Life Estates

Question 1

Life Estate - Equitable Freehold Estate

Answer 1

• A life estate lasts for the duration of the life of a specified person.
• The specified person whose life determines the duration of the life estate is called the cestui que vie.
• Often the cestui que vie is the same person with a life interest in the estate, but not always.

Question 2

Land and Conveyancing Law reform Act 2009:

Answer 2

• S. 11 (6) of the Land and Conveyancing Law Reform Act 2009 provides that life estates now only exist in equity.
• Any pre-existing life estates only exist in equity.
• Therefore, they have been converted into a trust (on 1 December 2009) whereby both the person with the life interest and the person with an interest in what is left at the end of the life interest both have an equitable interest. The fee simple is held by trustees (the legal interest).
• In respect of converted estates that originally had no trustee, the person who held the life interest is now also a trustee (we’ll see this again when we look at Settlements).
• If no trustee is appointed in the creation of a life estate, section 19 sets out a sequential list of potential trustees.
• These are:
  (1) person with the power of sale
  (2) a person empowered to appoint trustees
  (3) the person who created the interest or
  (4) if a will, the personal representative(s) of the testator.

Question 3

How Life Estates operate:

Answer 3

• Life estates last for the length of the life of the cestui que vie.
• The cestui que vie is often the same person as the life tenant (the holder of the life estate).
• E.g., “To Sally for life” =Sally: life tenant and Sally: cestui que vie
• On the other hand, a different person might be the cestui que vie. This kind of life estate is pur autre vie (for the life of another).
• E.g., “To Sally for the life of Tom” = Sally: life tenant and Tom: cestui que vie
• Other conditions may also be attached to a life estate.

Question 4

Future Interests

Answer 4

• In respect of the life estate that there will always be someone to take whatever is left after the life tenant loses their interest upon their death or the death of another (pur autre vie life estate).
• When this happens the trust ends, and the person entitled to take what is left obtains a fee simple interest.
• Remainders
• Reversions
• A remainder interest is where the grantor of the life estate also specifies the person with a remainder interest.
• E.g., “to Sally for life, remainder to Jim in fee simple”
• Sally has the life interest.
• Jim has the remainder interest.

Question 5

Part 4 Trust - Remainder

Answer 5

• “To Sally for life, remainder to Jim in fee simple”
• This creates a Part 4 trust under the 2009 Act.
• The land is subject to a trust until Sally dies. When Sally dies Jim obtains a fee simple, the trust ends, and he ends up with the legal and beneficial ownership in the property at that time.

Question 6

Part 4 Trust - Reversion

Answer 6

• If Tom creates a life estate in favour of Sally and no third party is specified as taking what is left, a fee simple reversion is created.
• E.g., “To Sally for life”
• Here the grantor, Tom, retains an interest in what is left after the life estate ends (the fee simple reversion). The rights in the land revert back to him.
• In this instance a Part 4 Trust is created whereby the land is held in trust until Sally dies. Once Sally dies, the trust ends, and Tom (or his successors) will have the fee simple.

Question 7

Life Estate: Rules of Waste

Answer 7

• The danger of a life estate, is that the holder of the life interest will dissipate the value in the property, leaving nothing for the remainder or reversion interest.
• This danger led to the development of rules to prevent such behaviour, known as rules of waste (to prevent the life tenant wasting the land).

Question 8

Rules of Waste: Section 18(4) of the 2009 Act

Answer 8

life tenant is still liable for waste upon the conversion of a pre-existing life interest to an equitable interest under Part 4.

Question 9

Rules of Waste: Wylie 2020

Answer 9

• ‘The courts developed some special rules to govern the position of a tenant for life to take account of two things. First, there was the fact that his occupation of the property was bound to be for a limited time, so that those taking the property after him should have their interests protected during his tenancy. Secondly, his interest was of uncertain duration, so that he should not be deterred from making the best and fullest use of the property by the fear that he would die before he could enjoy the fruits of his labour.’
• ‘The general rule is that the reversioner or remainderman may in certain circumstances apply to the court for an injunction to restrain waste being committed by the tenant for life. He may also be able to claim damages if he has suffered loss as a result of the waste or ask the court to order the tenant to account for any profits, he has made form the waste. ‘

Question 10

What are the 4 categories of waste?

Answer 10

1. Voluntary Waste
2. Permissive Waste
3. Ameliorating Waste
4. Equitable Waste

• The liability of the tenant for life will vary depending on the type of waste and the possibilities of liability being limited.

Question 11

Voluntary Waste

Answer 11

• “Voluntary waste refers to positive acts that have a negative effect on the land, usually concerning the exploitation of natural resources.” (DL)
• The holder of the life interest is automatically liable for voluntary waste.
• Unless the grantor of the life interest relieved the life tenant from this obligation, thereby making the life tenant, “unimpeachable at waste”.

