Settlements and Trusts of Land (NOT ON EXAM)

Question 1

Settlements

Answer 1

• Reference to ‘settlement’ can be general in the terms of someone ‘settling’ property upon another.
• However, ‘settlement’ in this context is used to describe a way of arranging land interests for generations.
• If this was done without a trust it was classically described as a ‘strict settlement’.
• It was, however, also possible to achieve a similar goal by virtue of a trust.
• “A settlement exists where a disposition provides for the enjoyment of present and future interests in property.” (Coughlan, 1998)
• A settlement creates successive interests in land.

Question 2

What was the purpose of settlements

Answer 2

• The purpose of the settlement is to ensure that the family is provided for in the present and that future generations will be similarly provided for.
• Obviously, such arrangements have less utility today where land is viewed as a commodity.
• It is also difficult to create settlements that avoid heavy taxation.
• The grantor/ the settlor would settle a limited interest in property to the grantee so that the grantee could enjoy the property for their lifetime without adversely affecting the property for other generations of the family.
• This often utilised two estates we have looked at previously: the life estate and fee tail.
• The limitations places on these estates under the 2009 Act demonstrate how settlements are less popular today.

Question 3

Settlements: Possibility 1 - ‘Strict Settlement’

Answer 3

1. Transfer of land legally and beneficially to persons intended to take in succession
   o EG: “Land is conveyed ‘to Jane for life, remainder to William in tail.’
   o This conferred a life estate to Jane, a legal fee tail to William and his heirs.

Question 4

Settlements: Possibility 2 - ‘Trust’

Answer 4

2. The entire legal estate might be vested in trustees and the equitable estate could be divided into successive interests. The trustees therefore manage the property and ensure that it is not dissipated by the equitable owners.
   o EG. “Land is conveyed ‘unto and to the use of Charles and his heirs on trust for Jane for life, remainder on trust for William in tail’.

Question 5

What are the problems with settlements

Answer 5

• Often in addition to the settlement of the land there would be additional jointures or portions which had to be paid from the income from the land.
• A jointure was money paid to the widow of the settlor.
• A portion was money paid to other heirs of the settlor who were not entitled to the land.
• These demands on the land coupled with the difficulty of dealing with the settled land that was tied up for future generations, meant that often these once rich property-owning families would become poor.

Question 6

What were the solutions to the problem?

Answer 6

• Solutions to this problem were sometimes developed by the holders of the land themselves.
• The person who was entitled to the fee tail (usually the grandson if the land had been settled by his grandfather) would bar it with the permission of the protector (usually his father who was the holder of the life estate).
• However, typically the protector would require provision to be made for subsequent generations or if there was no protector the present possessor of the entail would similarly wish to resettle the land.
• Thus, the tail would be barred on condition that it would be resettled again subsequently once the required funds were obtained.
• This resulted in several generations of baring and resettling the land.

Question 7

What did the law develop to deal with the problems?

Answer 7

• The law wanted to ensure that the alienability of land was not unduly affected while property owning families wanted to maintain the land for future generations.
• The law therefore developed a way in which settled land could be alienated.
• The first solution was the Settled Estates Acts 1856-1876 and 1877 (the old Settled Land Acts) whereby settled land could be sold with the permission of the court. This was however problematic. In addition, it was possible for the settlor to create a clause ensuring that the legislation would not apply to the settlement.
• The second most notable move to make settled land alienable in a more convenient manner was the Settled Land Acts 1882-1890.

Question 8

Settled land acts 1882-1890

Answer 8

• The Settled Land Acts enabled settled land to be alienated but any money from the sale was to be handed over to objective overseers (trustees of the settlement) who would ensure that all those who had rights over the land (future interest holders) could have rights to the money (or its subsequent investment).
• Tenant for life:
  o person entitled to possession of the property at any relevant time.
• Future Interest Holders:
  o parties with a future interest in the property
• Trustees of the settlement:
  o overseers of the land who ensured that parties with interests in the settlement (Future Interest Holders) were not adversely affected

Question 9

How is settled land defined in the settled land acts?

