When you hold land in a trust, the trust is not noted on the register at the Lands Titles Office or on the certificate of title for the land. Instead, the register and the title simply show that the land is held in the name of the persons who act as trustee of the trust. The reason for this is section 162 of the Real Property Act 1886 (“RPA”) which prohibits the Registrar-General from entering any particulars of a trust on the register.
For this reason, it has become common practice to note trustee capacity by noting on the register that the registered proprietors hold the land “with no survivorship”. While effective to indicate a trust holding, this technique can lead to a number of practical problems which are often not considered at the time the phrase is employed.
The words “with no survivorship” can be used where there are two or more registered proprietors who jointly hold the land as trustees. The effect of this is that it will not be lawful for any less number of joint proprietors than the number registered at the time that the notation is made to transfer or otherwise deal with the estate or interest in the land without first obtaining an order of the Court (section 165 of the RPA).
Alternatively, the notation can state that the above restriction as to transfer or other dealings with the land will not apply unless the number of persons registered as proprietors drops below a certain number. For example, the notation may operate such that the restrictions on dealings only applies once the number of proprietors drops below two, even if there were more than two proprietors at the time that the notation was made.
The notation acts to deny the operation of ordinary principles of survivorship that apply to joint proprietorship. This means that when one of the owners dies reducing the number of trustees to one or less than the specified number, title to the land does not vest in the survivor(s).
In practical terms, this means that if the number of trustees of the relevant trust drops below either the number existing at the time that the notation was made or the other number specified in the notation, a dealing with land to be registered by the Registrar General cannot be made without an order of the Court unless and until the requisite number of trustees is restored.
Consequently, in the event of the death, retirement or removal of a trustee which would cause the number of trustees to drop below the required number, the endorsement will compel the appointment of a replacement trustee and their registration as a proprietor of the land before any further dealing in respect of the land can be effected. This is so even if the terms of the relevant trust deed or the Trustee Act 1936 do not require the appointment of a replacement trustee and the surviving trustee or trustees are otherwise authorised at law to deal with the property.
It is common practice for trust deeds not to impose a minimum number of trustees. Ordinarily, therefore, where a trustee dies, retires or is removed, there is no need to appoint a replacement. In fact, there may be any number of reasons why the remaining trustee or trustees may not want to appoint a replacement. The requirement to do so in order to comply with the provisions of the RPA can therefore impose an unnecessary burden on the surviving trustee or trustees.
The most obvious example of where this may cause difficulties is in a family trust. For example, Mr and Mrs A, a married couple with 2 children, act as trustee of the A Family Trust and in that capacity purchase a piece of land. The title notes that they hold the land “with no survivorship”. Subsequently Mr A dies. The trust deed does not require there to be more than one trustee at any time. Accordingly, upon Mr A’s death, the trust deed provides that Mrs A becomes the sole trustee of the trust. However, as the ownership was noted as being “with no survivorship”, Mrs A cannot transfer or otherwise deal with the land in any way unless at least one further trustee is appointed. The logical thing to do would be to appoint Mr and Mrs A’s two children as additional trustees. However, this may not always be appropriate and can create its own practical difficulties if one child is not in harmony with the other or with Mrs A and refuses to agree to proposed actions or if the trust deed allows decisions of a majority of the trustees to be binding on all, the children could potentially exercise powers of the trustee against the wishes of Mrs A.
It is relevant to observe that there is no requirement for a trust holding to be noted with “with no survivorship” on the title. From an evidentiary perspective, the notation serves no purpose other than to notify that the land cannot be dealt with by a single surviving joint proprietor. It does not, by itself, provide any evidence of particular trusts that the land is held on. There are other ways that the trust holding can be indicated on an LTO panel form Memorandum of Transfer, for example by noting in the consideration panel that the consideration is paid by the transferee in its capacity as trustee of the particular trust. In addition to this, there are any number of ways to evidence the trust capacity through contracts or other documents recording the details of the transaction pursuant to which the transfer or other dealing occurs, but these do not achieve notation on the certificate of title and this limitation appears to be the genesis of the current preference for use of the term “with no survivorship”.
While there may be instances in which the use of “with no survivorship” and the resulting requirement for a minimum number of trustees to be maintained are justified, the perceived benefits from its use, as opposed to the practical problems that can arise from its use, warrant closer consideration than they appear to be receiving in current conveyancing practice.
This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this report, or what it means for you, your business or your clients' businesses, please feel free to contact us.