The undivided owner has ‘a perfect right’ to possession of the land free from exclusion. This lies in relation to co-ownership requirement for the unity of possession. Pre-1996 case law reinforced this right and as asserted in Bull tenants in common were entitled to the same rights as the extinct legal tenants in common S14LPA, thus the occupier could remain in the land. This right has now been legitimised under S12TLATA, which gives the beneficiary an absolute right to occupation. It is now dependant upon the purpose of the trust and the availability of land. This however has been criticised for being restrictive as it inhibits the free right to enjoy the land. It is also subject to the trustee’s power under S13 to exclude or restrict the occupying tenant. This assumption may be an exaggerated one. For instance the S13 right cannot be enforced against a tenant in occupation without prior consent. In addition even where the beneficiary is excluded he or she is entitled to compensation by way of rent and furthermore the provision confers on the trustee a duty to act reasonably S14. For instance a decision not to compensate would breach his fiduciary duties under the trust to ensure the beneficiary enjoyment of the land is fulfilled.
The power to exclude co-owners provides further advantages to beneficial interest as it gives courts more flexibility in cases relating to the relationship breakdown between co-owners. These cases often arise when making an order under S14. It is also this practice which the power to restrict is most likely to be exercised. In any case the provision is unlikely to have an effect on a sui iuris beneficiaries, who have dual entitlement as trustee and beneficiary (i.e.: like a tenant for life) and are therefore protected by the provision that trustees act unanimously. Effectively the changes in TLATA affect beneficiaries who only have an equitable interest in the land those under strict settlement and bare trusts are therefore excluded.
It appears that upon entitling all co-owners to demarcate their shares, the 1925 legislation did not anticipate the possibility that the purpose of a trust was not always monetary and even when it was, it may change overtime. So even expressed trusts did not always accommodate the beneficial interests. The reality is that disputes between co-owners can arise at any time, and these disputes generally revolve around two main rights; right to sell or right to occupy the land. S13 rights may not adequately resolve disputes of this nature and therefore S14TLATA and S15 are more appropriate. The right entitles any person with interest in the land to apply to court for a S14 order to make a decision on whether to retain the land or to dispose and distribute the proceeds. Prior to TLATA courts invoked a number of principles as to how they would exercise discretion in disputes. Effectively TLATA merely documents and consolidates the principles predating it.
The statutory criteria under S30 took into account the intention of the person creating a trust- where rights are conveyed in a trust the right of the occupier would depend upon the purpose expressed in the instrument. Yet this approach may detriment the beneficiary as in Barclays where the interests of the testator prevailed over the beneficiary’s right to occupation. The Pre1997 courts have also given effect to the underlying purpose of the trust, which constitutes any presumptions arising from the present circumstances of the occupiers. It helped to determine whether to sell (subject to sale of land) or whether to retain for an alternative reason. Chokah where even though the couple had split and reconciled after the sale had completed, the beneficiary had been in occupation at the date of the application of sale and the underlying purpose was upheld against a third party purchaser,.
Although there is no obligation to use S15, the provision clarified the considerations which were already being applied by the courts. It provides a guideline as to what, (in absence of expressed statement) the purpose of the trust was and when that purpose should cease to prevent a sale. In other words it upheld the inevitable duty to sell but exercised the power to postpone. Many of the disputes related to matrimonial disputes or separation of unmarried couples. In the absence of children, the family home was deemed to have fulfilled its purpose once the relationship ceases (if ever) in this event the trust would be complete and the property no longer needed. S13(2)
S14 replaced S30LPA, under the old law the only duty which a court had was to execute a salealthough it may order a sale unless parties agree to a financial arrangement, such as rent charges. TLATA has widened the courts power to make a decision ‘as it thinks fit’, thus enabling it to give effect to rights to occupation, the power to postpone and to order compensation. These are new privileges which pose an indirect benefit to tenants whose interest lay in realty as opposed to personalty.
Minors cannot be beneficiaries under a trust and are not even ‘in actual occupation’ of a home under the Matrimonial Act. Thus it would appear that they do not have any rights to occupy the land. However the common law approach to cases involving children was laid down in Rawlings where, the ‘purpose of the trust would no doubt be to provide a family home for them’. In EversTrust the sale was postponed until the children reached a certain age. However the ruling has been criticised for giving children quasi-beneficiary rights, when in actuality the fact that the parents own the home does not automatically give children beneficial rights . Therefore just as children may be used to prevent a sale so might their absence encourage the disposal of the land.
S15(b) makes statutory provision which entitles children to live in the family home. And so upon the separation of spouse-guardians the presence of children will override any interest in the land. The provision gave rights to unmarried co-owners, as they would not otherwise have a right to be supported by the ex-spouse. Effectively their right to enjoy the land will arise solely from the occupational right given to the child. In such cases the court will restrict the duration of the order until the child has completed education, at which point the property returns to excluded spouse (on resulting trust). This ruling appeared problematic as there is no general age for a person in ‘education’ (ie; higher education, or school drop-outs).
In cases concerning secured creditor and the application for sale of property the same rules applied, as in cases of insolvency. The absence of exceptional circumstances meant the voice of the creditor normally prevails. The facts in Barhoda were similar to Flegg. However because there was a sole trustee, the creditors had not acquired good title and the wife’s defence of overriding interest S70(1) prevailed. Since TLATA has come into force, the interest of the creditor is now regarded as one of many factors to be taken into account (under S15(1) guidelines). However if the court refuses to grant a sale of land and the debtor is also declared bankrupt, a creditor can petition for a trustee in bankruptcy. These trustees are not covered under TLATA and so may be exercise duties free from the consideration for beneficial interest.
Consequently because S15 does not apply to applications made by the trustee in bankruptcy neither the ‘vulnerable’ children nor the occupiers in the land can enforce rights against the sale of land. Even the beneficiaries’ right to give consent may be excused by the court- thus breaking contractual obligations in favour of a sale. In the event of a personal financial crisis, the family home is often the only substantial capital asset available. The trustee in bankruptcy will often wish to sell the land and distribute the proceeds to the creditor- an act which if executed would defeat the interest of the beneficiaries in the land. In ReCitro- the co-owner was bankrupt and claimed exceptional circumstances to protect his family’s interests. It was held that whilst the sale of land would have an unfortunate effect on the family, it was not exceptional; distress being a common effect of bankruptcy. Therefore the purpose of the trust had terminated and the land was sold by the creditors. Whilst courts must have regard to interests and need under S335A it remains difficult to rely on exceptional rights.
Whilst the objective of law reform is to improve the law, by making it clearer and more just a steady stream of case law under S15 makes it seem doubtful that the act is achieving either of these objectives. While the machinery of the Act seems to give courts a wider jurisdiction as to how to resolve such disputes than it formerly had under S30LPA, it does not appear to have done much to better the position of beneficiaries in cases where the claimant is a derivative co-owner: banks and other secured lenders seeking to enforce their security interests. Disputes of this kind are by perhaps most frequent in practice. It is becoming increasingly difficult not to take a sceptical view of the general impact TLATA has had on beneficiary rights.
Words 2486
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Philpott v Dobinson (1829)
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Abbey National Building Society v Moss (1994)
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Pritchard Englefield v Steinberg (2004)
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Pg635 GRAY V GRAY
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Matrimonial act applies only to married couples
513 Megarry & Wade the law of real property
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