become uncertain.

Fourthly, TLATA’s role was to tackle the unfair advantage of tenants for life, who, unlike any other person in a position of trusteeship, could not be easily removed if they turned out to be unsuitable.

3. What main changes did it make to the law?

TLATA 1996 removed the division between settlements and trusts for sale and introduced a unitary system of trusts of land – any trust of property which consists of or includes land (s. 1(1)(a)). Trusts for sale in existence on 1 January 1997 when TLATA came into force automatically became trusts of land. Subject to two exceptions (land which was settled prior to 1997 and universities and colleges land), after 1 January 1997, it became impossible to create any new settlements for the purposes of the Settled Land Act 1925.

TLATA dealt with the problem of sale of family homes in cases of separation by imposing statutory considerations to be taken into account when dealing with disposition of trusts and ordering a sale of a family home. S. 14 allows a creditor to apply for an order to sell the property, but under s. 15, in allowing or rejecting the application, the court must consider the intentions of the person who created the trust, the purposes for which the property subject to the trust is held, the welfare of a minor occupier of the land, subject to the trust, and the interests of the secured creditor of the beneficiary.

S. 3(1) of TLATA abolished the doctrine of conversion by which a beneficial interest in land held on a trust for sale was regarded as an interest in personalty and a beneficial interest in personal property held on a trust for sale to purchase the land was regarded as an interest in the land. Currently, under TLATA where land is held by trustees subject to a trust for sale, it is not to be regarded as personal property and where personal property is subject to a trust for sale, so that the trustees can acquire land, the personal property is not to be regarded as land.

Ss. 9, 11 and 12 confer a number of rights on beneficiaries who are entitled to an interest in possession in land subject to a trust – right to be delegated a trustee function by the trustees, obligation on the trustees to consult the beneficiaries and the right to occupy the land. As a result of the abolition of the doctrine of conversion, all beneficiaries entitled to an interest in possession in land subject to a trust, including trusts for sale, have the rights, enshrine in ss. 9, 11 and 12.