What can the court order under sections 14 and 15 of the Trusts of Land and the Appointment of Trustees Act 1996 (“TOLATA”)? Is there a valuation threshold for orders for sale?
Under section 14 of the Trusts of Land and the Appointment of Trustees Act 1996 (known as “TOLATA”) a trustee or a person with an interest in land subject to a trust can apply to the court to request that an order is made relating to the exercise by the trustees of their functions or declaring the nature and or extent of a person’s interest in property subject to a trust. One of the most common orders that the court is asked to make is an order for sale. This is an order which gives the applicant the power to sell a property in order to enforce a financial interest and is commonly used when parties are in disagreement about what should happen to the property.
When making such orders the court has relatively broad discretion but must consider various factors in s.15 of TOLATA. These are; the intentions of the person or persons who created the trust, the purposes for which the property subject to the trust is held, the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home and the interests of any secured creditor of any beneficiary.
In Bagum v Hafiz  EWCA Civ 801 the Judge ordered that the trust property should only be sold once one of the beneficiaries (Mr Hafiz) had the opportunity to purchase the property for a price set by the court and within a specified time frame. The Court of Appeal found that whilst it was an unusual order (in many similar instances, orders had been made giving the opportunity for all beneficiaries to bid to maximise the chance of obtaining of best market value for the property), HHJ May QC had nonetheless acted within the discretion given under ss.14 and 15 of TOLATA and had carefully considered the differing interests of the beneficiaries and the intentions of the person making the trust (which had been to secure the property as a home for Mrs Bagum, Mr Hafiz and their families and to secure a financial interest for Mr Hai).
These principles were more recently upheld by the court in Kingsley v Kingsley  EWCA Civ 297 (Ch) where the surviving partner of a farming partnership sought an order giving her the right to buy the farm property before its sale on the open market. Sally Kingsley, who owned 50% of the farm with her late brother, was granted an order that the property be sold to her for 50% of its market value. In this instance, Kingsley v Kingsley upheld the judgment in Bagum v Hafiz, namely that the court had no obligation to ensure that the sale price of properties is at or above market value. The risk of the property being sold at an undervalue was also found not to fall within Article 1 Protocol 1 of the Human Rights Convention (“A1P1”) regarding deprivation of possessions in the context of a beneficial interest. The court also made clear that low risk of undervaluation was not a threshold requirement for exercising discretion under s.14.
Going forward, this suggests that there is no requirement for the court to show that the risk of undervalue of trust property is low in order to exercise its discretion under s.14. The risk of undervalue is to be regarded a factor to be considered by the court generally when exercising such discretion.
If you are looking for assistance in making an application under s.14 TLATA 1996, please do not hesitate to contact one of our specialists who will be happy to help.
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