Strict Settlements

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Purpose of a strict settlement
Trusts for sale

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To create a series of beneficial interests in favour of a succession of persons - used by aristocracy traditionally.
Between 1925 and 1997 trusts for sale essentially gave the trustees of the land a duty to sell it, and a power to postpone the sale.

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1925 several key reforms

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Several reforms to deter creation - punitive tax regulation, settled land Act 1925.
Sice 1925 all strict settlements must involve a trust. Trust for sale until 1997 was applied broadly to describe a chain of interests in land. Trustees duty to sell and power to postpone - not always appropriate remedy. Equitable interests attached to proceeds of sale rather than the land itself with the help of overreaching.

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Trusts of Land and Appointment of Trustees Act 1996 (TLATA 1996 ss.2, 4,5)

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All settlements take effect as trusts for land under this Act. Came into force 1997 (1/1/970)

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Bull -v- Bull [1955] 1 QB 234

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Denning LJ: "The son is, of course, the legal owner of the house, but the mother and son are, I think, equitable tenants in common. Each is entitled in equity to an undivided share in the house, the share of each being in prportion to his or her respective contribution. Each of them is entitled to the possession of the land and to the use and enjoyment of it in a proper manner. Neither can turn out the other; but, if one of them should take more than his proper share, the injured party can bring an action for an account. If one of them should go so far as to oust the other, he is guilty of trespass.
My conclusion, therefore, is that when there are two equitable tenants in common, then, until the place is sold, each of them is entitled concurrently with the other to the possession of the land and to the use and enjoyment of it in a proper manner and that neither of them is entitled to turn out the other."

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Legal background to trusts & estates: no valid will - 'trust for sale'

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The rules of intestacy can provide for assets to be held in a statutory trust (TSEM6120). These are ‘trusts for sale’. This does not mean the trustees are obliged to sell immediately. The phrase means the trustees have the power to sell. Usually they have the power to sell, and also the discretion to postpone sale. They can defer the sale for as long as they think fit. Without the discretion to postpone, they must sell as soon as they can.

They must re-invest the proceeds for the benefit of the beneficiary.

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The main legislation in respect of land which is owned is the Trusts of Land and Appointment of Trustees Act 1996. This replaced the Law Of Property Act 1925. The Trusts of Land and Appointment of Trustees Act 1996 is known as either TLATA or ToLATA for short.

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ToLATA does not create an interest in land. What it does is set out the framework for determining the extent of any interest when disputed and also how that interest can be dealt with.

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Jones v Kernott - 'The story'

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The case was brought under the Trusts of Land and Appointment of Trustees Act 1996. The brief facts were that an unmarried couple purchased a house in joint names (ie 50/50 ownership). The amount of money they contributed was unequal (overall Ms Jones contributed far more than Mr Kernott). They split up after 8 years living together in the house, in 1993. Ms Jones remained in the house with the parties children and paid all subsequent bills and expenses on the house. Over 13 years later Mr Kernott sought to realise his interest in the property, claiming a 50% share. Ms Jones argued she was entitled to the house in its entirety.

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The results - 90% her share 10% his share based on the following -

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(1) The starting point is that a property purchased in joint names without any express declaration of shares is held jointly 50:50.

(2) The starting point can be displaced by showing (a) the parties had a different common intention at the time bought the home, or (b) that they later formed the common intention that their respective shares would change.

(3) Where they did not write down what was agreed you have to look at their conduct.

(4) Where it is clear that they did not intend to hold the property equally the Court has to decide what is fair having regard to the whole course of dealing between them in relation to the property. This is given a broad meaning.

(5) Each case will turn on its own facts. Financial contributions are relevant, but there are many other factors which may enable the court to decide what shares were either intended or fair.

Where the family home was put into the name of one party only the Court has to firstly decide if it was intended that the other party have any share of the property at all. If so the Court has to decide what that interest is and the common intention has once again to be deduced from their conduct. If the evidence shows a common intention to share ownership in the property but does not show what shares were intended, the court will have to proceed as at paragraphs (4) and (5) above.

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The first thing to do is establish what legal rights or title each party has to the land. There are 2 sets of rights regarding land, namely the legal title and the beneficial title.

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The legal title is usually what is registered with the Land Registry.
The beneficial title is what people are truly entitled to. Beneficial rights can be acquired irrespective of whether a legal title has ever been registered in a person's name.

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Changes introduced by ToLATA 1996

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s 4 (1) now a trust of land not of sale; the trustees have unlimited powers of disposition under s 6; s14 and s 15 to solve disputes; beneficiaries have the power to occupy the land if that is the purpose of the trust; the doctrine of conversion is abolished