Subinfeudation was abolished in the 13th century, so that no
further tenurial relationships could be created, except by the king.
As a result, land-owners issued land rights to their sub-tenants
by granting certain estates -- packages of ownership rights --
rather than creating new tenancies with their accompanying feudal
obligations.
The estate defined the duration of the rights enjoyed by its owner,
and the accompanying
responsibilities.
Each of the
tenants and sub-tenants of a particular piece of land
might be holding his estate on different
terms. For example, person A might grant to person B an `estate
in fee simple' in return for the rendering of certain monies and
services. `Fee simple' meant that the estate owned by B could be
inherited by his heirs, according to the standard rules of
inheritance. Another mode of ownership was the `estate for
life'. Here the sub-tenant would have the right to enjoy the
products of the land for the duration of his life, after which the
land would revert to the grantor.
At the bottom of the feudal social pyramind were the peasants who
occupied land at the pleasure of the local lord of the manor in return
for agricultural services. Over time this form of occupancy became
recognized as a right, and its owner was known as a villein.
The villein's tenancy was known as copyhold, as the proof
of his right was a copy of the records of the manorial court.
A fee simple estate was
of considerable value to its owner. Moreover, the owner in fee simple was very
close in practice, if not in theory, to being the absolute
owner of the land. This meant that he could sell his estate, if he
wished, to
whomever he chose. So while the income from the fee simple estate
could provide for its owners and their descendants in the long term,
it could
raise a great deal of money for the current owner in the short term.
A young man (it would normally have been a man) who inherited an
estate on the death of his father was faced with a choice:
sell it, and live richly on the proceeds, or keep it to provide
modest support to
generations as yet unborn. Needless to say, many inheritors preferred
the former option. As a result, more mature owners of large fee simple
estates began
to look for ways to pass on their estates in ways which prevented them
being sold outside the family. In their wills they would use
language like `I grant to my son and the heirs of his body...' The
idea was that only direct lineal descendants (`heirs of the body')
would be able to inherit
the estate; if could not be passed to a non-descendant by a will, for
example. The land-owners could not actually prevent the sale of the estate
outside the family by this technique; however, by limiting the
class of person who could inherit, it was hoped that the land would be
of no value to prospective purchasers. A person who did buy the land
would not be buying an estate of indefinite duration, because if the
seller died without descendants, the estate
would come to an end, and the buyer would be left with nothing.
Legal devices such as this were objectionable to the 13th century courts.
It was a principle of the common law that estates in
land should be `freely alienable', that is, capable of being bought
and sold without restriction. By placing restrictions on the value of
the estate being sold, this principle was subverted. Nevertheless,
in 1285 influential landowners persuaded Parliament to enact
the statute De Donis Conditionalibus. This enactment
forced courts to recognise that expressions like `to the heirs of
the body' in a grant of land limited to the inheritance of land
to direct lineal descendants. Such an estate became known as
a fee tail or entail, from the French tailler,
`to cut'. When an estate was granted in fee tail, the grantor
retained a reversion, that is, a right to recover the
estate at some (unspecified) future date if the owner died without
descendants.
The fee tail was very popular with large landowners, as it allowed land to be kept within the family. However, it was not popular with kings, as it came to be seen as a direct threat to their authority. This is because it nullified one of the main sanctions available to the king against rebellion by wealthy families. It was accepted that if a person was convicted of treason, his estates would be forfeit to the Crown. However, if the estate was in fee tail, nothing of value would be forfeit. If the traitor died without heirs, the land would revert from the Crown to the original grantor of the estate. Subsequent kings sought to restrict the use of the fee tail, but these attempts were blocked by landowners. The fee tail was also unpopular with land owners of less substantial means, as they could not usefully sell or mortgage part of the estate to finance improvements and repairs to the rest. Of course, it was unpopular with profligate heirs, who were prevented from selling the land to their own benefit. This, of course, was exactly what the fee tail was intended to prevent. There was thus constant tension between the king, major landowners, and the large number of lesser landowners. Finally, to cut a long story short, in 1472 the courts allowed the owner of an entailed estate to take legal action against the grantor to block his reversion. This process, known as `common recovery', effectively converted the fee tail to a fee simple. For large landowners with sentimental attachments to land that had been in the family for generations, this was disastrous. Any wastrel heir could convert the fee tail into a fee simple, and sell the estate out of the family. The device of the trust was employed to circumvent the problem of common recovery, as it was used to circumvent so many other problems. So, to understand the next chapter in the story, we need a brief digression to explain the origin and purpose of the trust.
