LORD CHANCELLOR'S DEPARTMENT 342/96 03 December 1996 TRUST LAW REFORM: COMMENCEMENT OF TRUSTS OF LAND AND APPOINTMENT OF TRUSTEES ACT The Trusts of Land and Appointment of Trustees Act 1996 will 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. It abolishes the present dual system of trusts for sale and strict settlements which has been criticised over many years for its excessive complexity, 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. ENDS /more Notes for Editors 1.The relevant statutory instruments are the Trusts of Land and Appointment of Trustees Act 1996 (Commencement) Order 1996 (SI No. 2974) and the Land Registration Rules 1996 (SI No. 2975), together with provision in the High Court and County Courts Jurisdiction (Amendment) Order 1996. 2.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 amendments agreed 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). 3.The Act introduces 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). 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.Under the trust of land, title is vested in the trustees, who aregiven power both to sell and to retain the land, rather than being placed under a duty to sell. 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. Practitioners should note that this means that a charging order on a beneficial interest in land under a trust will now be capable of protection by registration. 5.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. Practitioners should note that pending applications under s.30 of the Law of Property Act 1925 will fall to be dealt with under the new provisions. 6.The Bill also 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. 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 are able under existing law to end the trust and take the property. There are provisions to protect the rights of trustees who are directed to retire.