One often is questioned by clients as to how many trustess should you appoint in a will. This is generally a matter of personal choice. However, it is generally recognised that if there are too many trustees then the trust can become unmanageable and if there are too few then issues of oversight of a trustee’s actions arise. There are no general rules stipulating the number of trustees that may be appointed in a trust document. It is normally the case that two trustees are appointed. It should be noted that unless the trust deed indicates otherwise trustees must act unanimously.

There is a misconception out there that for a trust of land, you need two trustees. That is only partially true. The requirement for two trustees stems back for historical reasons and the Settled Land Acts. Thankfully we don’t have to go into all of that for today’s blog. However, it is worth noting the new rules under The Land and Conveyancing Law Reform Act 2009, which codified and modernised the complex Settled Land Act provisions.

However, before we look at those, we need to remind ourselves of s.11 of the 2009 Act. This states that the only legal estates in land that may be created or disposed of are the freehold and leasehold estates specified by the section. What this means is that there are only two legal estates. It doesn’t mean that there are no equitable interests, but essentially that section streamlines legal ownership.

Related to this, or in line with that direction of travel, s. 21 of the 2009 Act contains an important but sometimes overlooked rule of conveyancing practice related to the above, but specifically in the context of trusts. In short, that section says that when a purchaser buys a property from a trust, all the existing equities that the property may be subject to are wiped out. Or put in the legalese of the 2009 Act:-

Subject to subsection (3) a conveyance to a purchaser of a legal estate or legal interest in land by the person or persons specified in subsection (2) [ie trustees] 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.

So, for example, John buys a property from Tom for €200,000 and John’s mother Susan gives funds to John to assist him in the purchase. Susan gave John €150,000 and they agreed between them that even though John remained on title, it was always the understanding that Susan really owned 75% of the property. John is a constructive trustee of Susan’s share. The property then is bought by Seamus from John, for €250,000. John decides not to honour the arrangement with his mother and decides to pocket the full €250,000. Susan cannot complain to Seamus about this and Seamus can rely on s. 21. Further, Susan’s 75% quasi ownership doesn’t flow into Seamus’ property and Seamus owns 100% of the property both legally and equitably thanks to s. 21. Seamus’ need not concern himself about the arrangements between John and Susan.

There is an important qualification to the above overreaching rules with respect to trusts for minors, or life interests or other land held by way of succession. In these cases a buyer cannot claim the benefit of the overreaching rules unless there are two trustees of the trust. Once there are two trustees to that trust, then the overreach rule applies. So that is why purchasers may be wary from buying from trustees, and insist on two trustees, particularly where they know that the trust is held for a minor.

However, there is no rule to state that there cannot be one trustee of a trust for land. In fact, the Land Registry will allow the registration of one trustee. So for example, a will states, I give devise and bequeath my farm on trust to my executor Sean, for my son Patrick until he reaches the age 35. In that case Sean can be appointed as sole owner of the property. Or, an executor can be a registered owner of property and (subject to certain qualifications) the Land Registry will permit the registration of a personal representative as owner of a property, in their position as trustee.

Hope this helps and next week we will look at one of the instances where the Land Registry will not allow a per rep to be registered owner, notwithstanding the above provisions.

In the meantime, if you have any will drafting, Land Registry practice, capacity or tax issues, please do not hesitate to contact me.