In the early medieval period, the English common law accepted that a feudal
overlord
had a right of wardship over the land of his tenants. A minor
(anyone under twenty-one years of age in those days) could not
own an estate in land, and could therefore not inherit it on the
death of his father. This is still the case, except that the age of
majority is now eighteen rather than twenty-one.
The land in such circumstances was held in
wardship by the overlord. Wardship was attractive to the overlord,
because it gave him the income of that land without increasing
his own obligations to the king. In the days of frequent wars and
crusades, the likelihood that a landowner would die before he
had an heir of full age was quite high. Feudal tenants, therefore,
had to find ways to direct the benefit of the land to their families
even when their heirs could not legally own land. The way this
was achieved was to transfer the estate to someone outside the
family, with the obligation that it would be used to the benefit
of the family. This device became known as the `use', because land was
held for the use of someone else. Now, the new legal owner of the estate
usually honoured his commitments to the grantor's
family. If he did not, however, the beneficiary of the estate
could not go to the
ordinary
common-law courts for redress. As far as the law was concerned, the
family had transferred the land to someone else, and no longer
had any rights over it. The beneficiary of the estate had no legal
rights that the courts could enforce. However, the courts of equity
had a greater discretion to act according to `conscience' than the
common-law courts, at least in the medieval period. The beneficiary
of a use could therefore go to the Chancery for a discretionary
remedy if the legal owner of his estate refused to honour his
commitments.
The use became a very popular method for granting interests in land
outside the restrictions of the common law. The beneficiary of a use
had rights that were effectively rights of ownership, and these
rights could be bought and sold like common-law rights. There thus
developed two completely separate systems of land ownership --
the legal system, enforced by the ordinary courts, and the `equitable'
system, enforced by the Chancery. Uses were unpopular with kings
for the same reason that other methods for avoiding feudal dues were
unpopular. King Henry VIII abolished the use, by ruling that all
existing uses were to be converted into ordinary legal ownership in
the hands of the beneficiaries. However, such a useful device could
not be suppressed for long, and the use re-emerged shortly
afterwards in the form of the `trust', which is the term that has
persisted to the present day.
So, returning to the problem of the owner of an estate who wished
to keep it in the family: the trust provided a useful strategy for
doing so. Remember that the estate in fee tail
could not be allowed to come into
the hands of an adult, because he could then seek common recovery and
sell it. So the owner would declare a trust over the land, placing
the legal ownership in the hands of trustees, who would manage the
estate for the benefit of his heirs. The problem with this approach
was that the courts were sensibly resistant to the notion of
allowing a landowner to control his land from beyond the grave.
Consequently there developed a `rule against perpetuities' -- a
trust would not be upheld if it did not result in somebody acquiring
absolute ownership, free of the trust, within a certain time. The
rules were quite complex, but in effect it was difficult to create a
trust that lasted more than about 80 years. So a landowner could not
simply request that land be held on trust `for the
heirs of my body, indefinitely' -- this trust would be `void for
perpetuity', and would not be enforceable.
So the solution was the process
that became known as `settlement-resettlement'. The current owner
of the land in fee simple would, on reaching the age of majority,
put the land on trust for himself for life, then for his heir
absolutely (settlement). This trust would not fall foul of the rule against
perpetuities, as it resulted in absolute ownership within the
prescribed limits. When the owner died, his heir would take the
land either in fee simple if the heir were of age, or beneficially
under the trust if he were still a minor. On reaching twenty-one, or
sometimes on marriage, the
heir would then resettle the land, that is, declare that he held it on
trust for himself for life, and then for his heir absolutely. And so
the process of settlement and resettlement would continue down the
generations. Of course, the whole process hinged on the current owner
of the land persuading his heir to take the estate for life, not for
ever. The main control mechanisms over the heir appear to have been
social, rather than legal. The grant of the trust to the heir would be
made on condition that he would himself resettle the land. Having
done so, the heir had no disincentive from imposing the same
restriction on his own heir. It would be well-known that a person was
expecting to inherit land under a resettlement arrangement, and it
would have been socially catastrophic for him not to honour the
resettlement when his turn came to do so. After all, the heir was
only in line to inherit at all because generations of his predecessors
had all honoured their parts of the bargain.
