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Title Research

A new era

  • Author : Kelly O’Hara
  • Author : Elaine Rogers
  • Date : September 2010
ABOUT THE AUTHORS: Kelly O’Hara is a Partner in Commercial Property and Elaine Rogers is an Associate in Private Client at William Fry

U ntil recently, the basis of much of Ireland’s trust, land and conveyancing law derived from 19th-century statutes (and even earlier legislation). A new era has, however, commenced in Ireland with the coming into effect of the Land and Conveyancing Law Reform Act 2009 (the 2009 Act). This is a hugely significant piece of legislation and it was introduced to modernise and simplify Irish land law with a view, in part, to facilitate electronic (or e-) conveyancing. The 2009 Act also introduced fundamental changes to the law relating to trusts of land and general trust law in Ireland, including provisions abolishing the rules against perpetuities and introducing wide variation of trusts legislation.

The 2009 Act came into force on 1 December 2009 (apart from its controversial ban on upwards only rent review clauses in commercial leases, which took effect from 28 February 2010). While it is not possible to analyse the 2009 Act in detail in this article, some of its key provisions are considered below.

Land law provisions
Contracts and deeds

Contracts to be evidenced in writing

The principle that a contract for the sale of land must be evidenced in writing to be enforceable has been retained but is restated in modernised language in the 2009 Act.1Root of title

The minimum period for production of a good root of title has been reduced from 40 years to 15 years.

Execution of deeds

Deeds executed by individuals no longer have to be sealed, but to be validly executed:

  • it must be clear from the document that it is being executed or signed as a deed
  • it must be signed in the presence of a witness who attests the signature2 (this is a new requirement; importantly, there is no requirement that the witness be independent); and
  • it must be delivered.

The 2009 Act now also recognises the execution of deeds by foreign-registered companies in line with the foreign law applicable to the company in question (which may or may not involve sealing). Construction of instruments and notice provisions

Statutory rules of construction will be imposed on private documents relating to land unless the documents provide to the contrary. In addition, where an instrument makes provision for serving a notice, but does not specify the manner of service, the notice provisions in the 2009 Act apply.

Appropriate definitions and notice provisions should therefore be included when drafting, otherwise statutory terms and provisions may be applied to documents that the parties may not have intended.

Abolition of archaic laws 

The 2009 Act abolishes any vestiges of feudal tenure that may have survived into modern times in Ireland. The doctrine of estates, however, which derives from feudal concepts, is retained but reformed so that now only two legal estates in land can be created or disposed of under Irish Law, namely the freehold estate of a fee simple in possession and a leasehold estate.

Old forms of freehold estate, such as a fee tail estate or a life estate have been abolished as legal estates. A life estate can, however, still exist in equity, where created by trust. The creation of fee farm grants (in essence, freehold estates with leasehold features such as an obligation to pay rent and to observe and perform covenants) is also prohibited after 1 December 2009.

Co-ownership

The 2009 Act introduces three very important changes to the law on co-ownership in Ireland:

  • it is no longer possible to unilaterally sever a joint tenancy. All joint tenants must now either consent to the severance or a court order must be obtained that consent has been unreasonably withheld;3
  • the 2009 Act clarifies that registration of a judgment mortgage against the interest of a joint tenant does not sever the joint tenancy.4 If the joint tenancy remains unsevered, the judgment mortgage is extinguished upon the death of the judgment debtor; and
  • the old law on partition has been abolished and in its place, new statutory provisions have been introduced to deal with disputes between all co-owners of land and other parties having an interest in the co-owned land (including mortgagees and judgment mortgagees).
Easements

A reduced user period of 12 years5 has been introduced for the acquisition of rights of way and other easements and profits a prendre by prescription, together with an obligation to register a court order declaring the existence of the prescribed right in the Registry of Deeds or the Land Registry, as appropriate. There are also new rules governing implied easements.

Freehold covenants

Parties holding the benefit of positive freehold covenants created after 1 December 2009 can enforce such covenants against successors in title of the original covenantor. This was not possible prior to the introduction of the 2009 Act and as a result, much of Irish property is held under long leases as positive leasehold covenants have always been binding on successors in title of the original covenantor.

A right has also been introduced (which has long existed in England and Wales) to apply to court for the discharge or modification of freehold covenants that constitute ‘an unreasonable interference with the use and enjoyment of the land’.6

Mortgages

Substantial changes have been made to the law of mortgages including:

  • the replacement of the antiquated rules whereby mortgages of unregistered land had to be created by transferring title to the mortgagee (by way of conveyance, assignment, demise or sub-demise). Legal mortgages of unregistered land may now only be created by way of a charge; and
  • the introduction of a distinction between ‘housing loan mortgages’ and all other types of mortgages so that it will not be possible to contract out of the new statutory provisions in relation to housing loan mortgages.
Judgment mortgages and lis pendens

The procedures governing judgment mortgages and lis pendens are now contained in the 2009 Act, in place of the 19th-century statutory provisions which previously applied.

