S.40 Vesting of property jointly owned with third parties

A question on automatic vesting of property interests on a change of trustees, if I may:

A, B and C are the registered owners of an option over land. A & B hold the title in their capacity as trustees of a settlement. C is a commercial third party

If B retires from the settlement in favour of D, would s.40(1) TA 1925 apply to vest the option in A, D and C?

I think not on the basis that the whole of the option is not “subject to the trust” (s.40(1)(a)) and because it feels wrong when there is a third party joint legal owner.

(to keep things simple, I think you can ignore the underlying beneficial interests in the option).

Textbooks and Land Registry guidance don’t appear to cover this issue which suggests I’m obviously wrong, obviously right or everybody would use a separate assignment to transfer the option to avoid any doubt.

Andrew Goodman
Osborne Clarke LLP

Are there not 2 separate trusts in this situation?

Whilst A & B are trustees of the settlement, it seems to me that A, B and C are trustees of the option. If, instead of being an option (which attaches to land) it was, say, a field, then there would be no doubt that they were trustees of the land and that s.40 could apply. That one of the trustees is a “commercial third party” does not to my mind undermine the fundamental principle.

Paul Saunders FCIB TEP

Independent Trust Consultant

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