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What happens to land held on trust when the trustee has been dissolved?

View profile for Matthew Smith
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What happens to land held on trust when the trustee has been dissolved?

A trust of land is when the legal title of a piece of land is held by one party, the trustee, on behalf of another party, who has the ultimate beneficial interest, known as the beneficiary. Depending on the circumstances under which the trust arose, the trustee may administer and even dispose of the land on behalf of the beneficiary, or they may merely hold the legal title until a time when the title reverts to the beneficiary and the trust comes to an end.  A trust can arise in several situations, either expressly or impliedly.

When a trustee of land is an individual, or there are several individual trustees, the process for what happens to the land upon the passing of a trustee is often clear and uncomplicated. However, the position can be different if the sole trustee is a company. If there are multiple companies acting as trustees, then the land will usually pass to the remaining trustee(s), but the position is much more complex if there is only one trustee, as the land does not automatically pass to any other parties.   

Ordinarily, the assets of a company pass to the Crown as bona vacantia upon its dissolution. However, one exception to this is when the asset is held on trust immediately before dissolution. This effectively means that the trustee of the land, and so the legal owner, remains the dissolved company. Being a dissolved company, it is not possible to merely convey the land to another party. It may be possible to resurrect the company to do this, but this will not be available in every scenario, particularly if some time has passed since the company was dissolved.

If resurrecting the company is not possible, then the beneficiaries must apply for a vesting order to have the interest transferred from the trustee to another party. Under Section 44 of the Trustee Act 1925, among other powers, when the trustee has been dissolved, the court may make an order vesting the interest ‘in any such person in any such manner and for any such estate or interest as the court may direct…’. Therefore, the court is afforded wide discretion when making a vesting order.

Fortunately, rules have been developed which assist the court when making such orders. One example is when the remaining beneficiaries over the age of 18, have capacity, and together are absolutely entitled to all the trust assets, then they may agree to bring the trust to an end under the rule in Saunders v Vautier, but a court order is still required to action this. This is a common occurrence as the remaining beneficiaries are often the only parties who are aware of the land / interest.

The above rules are the default position in absence of any contrary evidence or provisions found elsewhere, for example, in the trust document itself. Therefore, the trust document should always be the starting point when such a situation arises as this may regulate what happens if the trustee was dissolved. For example, the land may revert back to the settlor. However, an express trust document will not always exist, and this is when the above rules become important. For example, a trust may have arisen by way of a defective conveyance, and no express trust documents will exist to assist the beneficiaries in such circumstances.

The law surrounding trusts of land can be complex. Should you require any advice or assistance in respect of any of the issues above, please do not hesitate to contact us on 0161 696 6178 and our dispute resolution solicitors may be able to assist you.