A Matter of Trust
1) Alexia and her co-purchaser’s (or their solicitors) need to discover what interest, if any, Gail has in the land.
- Not all interests in land are revealed by reading the title documentation and undertaking searches of the Land Registry. Any beneficial interest in the land that has not been discovered may be binding upon the purchasers unless it has been overreached by the sale (see Land Law, Section 11.6.1).
- The presence of Gail’s boxes and suitcases may or may not be sufficient to protect Gail’s interest, if any, in the land (see Land Law, Sections 15.8.2, and 16.5).
- Since there is only one seller (Denise), any beneficial interest that may exist will not be overreached.
- It is better to clarify the situation prior to completion, rather than risk a long and expensive dispute after title to the land has been transferred to the purchasers.
2) What if Alexia’s dream is true and Denise and Gail purchased the house together?
- Gail’s existence was not revealed by the title deeds. This suggests that legal title to house was conveyed to Denise alone. Consequently, Denise holds the legal title on trust for herself and Gail as beneficial owners.
- It seems that Harry was drafting a trust deed setting out the terms of the trust. If so, and provided the necessary formalities were complied with, this would be an express trust (see Land Law, Sections 11.2). In the absence of any documentation, Gail’s contribution to the purchase price would almost certainly give rise to a constructive trust (see land Law, Section 14.3).
- The rules regulating trusts of land are contained in the Trusts of Land and Appointment of Trustees Act 1996. Denise (the trustee) has wide powers, but must exercise these in accordance with the duties she owes to the beneficiaries (Gail and herself). Gail has a number of statutory rights (see Land Law, Sections 11.4 and 11.5), including:
- the right to occupy (ss 12, 13);
- the right to be consulted about the proposed sale (s 11), although the purchasers are not concerned to see that this requirement is met (s 16(1)); and
- the right to refer any disputes about the house and its management to the Court (s 14).
These rights will bind the purchasers (and their mortgagee), unless Gail’s receives her share of the proceeds of sale or her interest in the land is overreached.