Answer 9

a. Any land held in a succession of estates created by document(s), i.e., land held in something “less than” a fee simple (fee tail, life estate) whether in law or in equity.
(Section 2)- we have seen two possibilities of such settlements earlier, but it would also include any situation where successive interests had been created (e.g., to Gary for life, remainder in fee simple to Jim’).
b. The land of minors; (Section 59)
c. Land held in a trust for sale for successive beneficial interests. (Section 63)

• Howlin and McGrath note that the first two kinds of interests needed to be dealt with under the legislation as
  o (a) was limited in respect of alienability and
  o (b) was problematic because a minor could sell land at the time but could repudiate the contract when they were no longer a minor.
• They consider the last category as unnecessary as the land can already be sold without the intervention of legislation

Question 10

Who was a tenant for life under the Acts?

Answer 10

• Section 2(5) provided a definition:
  o the person entitled to possession currently under the settlement.
• However, Section 58 specified certain categories of people who were considered as having the powers of a life tenant under the Acts:
  o tenants in tail
  o holders of base fees (these arose where an attempt to bar a fee tail had been unsuccessful)
  o holders of perpetually renewable leases and tenants’ pur autre vie (life tenant who held the interest dependent on the life of another).
• This caused confusion as to who exactly fell within the scope of the acts.

Question 11

What were the problems regarding who was a tenant for life under the Act?

Answer 11

(1) Uncertainty regarding holders of fees simple subject to condition subsequent and fee farm grants and whether they fell within the statutory definition of a tenant for life.
(2) Discretionary trusts whereby the trustees had discretion as to how the beneficiaries would benefit from the trust. As the beneficiaries did not have specific entitlements, they were not deemed to be tenants for life and could not avail of the Settled Land Acts.

Question 12

What are the Powers of the Tenant for life?

Answer 12

• The Settled Land Acts 1882-1890 set out that tenants for life had specific powers in addition to any powers they already had due to the nature of the holding.
• These minimum powers could not be contracted out of, as had been the case under the older legislation.
• It was possible that the settlor could give additional powers to the tenant for life, but they could not limit them beyond the minimum set out in the Settled Land Acts 1882-1890.
  1. Power of Sale
  2. Power of Mortgage
  3. Power of Lease
  4. Power to Demand Improvements
  5. Power to Sell the Principal Mansion House
  6. Power to enter into Contracts

Question 13

The power of sale

Answer 13

• Section 3 of the 1882 Act set out that the tenant for life had the power to sell the land or any part thereof in fee simple.
• Section 3 (iii) Settled Land Act 1882:
  o Could exchange the land for something or equal value or relatively equal value instead
• This meant that a person who only had a life interest could deal with the land as if they possessed the fee simple.
• However, the money from any such sale (capital monies) had to be paid to the trustees of the settlement.
• This meant that the future interest holders now had an interest in the capital monies as opposed to the original land.

Question 14

The power of sale:
Wheelwright v Walker 1883

Answer 14

o Tenant for life wished to sell the house subject to the settlement to purchase a smaller house for himself and have sufficient money to live out his old age (he was 70 at the time).
o The court was of the view that he had the power to do so if he so wished, even though it clearly showed lack of consideration for the future interest holders.
o However, in this instance, the man had rejected a good offer to buy from the future interest holders and instead wished to sell the house to another party at a lower value.
o The court were therefore willing to prevent the sale under these circumstances.

Question 15

The Power of Sale:
Re Fitzgerald 1902

Answer 15

o The tenant for life wished to sell the property but was hampered by the requirement that he reside in the house which was a condition of his life interest.
o The court held that the tenant for life could sell the house as his power of sale under the Acts could not be restricted.

Question 16

Power of Mortgage

Answer 16

• Potential to mortgage the property beyond the lifetime of the tenant for life in certain circumstances
• These circumstances primarily were where the money raised from the mortgage was to go towards the land itself.

Question 17

The Power of Lease

Answer 17

• Section 6 of the 1882 Act: Could create a lease which would last longer than the duration of the present tenancy for life.
• This lease would therefore bind future interest holders.

Question 18

The Power to Demand Improvements

Answer 18

• The tenant for life was responsible for making everyday improvements but more substantive improvements could be paid for out of any capital moneys that the trustees held upon submission of a scheme of works.
• The court could also order improvements to be made to the land.
• This could encompass the purchase of more land or building on the land etc.

