Sole proprietor/beneficial owner of registered UK land executes a declaration of trust stating that he holds the land as sole trustee on trust for himself and his three siblings as beneficial tenants in common in equal shares. However, contrary to Rule 94 of the Land Registration Rules 2003, he fails to lodge a Form A restriction with Land Registry.
Is the effect of this to make the declaration ineffective until such time as the restriction is lodged?
Paul Storrie
Storrie & Company
No- a declaration that is intended to take immediate effect does just that.
Tim Gibbons
No, I’m not aware of any rule to that effect. It must happen quite a lot with severance of joint tenancies. Other than the additional risk run by beneficiaries, I am not aware of this rule being enforced by the Registry.
Andrew Goodman
Osborne Clarke LLP
Thanks to forum members for the responses thus far.
If the trust is effective from the date that it was declared (despite the lack of the Form A restriction), the further issue is that the land has since been sold and only the sole registered proprietor signed for the proceeds. In the absence of the Form A restriction, the purchasers acted in good faith and therefore the sale would appear to be valid. The sole trustee has also dispersed the proceeds to the beneficiaries in accordance with the terms of the trust. Therefore, what is the effect in practice of the failure of the trustee to adhere to the overreaching rules?”
Paul Storrie
Storrie & Company
The failure to lodge a form A restriction has no effect on the validity of the declaration of trust. Its significance is that the sole proprietor may on his own be able to dispose of the property without accounting to the beneficiaries; and the purchaser will obtain good title. See LRA 2002 section3 23,24 and 26.
Clifford Payton
Alpha Court Chambers
Can I also please check this point, seems to be a similar issue although different facts.
H & W divorced in 1999, they shared 3 propeties owned as joint-tenants which were rented out. The W took over rental business of 2 properties and H took over rental business for another. They verbally agreed that (there was no written financial agreement), that her share of their joint assets when married is the 2 properties and his is the 3rd property. I understand that there were very small amount of mortgage on these properties which were paid of by H & W individially around mid-2000s.
They did not formalise in writing a deed of trust in 1999 - it was just verbal.
In 2010, restriction A was filed. They were barely talking to each other and things were quite strained, so things happened when ever they were in the mood to deal with their joint matters.
Now in 2020, they have agreed to formally pass the titles on to each other.
Property 1 was worth £200k in 1999
Property 2 was worth £300k in 1999
Property 3 was worth £500k in 1999.
So they divide the value of assets equally in 1999.
These properties are now worth :
Property 1 - £800k
Property 2 - £700k
Total £1.5M
Property 3 - £1.4M
Therefore if they were to change the ownership at Land registry to individual names then the W in today’s value makes a Capital gain of £100k.
My queries are: Can a ratified deed of trust be put in place indicating the intent of the parties in 1999 whilst they were still married and transfers in the year of divorce can still be done on no-gain/no loss basis?
Or they will need to in absence of any paperwork file CGT returns at today’s market value and pay the CGT?
Many thanks
Sameera Nathoo
In view of the provisions of s.53(1)© Law pf Property Act 1925, in the absence of the agreement being evidenced in writing I suspect there was no effective partition in 1999.
Paul Saunders FCIB TEP
Independent Trust Consultant
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