Property law vs trust law
When you buy a house, my tutor said that you are holding it for trust for yourself. I understand how it works under co-ownership, but WHY would you hold it on trust for yourself when you're the sole legal owner? I came up with two possible theories, both of which seem wrong:
1) Before the transaction is complete (registration not yet done etc), you already have an equitable interest so in that sense, trust is established, but the trustee is still the seller and not you
2) You are the absolute legal owner, i.e. having the legal and equitable title. In equity, Trustees own the legal and beneficiaries own the equitable title. Because you have both, you are also both the trustee and the beneficiary.
Can any property law students/ property law practitioners please help? Thank you!
1) Before the transaction is complete (registration not yet done etc), you already have an equitable interest so in that sense, trust is established, but the trustee is still the seller and not you
2) You are the absolute legal owner, i.e. having the legal and equitable title. In equity, Trustees own the legal and beneficiaries own the equitable title. Because you have both, you are also both the trustee and the beneficiary.
Can any property law students/ property law practitioners please help? Thank you!
I didn't really understand the point of 2, but admittedly haven't studied equity or land law yet!
If this is true of houses, presumably it would be true of everything? i.e. I am the legal owner of my iphone, but if I wanted to it I could settle it on trust with myself as sole beneficiary and myself as trustee (making no difference at all to anything).
I had assumed that completely empty trusts like this would be treated as if they didn't exist at all - I don't really see the *point* of what your tutor is getting at. How could a trust where no legal or equitable title has passed do *anything*
Would be interested to see the answer myself, I can't see how they are correct.
If this is true of houses, presumably it would be true of everything? i.e. I am the legal owner of my iphone, but if I wanted to it I could settle it on trust with myself as sole beneficiary and myself as trustee (making no difference at all to anything).
I had assumed that completely empty trusts like this would be treated as if they didn't exist at all - I don't really see the *point* of what your tutor is getting at. How could a trust where no legal or equitable title has passed do *anything*
Would be interested to see the answer myself, I can't see how they are correct.
Your tutor is wrong. You don't hold it on trust for yourself. A trust only occurs where there is a separation of beneficial and legal ownership. (Westdeutsche Landesbank, AC at para 669, 706 )
I'd lean more towards point 2 but I agree with Forum User - if it's only you, it's hard to see how there's any kind of trust. I think your tutor may be just trying to make the point that ownership can be legal and equitable and when you buy a house for yourself with no one else in the scenario, you must have legal and equitable ownership. But I wouldn't bother saying you're the trustee and beneficiary, you're just wasting words in an exam (this snide comment is directed at your tutor rather than you since I agree with your confusion 
)
)
Original post by Jilly.0
When you buy a house, my tutor said that you are holding it for trust for yourself. I understand how it works under co-ownership, but WHY would you hold it on trust for yourself when you're the sole legal owner? I came up with two possible theories, both of which seem wrong:
1) Before the transaction is complete (registration not yet done etc), you already have an equitable interest so in that sense, trust is established, but the trustee is still the seller and not you
2) You are the absolute legal owner, i.e. having the legal and equitable title. In equity, Trustees own the legal and beneficiaries own the equitable title. Because you have both, you are also both the trustee and the beneficiary.
Can any property law students/ property law practitioners please help? Thank you!
1) Before the transaction is complete (registration not yet done etc), you already have an equitable interest so in that sense, trust is established, but the trustee is still the seller and not you
2) You are the absolute legal owner, i.e. having the legal and equitable title. In equity, Trustees own the legal and beneficiaries own the equitable title. Because you have both, you are also both the trustee and the beneficiary.
Can any property law students/ property law practitioners please help? Thank you!
Either your tutor is wrong or you have misunderstood.
Original post by The West Wing
Your tutor is wrong. You don't hold it on trust for yourself. A trust only occurs where there is a separation of beneficial and legal ownership. (Westdeutsche Landesbank, AC at para 669, 706 )
How do you explain what a trust is when a layperson asks? I always struggle.
Original post by beepbeeprichie
How do you explain what a trust is when a layperson asks? I always struggle.
Mmm quite a few of my friends have trust funds or know people who have trust funds so that's always a good place to start. Something to the effect of 'you can have £100,000 when you get to the age of 25, and another £100,000 if you've gone to Cambridge'. I'd use the practical example first and then explain how it works - someone holds the property for someone else's benefit, and the trust is the device which allows for this arrangement.