Settlement-resettlement used the trust to create the illusion of the
fee tail, while avoiding the problem of common recovery. It was
popular with great landed families, with sentimental attachments to
their family heritage, because with careful control land could
be kept in the family indefinitely. Because of its popularity, a body of legal
principles grew up to regulate and control it. It was necessary to
decide, for example, what happened if the tenant for life died
intestate (without making a will). In general the courts, and
later Parliament, decided that the tenant for life wished to resettle
according to the usual practice. So the law favoured the
view that, where there was doubt, land was to be passed from
generation to generation according to the principles of settlement.
As the feudal era came to a decisive
end in the industrial revolution, and the capitalist era took hold,
the process of settlement-resettlement became less useful. Land began
to be seen not so much as a measure of one's feudal status, but
as a thing to invest and make money. In effect, land was treated as
a commodity like any chattel. The courts' assumption that
land was to be passed between generations by a process of strict
settlement became less useful, even an irritation.
Suppose, for example, that a person had
made a large amount of money, and wished to invest it for the
benefit of his descendants. He may wish to create a trust to give
the benefit of his good fortune to his descendants. This was all very
well unless the investments included land. If they did, then the trust
would be assumed to form a strict settlement, and would be
governed by the law of settlements. This may not have been the
intention of the benefactor at all: he may have wished, for example,
for the trustees to create a lease of the land and apply the benefit
of the lease -- the rent -- for the beneficiaries. Unfortunately he
could not do this, as the law assumed that as land was involved
in the trust, the benefactor was creating a strict settlement. Because
the default statutory rules governing strict settlements were very
restrictive, the trustees often found that they could not sell or
invest the property in a way that was helpful to the beneficiaries.
The device used to overcome this problem was the trust for
sale. A person who had invested in land and wanted to create a
trust of the investment in his will would
declare explicitly that the trustees were to hold the land on trust to
sell to raise money for the beneficiaries. This declaration was
taken by the courts to indicate that the beneficiaries were not to
receive an interest in land at all, but an equitable interest in
money. Money was not capable of resettlement, so the problems of the
strict settlement were avoided. Typically the trust gave the trustees
a power to postpone the sale of the land, perhaps indefinitely. If the
trustees never sold, then the trust was essentially a trust of land
without being a settlement. The trust for sale was essentially a legal
fiction, and recognised as such. It came to exist at all because
law could not adapt quickly enough to changing social conditions.
Unfortunately, the use of the formula `on trust to sell' had some odd
consequences if the trust property included a dwelling that people
lived in. Because there was a duty to sell, but only a power to
postpone, then if any person with the power to postpone decided to
sell, then the property would have to be sold. The agreement to
postpone sale had to be unanimous. This could not easily be avoided by
clever wording of the trust, because if the trust did not contain
a binding duty to sell, it would not be a trust for sale, but a
strict settlement.
In the feudal system of land ownership, most people - or at least most
men - had some form of land rights. Even copyholders had a recognized
title of sorts. As the feudal era came to a close, and the population
became more mobile, temporary rights over land came to be
recognized. In general, temporary land rights can be
divided into leases and licences.
The difference between a lease and a
licence is of great importance in land law, because although the
day-to-day rights and obligations of leaseholders and licencees appear
very similar, they are treated very differently by the courts.
A licence to occupy land is, in general, nothing more than a
contractual arrangement. For example, landlord L enters into a contract with tenant
T such that T can occupy some part of L's land, in return for payment
of rent. A licence has fewer feudal trappings, but the licencee
does not hold any interest in the land that he can enforce against
the landlord. His rights are (mostly) governed entirely by the contract.
A leaseholder, on the other hand, has an estate in land, which is
accompanied by certain obligations and privileges; these arise by
operation of law even if not contemplated by the parties when they
originally entered into the agreement. Moreover, some obligations
under a lease `run with the land', that is, they continue to be
binding on the landlord and/or tenant long after either or both have
sold their interests to other people.
For the freehold owner, the creation of a lease was
an investment. While the leaseholder could exclude the landlord from
the land for the duration of the lease, the landlord knew that
eventually the land would return to his family. In the meantime, the
landlord collected rent from the leaseholder. Large landowners were
reluctant to sell their freehold interests, and since the abolition
of subinfeudation prevented their creating new feudal obligations for
their own tenants, the lease was quite a popular way of getting
the benefit of land while keeping ownership of it.