Question 19

Power to sell the principal Mansion House

Answer 19

• Section 10(2) of the Settled Land Act 1890 set out that the principal mansion house and “the pleasure grounds and park and lands (if any) usually occupied therewith” could be sold, exchanged or leased by the tenant for life with the trustees or the court’s consent.
• However, it went on to specify that if the house was a “farmhouse” or was not accompanied on pleasure grounds and park of 25 acres or more, the property did not count as a mansion house.

Question 20

Power to sell the principal Mansion House:
Re Marquess of Aylesbury’s Estates 1892

Answer 20

o The tenant for life wished to sell the mansion house and gardens.
o The House of Lords granted consent to do so as they noted that if they did not, the rest of the land might not be sold.
o The prospective purchaser was in a good position to maintain the estate which would benefit the community surrounding it.

Question 21

Power to contract

Answer 21

• The tenant for life had power to make contracts (e.g., sell and lease the land).

Question 22

Duties of the tenant for life

Answer 22

• Section 53 of the 1882 Act:
  o Tenant for life = trustee for future interests in the land
• This meant that the tenant for life owed fiduciary duties to the future interest holders of the land.
• Unlike other kinds of trustees, the tenant for life could make a profit for themselves or acquire the property themselves as long as it did not create a conflict of interests.

Question 23

Duties of the tenant for life:
Re Earl Somes 1895

Answer 23

o the tenant for life attempted to sell a public house on condition that no alcohol was to be sold there.
o As the core value in the public house was the selling of alcohol, an attempt to sell it without this possibility would limit the value of the public house severely, thereby acting to the detriment of future interest holders.
o Therefore, the court did not allow the inclusion of this condition to the sale.

Question 24

Trustees of the settlement

Answer 24

• Majority of transactions could not go ahead without the permission of the trustees of the settlement.
• The majority or settlements specified who the trustees of the Settlement were.
• If no trustees were specified, the person with the power of sale (apart from the tenant for life) was the trustee.
• If no one had the power of sale, then the person who had power of sale over other land might be appointed the trustee.
• If there was no such person with any present power of sale, them someone with a future power of sale would be appointed.
• Ultimately, if no trustee could be found, the court would appoint trustees.
• The trustees of the settlement had a general supervisory role, and their consent would be sought, and notice given for transactions which the tenant for life wished to carry out.
• The role of the trustees was to ensure that the marketability of the land was maintained, and the family security looked after.
• However, the trustees were not liable for failure to act in response to notice that the tenant in life was about to do something that would damage the property and/or rights of those with future interests. Therefore, there was no sanction in place if the trustees of the settlement failed to take their duties seriously.
• Capital monies (e.g., money from sale of land, rents etc.) were paid to the trustees of the settlement.
• The trustees of the settlement would then invest the money on the direction of the tenant for life (who was also in a trustee position).
• The tenant in life was entitled to an income from the capital monies and once they were dead, the next tenant for life was entitled to redirect the investment if they so wished and take an income from the capital monies.

Question 25

Overreaching

Answer 25

• Overreaching meant that the land that was sold was sold free of any interests.
• Instead, those future interests would attach to the capital monies that were released from the sale of the land.

Question 26

Overreaching: Conditions - S.20 of the 1882 Act

Answer 26

1. All legal requirements had to be complied with.
2. The tenant in life must have had the power to dispose of the property
3. The capital monies had to be paid to the trustees of the settlement.

Question 27

Land of Minors

Answer 27

Section 59 of the Settled Land Act 1882 set out that any land held by a minor was treated as settled land until the minor reached the age of majority (18 years).

Question 28

Trusts for sale

Answer 28

• Section 63 of the 1882 Act set out that trusts for sale were to be considered as settled land for the purposes of the Acts if the beneficial interest was held in a succession of estates.
• The tenant in life was “the person for the time being beneficially entitled to the income of the land until sale”.