Original post by gethsemane342
I'd lean more towards point 2 but I agree with Forum User - if it's only you, it's hard to see how there's any kind of trust. I think your tutor may be just trying to make the point that ownership can be legal and equitable and when you buy a house for yourself with no one else in the scenario, you must have legal and equitable ownership. But I wouldn't bother saying you're the trustee and beneficiary, you're just wasting words in an exam (this snide comment is directed at your tutor rather than you since I agree with your confusion )
)Original post by TurboCretin
Either your tutor is wrong or you have misunderstood.
Original post by The West Wing
Your tutor is wrong. You don't hold it on trust for yourself. A trust only occurs where there is a separation of beneficial and legal ownership. (Westdeutsche Landesbank, AC at para 669, 706 )
I am quite sure i didnt get her wrong, because i asked her just to confirm that i heard her right—i said "miss, so when u buy a property, u r holding it on trust for urself?" n she said "yes, alot of people dont know that" and went on talking about how tt makes property lawyers different from laypeople, albeit not in an elitist way.
It probably has no merit at all in mentioning this in an essay but i feel that it is, conceptually, an important point. So i wanna get it right.
Today during the seminar of co-ownership, the tutor mentioned about how trustees can be ONE OF the beneficiaries i.e. Westdeutsche Landesbank isn't that accurate either? (Tho, granted, i havent learnt that case yet.) Nevertheless, when there are more than one beneficiaries i can understand how the concept works. But how is that applicable to sole trustees being the sole beneficiaries, i guess i shall never know.
Original post by beepbeeprichie
How do you explain what a trust is when a layperson asks? I always struggle.
Original post by The West Wing
Mmm quite a few of my friends have trust funds or know people who have trust funds so that's always a good place to start. Something to the effect of 'you can have £100,000 when you get to the age of 25, and another £100,000 if you've gone to Cambridge'. I'd use the practical example first and then explain how it works - someone holds the property for someone else's benefit, and the trust is the device which allows for this arrangement.
To a layperson, trust is better explained in terms of testamentary gifts. Trust in land law is, well, not much of a point in real life to a layperson, in my opinion. Just tell them that a trust is when A tells B to hold something on for C before he dies, probably becos C is underaged or something. That's a valid, and most common of all trusts.
Original post by Jilly.0
I am quite sure i didnt get her wrong, because i asked her just to confirm that i heard her right—i said "miss, so when u buy a property, u r holding it on trust for urself?" n she said "yes, alot of people dont know that" and went on talking about how tt makes property lawyers different from laypeople, albeit not in an elitist way.
It probably has no merit at all in mentioning this in an essay but i feel that it is, conceptually, an important point. So i wanna get it right.
Today during the seminar of co-ownership, the tutor mentioned about how trustees can be ONE OF the beneficiaries i.e. Westdeutsche Landesbank isn't that accurate either? (Tho, granted, i havent learnt that case yet.) Nevertheless, when there are more than one beneficiaries i can understand how the concept works. But how is that applicable to sole trustees being the sole beneficiaries, i guess i shall never know.
It probably has no merit at all in mentioning this in an essay but i feel that it is, conceptually, an important point. So i wanna get it right.
Today during the seminar of co-ownership, the tutor mentioned about how trustees can be ONE OF the beneficiaries i.e. Westdeutsche Landesbank isn't that accurate either? (Tho, granted, i havent learnt that case yet.) Nevertheless, when there are more than one beneficiaries i can understand how the concept works. But how is that applicable to sole trustees being the sole beneficiaries, i guess i shall never know.
The point of a trust is to divide legal and equitable interests in property; if there is a sole trustee, a sole beneficiary and they are the same person, that is not a trust in my understanding. That is simply ownership.
Original post by TurboCretin
The point of a trust is to divide legal and equitable interests in property; if there is a sole trustee, a sole beneficiary and they are the same person, that is not a trust in my understanding. That is simply ownership.
My dilemma exactly. the only possibility,i guess, is that she meant argument 2) then.
Original post by Jilly.0
Today during the seminar of co-ownership, the tutor mentioned about how trustees can be ONE OF the beneficiaries i.e. Westdeutsche Landesbank isn't that accurate either? (Tho, granted, i havent learnt that case yet.) Nevertheless, when there are more than one beneficiaries i can understand how the concept works. But how is that applicable to sole trustees being the sole beneficiaries, i guess i shall never know.
Today during the seminar of co-ownership, the tutor mentioned about how trustees can be ONE OF the beneficiaries i.e. Westdeutsche Landesbank isn't that accurate either? (Tho, granted, i havent learnt that case yet.) Nevertheless, when there are more than one beneficiaries i can understand how the concept works. But how is that applicable to sole trustees being the sole beneficiaries, i guess i shall never know.
