Dealing with the Home and Land
| Author | Lesley King/Peter Gausden |
| Pages | 153-166 |
14.1 Initial considerations before advising the testator
The nature of land and the possible interests in it make it essential to check the exact extent of the testator’s claim to ownership by reference to the official copy entries and/or title deeds. Apart from knowing about the value of the property and any potential for claiming inheritance tax agricultural or business property relief, there are certain key questions about the title which must be considered before advice is offered on how the land should be dealt with in the will. These questions include (but may not be limited to) the following:
(a) Is the testator the sole legal and beneficial owner? A testator may hold the legal title as trustee for someone else. Is what the testator thinks is his property actually vested in a company, albeit one he controls (see, also, para 21.1.10)?
(b) Is the testator a co-owner and if so, with whom and are the beneficial interests owned as joint tenants or tenants in common? If the latter, what is the extent of the testator’s share, since it should not be assumed it is equal to that of the other co-owner(s)?
(c) Is the tenure freehold or leasehold?
(d) Does the testator have vacant possession or is the land subject to a lease or tenancy or right of occupation which would be binding on a successor?
(e) Is the land encumbered in any way and if subject to a mortgage or charge, how much is outstanding? Is any mortgage or charge on the property supported by any form of life or mortgage protection assurance to cover repayment of the debt? If so, does the policy pay out on the first death or that of the survivor if there is co-ownership?
Above all, it is vital to ascertain whether the testator has power to dispose of the land and if enquiries reveal the testator is an equitable joint tenant, it is important for the person taking instructions to advise on the need to
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sever a joint tenancy so there is an interest the will can dispose of. Failure to do so is likely to lead to liability in negligence to the disappointed beneficiary in the will. According to Carr-Glynn v Frearsons [1998] 4 All ER 225, it is necessary to go even further and advise on the possibility of serving a precautionary notice of severance if the testator is uncertain of the nature of the co-ownership and it is not possible to clarify the position quickly.
In the case of spouses and civil partners, it is important to consider whether the provision made by will makes ‘reasonable financial provision’ for the survivor. The court has power under the I(PFD)A 1975 to make an order redistributing the deceased’s estate (see para 2.2). The survivor is entitled to reasonable financial provision irrespective of whether or not it is required for maintenance. A life interest or other occupation right (see para 14.3.2) may not be regarded as reasonable (see Iqbal v Ahmed [2011] EWCA Civ 900, Berger v Berger [2013] EWCA Civ 1305).
14.2 Points relevant to all testamentary gifts of land
Typically, the family home represents a major asset in most estates and is probably the asset carrying most value. Whilst in many wills it may not need to be dealt with as a separate gift because the whole estate is being given to one person or a class of people, in others it may be the subject of specific provision. Exactly what type of provision will depend on the circumstances and this is considered at para 14.3, but all gifts of land, and particularly the family home, share some common features.
14.2.1 Description
As with any specific gift it is important to describe the property with sufficient certainty. In the case of residential property, the full postal address usually suffices supported by the registered title number (though by no means essential) if there is one. In the case of other property, again the property address and any title number should suffice but sometimes more might be needed. For example, the gift might be of agricultural land with an unregistered title but described in the title deeds by Ordnance Survey numbers and/or a statement of its area.
Whatever the nature of the property, there is no need to recite any rights, covenants and the like which may be mentioned on the title documents since these will pass with the property in any event. Similarly, there is no need to say a property is subject to an existing tenancy because it will be in any event.
14.2.2 Ademption
A specific gift fails by ademption if the subject matter is no longer part of the estate at death (see para 8.3).
A specific gift of land is at risk from ademption, whether it is the family home or an investment property, due to the likelihood of it being sold after the date of the will and replaced with a different property. Should this happen, the problem can obviously be dealt with by putting in place a codicil or making a new will which refers to the new acquisition but a better solution is to draft the initial gift in such a way that it is ademption proof.
The common way of doing this is to express the gift in the alternative.
A suitable form of wording is:
I give my freehold property Tall Trees, 56 Kings Drive, Addleton, Surrey or such property which is my principal private residence at the date of my death to …
Of course, the testator may own more than one property and spend periods of time in each during the year. Consequently, it is usual to add words to the effect that if there is more than one such residence, or doubt as to which is the principal one, the executors have the right to choose. If the testator has a residence outside the United Kingdom as well as one within, the will should make clear it is a gift of the UK residence if such is his intention.
Ademption of a specific gift will occur if the property is subject to a binding contract for sale at the date of death and this includes a compulsory acquisition under statute or an option that has been exercised. The testator may wish to include a provision entitling the beneficiary to the net proceeds of sale or compensation due to the estate. A testator can extend this to the case where the sale is completed before death but no replacement property is acquired which would otherwise have passed under an appropriately worded gift as in the example above. This can happen if an elderly testator moves into residential care and sells his home. It is possible to give the beneficiary a pecuniary legacy equivalent to the net proceeds of sale (as clearly defined) of the house. This can work satisfactorily if the death is shortly after the sale but with the passage of time the estate can be diminished, for example, through application to care fees, and so the beneficiary’s legacy may then be out of proportion to the rest of the death estate.
14.2.3 Charges, mortgages and life assurance
If a legacy is made of property charged in the testator’s lifetime with a mortgage or other debt, section 35 of the AEA 1925 provides that the
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property is taken by the beneficiary subject to the debt or charge unless there is evidence of a contrary intention. Consequently, a gift of a house which has an outstanding mortgage means that the beneficiary who takes the property, must do so subject to the burden of paying off the capital and any interest that is due. In practice, this...
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