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.Root 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 years 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’.
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 circumstances. 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 only.
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 Commission 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.