Certainly the trustee can be *one* of a group of beneficiaries, there is no problem with that. I agree with the people who have said that a sole trustee cannot be a sole beneficiary - that is just ownership.
Original post by Jilly.0
I am quite sure i didnt get her wrong, because i asked her just to confirm that i heard her right—i said "miss, so when u buy a property, u r holding it on trust for urself?" n she said "yes, alot of people dont know that" and went on talking about how tt makes property lawyers different from laypeople, albeit not in an elitist way.
It probably has no merit at all in mentioning this in an essay but i feel that it is, conceptually, an important point. So i wanna get it right.
Today during the seminar of co-ownership, the tutor mentioned about how trustees can be ONE OF the beneficiaries i.e. Westdeutsche Landesbank isn't that accurate either? (Tho, granted, i havent learnt that case yet.) Nevertheless, when there are more than one beneficiaries i can understand how the concept works. But how is that applicable to sole trustees being the sole beneficiaries, i guess i shall never know.
It probably has no merit at all in mentioning this in an essay but i feel that it is, conceptually, an important point. So i wanna get it right.
Today during the seminar of co-ownership, the tutor mentioned about how trustees can be ONE OF the beneficiaries i.e. Westdeutsche Landesbank isn't that accurate either? (Tho, granted, i havent learnt that case yet.) Nevertheless, when there are more than one beneficiaries i can understand how the concept works. But how is that applicable to sole trustees being the sole beneficiaries, i guess i shall never know.
A trustee can also be a beneficiary - there's no problem with that, assuming there's more than one beneficiary. If your trustee is the sole beneficiary then yeah, that's just ownership. I think your tutor is either wrong or needlessly complicating trusts to make them simpler.
Original post by Forum User
Certainly the trustee can be *one* of a group of beneficiaries, there is no problem with that. I agree with the people who have said that a sole trustee cannot be a sole beneficiary - that is just ownership.
Original post by gethsemane342
A trustee can also be a beneficiary - there's no problem with that, assuming there's more than one beneficiary. If your trustee is the sole beneficiary then yeah, that's just ownership. I think your tutor is either wrong or needlessly complicating trusts to make them simpler.
i guess we can safely conclude, amongst us at least, that the tutor is wrong. thank you!
Original post by Jilly.0
When you buy a house, my tutor said that you are holding it for trust for yourself. I understand how it works under co-ownership, but WHY would you hold it on trust for yourself when you're the sole legal owner? I came up with two possible theories, both of which seem wrong:
1) Before the transaction is complete (registration not yet done etc), you already have an equitable interest so in that sense, trust is established, but the trustee is still the seller and not you
2) You are the absolute legal owner, i.e. having the legal and equitable title. In equity, Trustees own the legal and beneficiaries own the equitable title. Because you have both, you are also both the trustee and the beneficiary.
Can any property law students/ property law practitioners please help? Thank you!
1) Before the transaction is complete (registration not yet done etc), you already have an equitable interest so in that sense, trust is established, but the trustee is still the seller and not you
2) You are the absolute legal owner, i.e. having the legal and equitable title. In equity, Trustees own the legal and beneficiaries own the equitable title. Because you have both, you are also both the trustee and the beneficiary.
Can any property law students/ property law practitioners please help? Thank you!
Wait a minute, was she talking about when you take out a mortgage on a house? Perhaps a mortgage could be seen as holding property on trust for yourself and the bank, given that the bank presumably has a share of the equity in the property until the loan is repaid?
Just a theory.
Original post by TurboCretin
Wait a minute, was she talking about when you take out a mortgage on a house? Perhaps a mortgage could be seen as holding property on trust for yourself and the bank, given that the bank presumably has a share of the equity in the property until the loan is repaid?
Just a theory.
Just a theory.
A mortgage in favour of the bank does not necessarily give the bank an equitable interest. A mortgage is, in any case, distinct from an interest under a trust.
Consider a property of which A is the sole legal and beneficial owner. A mortgage granted in favour of Mammon Bank Ltd will mean Mammon has a legal interest in the property. If A defaults on its obligations under the mortgage, Mammon can take possession (though it may need a possession order if A is living in the property/otherwise present) and sell the property. Mammon does not, however, have an interest under a trust.
It is possible to have an equitable mortgage, whether the interest over which a charge/mortgage is granted is equitable rather than legal.
That said, a mortgagor does not hold land on trust for the mortgagee and mortgagor. All the mortgagor owes is the debt and any interest which arises. A person who is the beneficiary of a trust of land usually has a share in the value of the property, but a mortgagee will only be entitled to the value of the mortgage, plus interest. If a mortgagee gets an order for possession/sale, the me then holds any excess on trust for the mortgagor. But that's rather different.
