Trust For Sale - Definition - Law Dictionary Home Dictionary Definition trust-for-sale

Definition :

Trust for sale. Trusts for sale of land were commonly crated in settlements and well-drawn wills. The effect was to convert realty into personalty so that the proceeds devolved upon the beneficiaries as personalty unless they elected to take the property as realty (see CONVERSION), except that upon a lapse of the devise of realty in the testator's lifetime the property resulted to the heir-at-law, Ackroyd v. Smithson, (1780) 1 Bro CC 503. Another and more practical consequence was that the whole estate was vested as a rule in the trustees so that with or without consent of any other person as directed by the donor or testator they could vest the whole estate in a purchaser without his seeing to the application of the purchase money (Trustee Act, 1893, s. 14), and without participation of beneficiaries whose consent was not required, thus providing an expedient, which, together with the Settled Land Acts and other statutes giving analogous powers to mortgagees, personal representatives and trustees in bankruptcy, provided a model for much of the land legislation of 1925. Beneficiaries under a trust for sale had no estate in the land but only in the proceeds (see EQUITABLE ESTATES) so long as the trust continued. A testamentary trust for sale of leasehold land was subject to the rule in Howe v. Lord Dartmouth, (1802) 7 Ves 137, applying to all cases in the absence of directions, express or implied, to the contrary, that where a residue was settled by will upon legatees in succession, wasting property must be sold and the proceeds invested in trustee or authorized investments with con-sequential attribution of capital and income among the beneficiaries according to their rights. Trusts for sale are to be distinguished from powers of sale, e.g., a mere power did not effect conversion, Curling v. May, (1734) 3 Atk 255; and see Re Thursby, (1910) 2 Ch 181.

The (English) Law of Property Act, 1925, provides, in regard to all trusts for sale created or arising before or after 1926, for the duration or prolongation of the powers of sale until sale in favour of purchasers (s. 23); confers a power to postpone sale in the absence of a contrary intention (s. 25); consents, if requisite, are restricted to two in favour of a purchaser, and the wishes of beneficiaries are to be consulted (s. 26). Proceeds of sale or capital money must be paid to not less than two trustees, whatever may be declared by the instrument creating the trust, or to a trust corporation, or to a sole personal representative acting under his powers as such. Receipts by these discharge the purchaser of a legal estate from seeing to the application of the purchase money, but one trustee may act alone in all matters except where capital money arises on the transaction (s. 27); the trustees are to have all the relative powers of a tenant for life under the Settled Land Act, 1925, and land conveyed to them in exercise of those powers must be to them in exercise of those powers must be conveyed to them on trust for sale [s. 28 (1)]. Sub-s. (2) (ibid.) provides for the destination of rents and profits until sale, incidentally overruling Howe v. Lord Dartmouth, ubi sup., where that case would be applicable but without affecting the rule in cases of trusts for sale of pure personalty, Re Trollope, (1927) 1 Ch 596, s. 28 (2). S. 28 (3) gives power to the trustees to partition the land subject to the conditions and provisions of the sub-section. S. 29 provides for delegation of powers; s. 30 for applications to the court; s. 31 relates to mortgaged property. For other provisions see also ss. 32 to 39, and UNDIVIDED SHARES. As to the over-reaching equitable interests upon sale by properly appointed trustees for sale, see ss. 2 (2) and 28 of the (English) Law of Property Act, 1925, and LAW OF PROPERTY ACT (curtain).

A settlement of land upon trust for sale, even if the proceeds are settled, is not a settlement within the meaning of the Settled Land Act, 1926, s. 1 (7). See L.P. Amendment Act, 1926, Sch., and S.L. Act, 1925, ss. 3 and 36.

Trusts for sale are conveniently created by two instruments: (1) the conveyance of the land upon trust for sale and (2) the instrument declaring the trusts of the proceeds, and see s. 35, Trustee Act, 1925, which requires two instruments on appoint-ment of new trustees for sale (see APPOINTMENT OF NEW TRUSTEES), but trusts for sale arise by implication of law in many cases (see Wolst. And Ch. Conv. Stat., Notes to Law of Property Act, 1925, s. 23). A will of a person dying after 1925 is not a conveyance of the legal estate, which now devolves upon the personal representatives by Act of law; it is a trust instrument only.

Sect. 205 (1) (xxxix.) of the (English) L.P. Act, 1925, defines 'trust for sale' unless the context otherwise requires, in relation to land, as an immediate binding trust for sale whether or not exercisable at the request or with the consent of any person and with or without a power at discretion to postpone the sale, but in its general legal sense the term is not restricted to that meaning.

It has the same meaning as in s. 3 of the Indian Trusts act, 1882, and includes an obligation in the nature of a trust within the meaning of Chapter IX of that Act. [Specific Relief Act, 1963 (47 of 1963), s. 2 (c)]