Historically, the rights of landlords and leaseholders have always
been biased in favour of the landlord. Because people have
to live somewhere, and all the land in the country was owned by
somebody, people were forced to accept leasehold obligations that were
very unfavourable to them. To an extent this is still true today,
although recent legislation has rebalanced the landlord-tenant
obligations somewhat. Even where the leaseholder was, to all practical intents
and purposes, the owner of the land (very common in long leases), and
had paid a substantial sum of money for this privilege, the landlord
still retained rights over the property which he could not really
justify. Unscrupulous landlords could, and still can, cause a
leaseholder to forfeit the lease, at considerable loss, as a result of
technical violations of the leasehold agreement. In addition, a person
who has purchased a leasehold interest at great expense might hope to
have something that he can pass on to his descendants, or sell on
in the future, but the value of a lease diminishes over time as
its remaining term gets shorter.
The lease is a phenomenon almost unique to English law. While most
jurisdictions allow for land and property to be rented, usually the
rental agreement is nothing more than a contract; it is what would be
called a licence under English law. While the rights of leaseholders
may have been unbalanced with respect to their landlords, in
English law the position of a licencee is even more precarious. It is
clearly in the interest of a landlord to assert that his tenants
are mere licencees, not leaseholders; the interest of the tenant
is to the contrary. The assertion that a lease was, in fact, merely
a licence was resisted by the courts, which
were unwilling to let landlords diminish the rights of their tenants
this way. Whatever the agreement between landlord and tenant was
stated to be, the courts tended to find that if it was for a fixed
duration, and gave the tenant the right to exclude the landlord from
the property, then it was a lease.
Historically the lease was used to allow the freehold owner to obtain
an income from land. However, in the last hundred years or so the
lease has also become a technical device for enforcing obligations
between occupiers of dwellings. When a builder constructs a block of
flats, or converts a larger dwelling into separate flats, there often
remain parts of the building that are shared between the occupiers
(the roof is an obvious example). A problem that arises is that of
ensuring that somebody takes responsibility for the maintenance of
these shared areas. If the builder sells the freeholds of the
individual flats, he can insist that the buyers covenant to take on
specific maintenance responsibilities. However, although some
covenants do `run with the land', and will bind subsequent buyers,
only those flats on the ground floor stand on a specific pieces of
land, the others do not. There is thus no specific land for the
obligations to `run with'. The usual solution to this problem is
for the builder to sell long leases rather than freeholds. Individual
flat owners therefore have a landlord on whom they can call to enforce
the obligations of other flat owners. Of course, for the builder this
may be an unwelcome ongoing obligation. Having sold the long leases,
the builder has made all the money on the deal that he is likely to
make, and may well be happy to shed any remaining liabilities.
Worse, there has been a tendency for unscrupulous property management
companies to buy up the freeholds of developments of this type, and
exploit the leaseholders by imposing swingeing management charges.
One of the most recent developments in land law -- the introduction
of `commonhold' interests -- is aimed at preventing this kind of
exploitation and making it easier for builders to sell freeholds
of their developments.
By the start of the 20th century, English land law had become
extremely complex. Many legal land interests were
recognised, including certain conditional, determinable, and future
interests as well as straightforward freeholds and leaseholds.
The use of the trust to accomplish objectives
that could not be accomplished by strict legal means made the
situation even more complicated, as did the widespread use of
legal fictions like the trust for sale. Conveyancing
was often problematic for practitioners, as it was difficult to
tell exactly who had rights over a particular piece of land.
So, in 1925 there was a major reform of
the whole law of land ownership, effected by the enactment of a number
of huge, complex statutes. The Law of Property Act (LPA) abolished all
forms of estate in land apart from two: the fee simple absolute
in possession, and the term of years absolute. Because
all other forms of legal ownership have been abolished, we
generally just use the term `freehold' for the fee simple absolute in
possession, and `leasehold' for the term of years absolute.
From a historical perspective this is inaccurate; prior to 1925, for
example, it was possible to own a freehold `in remainder' rather
that `in possession'. This meant that one expected to receive to
receive the benefit of the estate at some future date, perhaps on the death of
the current owner. These days, such devices would have to be
accomplished by trusts, as would any other form of ownership other
than the fee simple of term of years.