There are 3 kinds of exploitation which are allowed:
1. necessary for the repair/maintenance of the land.
2. the land is suited to that purpose only.
3. the grantor has given permission.

• Traditionally exclusions for cutting timber and mining in certain circumstances if permission obtained under the terms of the settlement.
• Most mining rights now owned by State as we have seen previously.

Question 12

2. Permissive Waste

Answer 12

• “Permissive waste comprises the failure to do things necessary for the maintenance of the land.” (DL)
• Unlike voluntary waste, life tenants are usually not automatically liable for permissive waste.
• However, it is possible for the grantor to specify expressly that liability is imposed for permissive waste.

Question 13

3. Ameliorating Waste

Answer 13

• “Ameliorating waste comprises acts that have a positive effect on the value of land.” (De Londras)
• In the past an action could be taken for such acts of waste. However, by 1833 could only obtain an injunction if the result of the act was actual damage to the future interest.
• Wylie notes that, ‘the courts have shown little enthusiasm for actions complaining about’ ameliorating waste.

Doherty v. Allman (1878) 3 AC 709:
- The House of Lords refused to prevent the conversion of disused store buildings into dwelling houses.
- The improvements had to be accepted.

Lord O’ Hagan:
‘The waste with which a Court of Equity, or your Lordships acting as a Court of Equity, ought to interfere, should not be ameliorating waste, nor trivial waste. It must be waste of an injurious character- it must be waste not only of an injurious character, but of a substantially injurious character, and if either the waste be really ameliorating waste- that is a proceeding which results in benefit and not in injury- the Court of Equity, and your Lordships, acting as a Court of Equity, ought not to interfere to prevent it.’

• See also Craig v. Greer [1899] 1 IR 258- building a spirit store behind a house, when the area had already become urbanised, was not waste.

Question 14

4. Equitable Waste

Answer 14

• “Equitable waste could be described as “malicious waste and comprises the wanton destruction of land.”
• Tenants for life are automatically liable for equitable waste unless a specific clause is used to exempt the life tenant. Generally making the tenant for life ‘unimpeachable for waste’ would not be enough.

Vane v. Lord Barnard (1716) 2 Vern 728
- The father settled the ownership in the family castle so that he kept the life interest with the remainder fee simple to go to the son. In setting out the life interest, he specified that the life tenant (himself) was unimpeachable for waste. While in possession of the life estate he stripped the castle of its valuables.
- The son attempted to stop the father from doing this. The father claimed that he could do nothing because he was unimpeachable at waste.
- The court held that he was unimpeachable at law, but not in equity. The law of equity would not facilitate the wanton and malicious destruction of land.

Question 15

Alienation

Answer 15

• Life tenant can transfer their life interest to another person.
• If a life tenant holds an estate pur autre vie and predeceases the cestui que vie, then the life interest can be transferred by will or on the rules of intestacy.
• E.g., “to Luke for the life of Carol”. If Luke dies before Carol, the life interest can be passed to someone else until Carol dies.

Question 16

Words of Alienation

Answer 16

• Transferred by words “for life”
• E.g., To John for life
• De Londras suggests that if unrecognised words of limitation are used to transfer land, a life estate might also be created after 2009.

Question 17

The Rule in Shelley’s Case (1581) 1 Co Rep 88b

Answer 17

• The rule in Shelley’s Case determined whether the word “heirs” was to be taken as a word of purchase or word of limitation.
• To Liam and after his death to his heirs.

What does this mean?
A. A life estate to Liam and the remainder to his heirs?
B. A convoluted way of transferring a fee simple to Liam (e.g., remember “To Liam and his heirs” would convey on a fee simple)

• “When an estate of freehold is given to a person and by the same disposition an estate is limited… to his heirs or to the heirs of his body, the words “heirs” or “heirs of his body” are words of limitation and not words of purchase” (Megarry & Wade, The Law of Real Property, 1966)

1. “To Liam for life, remainder to his heirs”: gave a fee simple to Liam
2. “To Liam for life, then to Mary for life, remainder to Liam’s heirs.”: Liam was said to have had a fee simple vested in remainder- this interest was postponed until Mary’s death.

Question 18

The Shelley Rule is now abolished

Answer 18

• Section 67(3) of the Land and Conveyancing Law Reform Act 2009 abolishes the rule in Shelley’s case and acts retrospectively.
• It was however possible to make an application under Section 68 in respect of this and potentially obtain an order recognising an interest which arose due to Shelley’s case prior to 2009 or obtain compensation in its stead.
• However, this possibility only existed for 12 years post the commencement of the section (1 Dec 2009).
• This possibility therefore expired on the 1 Dec 2021, and it is therefore no longer possibility to have any such interests recognised.
• There does not appear to be any reported decisions dealing with the operation of section 68.