Trust Law Provisions
Trusts of land

Prior to the 2009 Act, trusts of land in Ireland were generally governed by the Settled Land Acts 1882-1890 (the Settled Land Acts). The 2009 Act replaces the Settled Land Acts with a simplified statutory code for dealing with trusts of land and covers all trusts of land created by a lifetime instrument or by will including the old settlements of land, express trusts and bare trusts, trusts arising by implication or operation of law and also discretionary trusts of land.

Trustees

Under the 2009 Act trustees hold the legal title to any trust of land. The 2009 Act contains provisions identifying the trustees including a default provision for application to be made to court for the appointment of trustees where trustees cannot be identified.

Powers of trustees

Trustees are given full powers of an owner to deal with land under the 2009 Act. The powers of trustees include powers to allow particular beneficiaries to occupy or use land and trustees are also now specifically permitted to purchase land outside this jurisdiction in particular circumstances7. It is possible to qualify, restrict or vary these powers by instrument and this may be done for example to give the tenant for life a role in relation to a sale of land.

Trusts for minors

The 2009 Act also covers trusts which are created where land is vested in a minor and provides that a minor’s land will be held on trust with the minor holding an equitable interest only. The Settled Land Acts treated such land as if it created a settlement (with the minor as a tenant for life) even though the land was vested in the minor absolutely.

Overreaching provisions

The 2009 Act includes overreaching provisions in relation to conveyances in favour of a purchaser for valuable consideration whether or not that purchaser has notice of equitable interests. Although there are exceptions, purchasers, in most instances, will not need to make detailed enquiries in relation to trusts of land.

Charitable trusts

The 2009 Act deals with the vast majority of trusts involving land but does not apply to land currently held on trust for charitable purposes although the provisions do apply where the charity holds a remainder interest only8.

The rule against perpetuities

A number of rules of law relating to trusts have been abolished including the rule against perpetuities.

The 2009 Act provisions regarding the abolition of the rule against perpetuities have retrospective effect, except where in reliance on the rule prior to 1 December 2009 property has been distributed or otherwise dealt with. Therefore if trusts were previously discovered to be void and assets distributed on that basis there is no need to review the issue.

Variation of trusts

Prior to the 2009 Act there was no variation of trust legislation in Ireland. Variation of a trust arrangement could be achieved by reference to the rule in Saunders v Vautier or under the ‘salvage’ jurisdiction Irish courts have an inherent power to authorise variations of trusts in limited circumstances. The 2009 Act provides courts with a new jurisdiction to vary trusts, including lifetime and will trusts.

However, an application for a court order for a variation arrangement will be refused where the Irish Revenue Commissioners have satisfied the court that the application is substantially motivated by a desire to avoid or reduce the incidence of tax. It will be interesting to see how this provision is interpreted by the Irish courts as many variations which will be sought will have tax benefits although if the substantial motivation is providing benefits to the beneficiary the court should still be in a position to make the orders.Future reform of trust law

The Irish Law Reform Commission9 issued a report at the end of 2008 that recommends the introduction of modern legislation concerning the duties, responsibilities and powers of trustees to replace the outdated provisions of the Trustee Act 1893 and will hopefully prompt the complete overhaul of trust law in Ireland to complement the 2009 Act provisions.

The recommendations, if implemented, would have significant implications for all persons acting as trustees so that trustees may be obliged to reconsider their roles and duties and a review of existing trust structures may also be necessary. The recommendations together with the Charities Act 2009 (once generally in force) and the 2009 Act should be welcomed as it will allow for more effective management of Irish trusts.

It was decided in Ireland not to follow the reforms in England and Wales introduced by Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 which provide that no contract at all would exist unless put, with all its terms, in writing and signed by both parties.
Or, it can be signed by a person at the individual’s direction, such direction to be given in the presence of a witness who must also attest the signature.
This prohibition operates from 1 December 2009 but applies to co-owners already in existence at that date.
This removes an anomaly which existed in Ireland prior to the 2009 Act that the registration of a judgment mortgage severed a joint tenancy over unregistered land but not registered land.
Previously the user periods ran from a minimum of 20 years up to 60 years.
This applies to both positive and negative freehold covenants and whether created before or after 1 December 2009.
The equivalent provisions in England and Wales do not allow purchase of land outside the jurisdiction.
The Charities Act 2009 in Ireland sets out a new statutory regime for charities and establishes a new regulatory authority for charities (the Charities Act 2009 has generally not yet come into force with the exception of certain sections of this Act).
The 2009 Act is largely based on the content of various Law Reform Commission Reports including draft proposed legislation. See www.lawreform.ie

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