LORD CHANCELLOR'S DEPARTMENT
 
229.96                                  24 July 1996
 
                 TRUST LAW REFORM
TRUSTS OF LAND AND APPOINTMENT OF TRUSTEES ACT
               RECEIVES ROYAL ASSENT
 
The Trusts of Land and Appointment of Trustees Act 1996 receives 
Royal Assent today and is expected to come into force on 1 January 
1997.
 
The Act simplifies the law relating to joint and successive ownership
of land, which governs, for example, the way in which the interests 
in a jointly-owned family home are held. This is done by abolishing 
the present dual system of 'trusts for sale' and 'strict 
settlements', which has been criticised over many years for its 
excessive complexity, and replacing it with an entirely new single 
system.
 
The new system puts trusts of land on a similar footing to trusts of 
personal property such as money or shares, with broader and simpler 
provisions designed to resolve existing legal difficulties while 
continuing to provide security for both beneficiaries and purchasers 
of land subject to a trust.
 
In addition, the Act introduces for trusts both of land and of 
personal property a new power which will in certain circumstances 
allow the beneficiaries, acting unanimously as a body, to have a say 
in the appointment of the trustees who manage the trust on their 
behalf.
 
Gary Streeter MP, Parliamentary Secretary at the Lord Chancellor's
Department, said of the Act:
 
" This is a worthwhile reform of the technicalities of a complex but 
important area of the law, which will in the long run make the 
structure of property settlements and the co-ownership of land 
simpler and more comprehensible and therefore cheaper to operate for 
those concerned - which includes everyone who jointly owns a house."
 
                       ENDS
 
Notes for Editors
 
1. The Trusts of Land and Appointment of Trustees Act gives effect to
the recommendations of the Law Commission in its report on Transfer 
of Land: Trusts of Land (Law Com. No. 181), subject to some minor 
changes to reflect responses on consultation prior to introduction 
and amendments made during the Bill's passage through the House of 
Lords. It also implements the minor recommendation concerning "bare 
trustees" in the Law Commission's report on Overreaching: 
Beneficiaries in Occupation (Law Com. No. 188).
 
2.  Problems with Existing Law.     Under the present law 
(principally contained in the Law of Property Act 1925 and Settled 
Land Act 1925), land can be owned jointly (for example, where a 
husband and wife buy a home together) only under a trust for sale, 
which deems the beneficial interest to be in the proceeds of sale 
rather than the land itself, because the trustees hold the land on 
trust to sell it (although with a power to delay sale). Land can be 
owned successively (such as where a house is left to the widow or 
widower for life and thereafter to the children) under a trust for 
sale or a "strict settlement".  "Strict settlements" can be very 
complicated and costly to operate, particularly where conveyancing is
concerned, and they are not often set up deliberately today, but the 
law is structured so that a strict settlement will result by default 
where any successive interest is set up, unless a trust for sale is 
expressly created, and so wills leaving property to a spouse and then
to the children frequently invoke a strict settlement where that was 
very unlikely to have been the testator's intention.
 
3.  The Bill. The Bill does away with these problems by replacing 
trusts for sale and strict settlements with a new single system of 
co-ownership of land known as the "trust of land". Trusts for sale 
are abolished and existing trusts for sale become trusts of land as 
from commencement. No new strict settlements can be created (with 
very limited exceptions), but a similar effect can be achieved if 
desired by express provision in a trust of land (where trustees can 
delegate appropriate powers to certain beneficiaries), and existing 
"private" (as distinct from charitable) strict settlements are 
allowed to operate under the old law unless those involved take 
action to bring them under the new regime.
 
4.  New Trust of Land. Under the trust of land, title is vested in 
the trustees, who are given power both to sell and to retain the 
land, rather than being placed under a duty to sell, and the doctrine
of conversion is abolished, so that a joint beneficial interest in 
land is treated as an interest in the land rather than the proceeds 
of sale, reflecting the fact that most co-ownership of property is 
for the purpose of providing a home rather than an investment, and 
that most joint home owners already believe themselves to have an 
interest in land rather than in money.  Protection for purchasers (by
the "overreaching" machinery) is maintained and will cover all cases 
of co-ownership except existing settlements, so that conveyancing 
will be simplified. Provision for enabling application to the court 
to resolve disputes is also simplified, with flexible guidelines 
reflecting the different purposes for which the property may have 
been bought. In addition, the Bill makes a number of changes 
concerning the administration of the trust so as to balance the power
of the trustees against the interests of the beneficiaries, 
concerning such matters as consultation.
 
5.  New Power for Beneficiaries to appoint Trustees. Finally, 
beneficiaries in all types of trust are given a power to direct the 
appointment of new trustees, or to direct one or more of the existing
trustees to retire from the trust, or to combine both directions. The
power is subject to strict qualifying conditions, so that it can only
be exercised where the beneficiaries are unanimous and could under 
existing law simply end the trust and take the property in any event;
and there are provisions to protect the rights of trustees who are 
directed to retire.