Question 29

New Approach: Trusts of Land under Part 4 of the 2009 Act:

Answer 29

• Section 18 of the Land and Conveyancing Law Reform Act 2009 sets out the categories of land which come within the scope of Part 4 to be dealt with as trusts of land.
  i. Settlements
  ii. Land Held in Trust
  iii. Land of Minors

Question 30

1. Settlements - Section 18

Answer 30

• Section 18(1)(a):
  o sets out that settlements in land previously governed by the Settled Land Acts 1882-1890 are now to be treated as trusts under Part 4 of the Land and Conveyancing Law Reform Act 2009.
  o This encompasses pre-existing settlements and any settlements that might be created in the future.
• Section 18(2)(a):
  o sets out that a “fee simple in possession” (this includes modified fees simple) do not come within the scope of Part 4.
  o This clarifies confusion that existed in respect of the Settled Land Acts 1882-1890.

Question 31

2. Land held in trust

Answer 31

• Section 18(1)(b):
  o sets out that land held “on a trust whenever it arises and of whatever kind” is governed under Part 4 of the Act.
• However, charitable trusts are outside of the scope of the Act (unless it involves a remainder interest).
• This encompasses trusts created both before and after the commencement of the Act.

Question 32

3. Land of Minors

Answer 32

Section 18(1)(c):
- land “vested, whether before or after the commencement of this Part, in a minor”.

Question 33

Part 4 Trustees

Answer 33

Part 4 trustees have extensive power.
Section 20(1):
- Trustees have “the full power of an owner to convey or otherwise deal with” the land which is the subject of the trust.

Question 34

Part 4: (i) Settlements prior to the commencement of the 2009 Act:

Answer 34

• If you recall, under the Settled Land Acts 1882-1890 the tenant in life had extensive powers, in particular the power of sale.
• The 2009 Act has reconciled any potential loss of power for the tenant for life by making the old tenant for life a trustee.
• Section 19(1)(a)(i) therefore sets out that for settlements that existed prior to the 2009 Act, the trustees will be the trustees of settlement in addition to the tenant for life.

Question 35

Part 4: (ii) Settlements created after the commencement of the Act:

Answer 35

• For settlements that are set up after the 2009 Act, section 19(1)(a)(ii) sets out:
  o that the trustees are those who would be trustees if an express trust was involved.
  o This will usually be whoever is named in the document creating the trust.

Question 36

Part 4: (iii) Express Trust:

Answer 36

• Section 19(1)(b):
  i. If the trust names a trustee, then they are the Part 4 trustee.
  ii. If no trustee is named, any person with a present or future power of sale or power to consent to sale.
  iii. If no person with this power of sale, then the person with the power to appoint a trustee.
  iv. If still no trustee, the settlor themselves or their personal representative if they are deceased.
• Section 19(3): Court also has powers to appoint trustees.

Question 37

Part 4: (iv) Implied, Resulting, Constructive and Bare Trusts:

Answer 37

• Section 19(1)(d):
  o “The person in whom the legal title to the land is vested” is the trustee.
• This is because such trusts arise due to circumstances so no trustee will have been expressly specified.

Question 38

Part 4: (v) Land of Minors:

Answer 38

• Section 19(1)(c):
  o The trustee will be the same as that under an express trust under S. 19(1)(b).

Question 39

Powers and Liabilities of Trustees

Answer 39

• Section 20(1):
  o The trustee of a Part 4 trust “has the full power of an owner to convey or otherwise deal with” the land. – Very extensive power!
• Section 20(2):
  o These powers include the power to allow beneficiaries to the trust to use or otherwise occupy the land and the power to sell land and invest the proceeds in the purchase of land either within or outside the State.
• However, unlike the Settled Land Acts 1882-1890, the power of the trustee(s) may be limited by the settlement itself.
• Section 20(1)(b):
  o Powers of trustees are limited by “any restrictions imposed…by any instrument…relating to the land”.
• The trustee owes fiduciary duties to the beneficiaries and therefore must act in their best interest at the risk of being liable.

Question 40

Overreaching

Answer 40

• Overreaching as it existed under the Settled Land Acts 1882-1890 is similarly provided for under the Land and Conveyancing Law Reform Act 2009.
• Section 21(1):
  o “…a conveyance to a purchaser of a legal estate or legal interest in land…. overreaches any equitable interest in the land so that it ceases to affect that estate or interest, whether or not the purchaser has notice of the equitable interest.”
• If the requirements are complied with, then the equitable interest will attach to the proceeds of sale.