The LPA defines how attempts to create other forms of estate
are to be treated.
For example,
an attempt to create a fee tail results in the creation of a fee
simple, while the creation of `successive interests' (``to my
wife for life, then to my children in equal shares'') automatically
creates a settlement trust. These statutory rules of interpretation
of the wording of dispositions of
land commonly cause problems for the beneficiaries of wills,
because the testator is unaware of the way his words will be
interpreted by the courts.
Solicitors who specialise in wills and probate work have an interest
in encouraging people to seek professional advice when making a
will, but in fact if the will is simple, straightforward language
will often bring about the desired disposition. ``Everything to
my wife'' is a valid will, if correctly signed and witnessed.
However, the use of quasi-legal language in home-made wills does
cause problems that professionals would be able to avoid. For
example, if a testator makes a disposition of land ``to
my children, until the eldest is 21, then to Battersea Dogs' Home''
this creates a trust of land, whatever the testator's actual
intentions. A disposition
``to the heirs of my body, until the eldest is 21, then to
Battersea Dogs' Home'' -- because it sounds more `legal' --
does not create a trust at all, but transfers the legal estate
jointly to the testator's children in fee simple. This is because
the phrase `heirs of my body' is formulaic of the creation of
a fee tail.
The LPA was not the only major statute of 1925. The Land Registration
Act (LRA) introduced a system of compulsory land registration. For the
first time, most interests in land would have to be registered to be
enforceable. This includes both legal and equitable interests.
The LRA introduced by the back door the concept of
`ownership' of land. Although one cannot, in theory,
own land outright, one can be registered as having `absolute freehold
title', which is as close to outright ownership as makes no practical
difference. Now that all other forms of feudal obligation have been
abolished, owners of freehold land now technically `hold land of the
Crown in free and common socage'. The idea that the Queen will demand
socage is merely a notional one, of course.
The Trustee Act set out to rationalise the powers and duties of
trustees, including trustees of land, while the Settled Land Act
controlled the creation and management of strict settlements.
The LPA did go some way towards resolving the problems associated
with the law's bias towards the strict settlement as a way of
holding land on trust. For example, it stipulates that if the
trustees use the trust money to purchase land, and it does not contain a
dwelling, the land is not
to be settled but held on a trust for sale.
Most of the provisions of the 1925 reforms remain in effect today,
although there have been many detailed amendments to the statutes.
Until quite recently there were few significant reforms of the law
of land ownership. However, in 1996 the Trusts of Land and Appointment
of Trustees Act radically changed the way in which trusts of land
are created and managed. In short, this act prevents the creation
of any new strict settlements or
trusts for sale, and provides that all trusts that include land are
to be regarded as simple, general trusts of land. Unfortunately for
lawyers, these reforms are not retrospective, and pre-1997 settlements
remain governed by the SLA (but pre-1997 trusts for sale are
automatically converted into trusts of land). A trust of land has no
obligation to sell, unlike a trust for sale, and therefore avoid some of
the anomalies of the earlier trust. In addition, the default powers
granted to trustees are much more extensive. While the creator of the
trust can always reduce these powers in the trust document, the
stronger default powers will be helpful to people who have become
beneficiaries of trusts accidentally, through carelessly worded will,
for example.
More recently, the Commonhold and Leasehold Reform Act (2002), which
was not in force at the time of writing, introduces an entirely
new form of land ownership - the `unithold'. Although commonhold land
is not a new legal estate -- it is only a variation of the fee simple
freehold that currently exists -- commonhold land must be registered
specifically as commonhold. Within the commonhold each of the
unitholders will be the absolute owner of the unithold. The fee
simple will be owned by an association consisting of the unitholders.
The Act sets out how duties of one unitholder to another, and
to the association, are to be enforced. In a sense, commonhold is
only a formalisation of the device that is currently widely used, of
allowing the leaseholders of flats to jointly form a limited company
to buy the freehold. Commonhold, however, is less technical, and less
obviously a fudge. In addition, the unithold is a permanent interest
-- it does not diminish in value over time as the lease does.
The Government has suggested that commonhold should
eventually become the standard way in which shared land is owned.
©1994-2003 Kevin Boone, all rights reserved