I agree with Tim Gibbons. The widow has not been given a life interest, just a right to occupy the property (both would of course amount to an IIP but this does not mean they are the same thing). Absent any additional words, the right would not carry over to a replacement property. Here, there appears to be express wording that actually confirms the widow has no right to occupy a replacement property.
The trustees could use the power of investment to invest the proceeds but it would not affect the beneficial position and they would be investing residue. Presumably the residuary beneficiaries have absolute interests.
The only solution I could see would be via the consent/agreement of the residuary beneficiaries. It may well be in their interests if the downsizing releases funds to them earlier than might otherwise be the case.
TLATA might help the widow to remain in occupation if she had no absolute right to do so (but could show it was the clear intent at purchase) - she could certainly use it to force the trustees to sell. I don't think it could ever be used to authorise/force the trustees to then purchase a replacement property.
Osborne Clarke LLP