The grant of a mortgage no longer leads to transfer of title to the mortgagee, subject to the mortgagor's equity of redemption. The mortgagee has a legal/equitable *interest*, but does not have a share in equity.
Original post by Jilly.0
When you buy a house, my tutor said that you are holding it for trust for yourself. I understand how it works under co-ownership, but WHY would you hold it on trust for yourself when you're the sole legal owner? I came up with two possible theories, both of which seem wrong:
1) Before the transaction is complete (registration not yet done etc), you already have an equitable interest so in that sense, trust is established, but the trustee is still the seller and not you
2) You are the absolute legal owner, i.e. having the legal and equitable title. In equity, Trustees own the legal and beneficiaries own the equitable title. Because you have both, you are also both the trustee and the beneficiary.
Can any property law students/ property law practitioners please help? Thank you!
1) Before the transaction is complete (registration not yet done etc), you already have an equitable interest so in that sense, trust is established, but the trustee is still the seller and not you
2) You are the absolute legal owner, i.e. having the legal and equitable title. In equity, Trustees own the legal and beneficiaries own the equitable title. Because you have both, you are also both the trustee and the beneficiary.
Can any property law students/ property law practitioners please help? Thank you!
Geth and West Wing are right. The crucial thing to bear in mind here is that there can be no trust without a separation of legal and beneficial ownership. Hence, a person can simultaneously be trustee and beneficiary provided there exist EITHER another trustee AND/OR another beneficiary. A person who has the sole legal and beneficial interests in property is simply its owner.
Original post by jjarvis
Geth and West Wing are right. The crucial thing to bear in mind here is that there can be no trust without a separation of legal and beneficial ownership. Hence, a person can simultaneously be trustee and beneficiary provided there exist EITHER another trustee AND/OR another beneficiary. A person who has the sole legal and beneficial interests in property is simply its owner.
Thank you very much.
Original post by jjarvis
A mortgage in favour of the bank does not necessarily give the bank an equitable interest. A mortgage is, in any case, distinct from an interest under a trust.
Consider a property of which A is the sole legal and beneficial owner. A mortgage granted in favour of Mammon Bank Ltd will mean Mammon has a legal interest in the property. If A defaults on its obligations under the mortgage, Mammon can take possession (though it may need a possession order if A is living in the property/otherwise present) and sell the property. Mammon does not, however, have an interest under a trust.
It is possible to have an equitable mortgage, whether the interest over which a charge/mortgage is granted is equitable rather than legal.
That said, a mortgagor does not hold land on trust for the mortgagee and mortgagor. All the mortgagor owes is the debt and any interest which arises. A person who is the beneficiary of a trust of land usually has a share in the value of the property, but a mortgagee will only be entitled to the value of the mortgage, plus interest. If a mortgagee gets an order for possession/sale, the me then holds any excess on trust for the mortgagor. But that's rather different.
The grant of a mortgage no longer leads to transfer of title to the mortgagee, subject to the mortgagor's equity of redemption. The mortgagee has a legal/equitable *interest*, but does not have a share in equity.
Consider a property of which A is the sole legal and beneficial owner. A mortgage granted in favour of Mammon Bank Ltd will mean Mammon has a legal interest in the property. If A defaults on its obligations under the mortgage, Mammon can take possession (though it may need a possession order if A is living in the property/otherwise present) and sell the property. Mammon does not, however, have an interest under a trust.
It is possible to have an equitable mortgage, whether the interest over which a charge/mortgage is granted is equitable rather than legal.
That said, a mortgagor does not hold land on trust for the mortgagee and mortgagor. All the mortgagor owes is the debt and any interest which arises. A person who is the beneficiary of a trust of land usually has a share in the value of the property, but a mortgagee will only be entitled to the value of the mortgage, plus interest. If a mortgagee gets an order for possession/sale, the me then holds any excess on trust for the mortgagor. But that's rather different.
The grant of a mortgage no longer leads to transfer of title to the mortgagee, subject to the mortgagor's equity of redemption. The mortgagee has a legal/equitable *interest*, but does not have a share in equity.
Original post by TurboCretin
Wait a minute, was she talking about when you take out a mortgage on a house? Perhaps a mortgage could be seen as holding property on trust for yourself and the bank, given that the bank presumably has a share of the equity in the property until the loan is repaid?
Just a theory.
Just a theory.
Just an addition to what TurboCretin has said, the mortgagee as a charge on the property, but this is different from equitable interests and the mortgagor does not hold it on trust for the mortgagee.
Can someone tell me when is a mortgage a secure one?
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