The importance of a well drafted trust in the context of the family home

Charlotte Mandy

Article by Charlotte Mandy, Solicitor, Private Client department

In the recent case of Gandesha (2) v Gandesha (4) [2020] EWHC 1743 (QB)  the High Court ruled that the exercise of its discretion to order a sale of the property under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 (TLATA 1996) depended on whether the secondary purpose of the trust was still capable of being fulfilled.

The case concerned a 14 bedroom urban property valued at £1.9 million. The house was acquired by five bothers and was owned in equal shares under the terms of a trust deed. The Court established that this was the primary purposes of the trust.

The trust was entered into by the Gandesha brothers years after they acquired the house and stated that it had been bought as a home for themselves and their families. This was the secondary purpose of the trust. Crucially, the trust included a declaration that, save by unanimous agreement between all surviving brothers, the property could not be sold whilst any of them remained alive.

However, due to a serious breakdown in personal relations, the two youngest brothers chose to move out.

With a view to realising their shares in the property, they sought an order requiring its sale. However, their application was successfully resisted by their two surviving brothers and the heirs of the deceased fifth brother, who relied on the terms of the deed.

In allowing the youngest brothers’ appeal against that outcome, the Court noted their testimony that the rift within the family was ‘irreconcilable’ and that they could never envisage returning to the property. On that basis, one of the purposes of the trust – to provide a home for all surviving brothers and their families – could no longer be achieved. The express prohibition on sale of the property without the unanimous consent of all the surviving brothers was not intended to apply to a situation where relations within the family had irretrievably broken down. The Court had to consider whether it would have been unjust and inequitable to give effect to the primary purpose of the trust, given that the secondary purpose was now incapable of being fulfilled.

The Court acknowledged that an enforced sale of the property was bound to disrupt the lives of the defendants, some of them elderly, who had called it home for many years. There was, however, nothing unjust or inequitable about such an outcome, which offered the prospect of a clean break and which would reduce the risk of further litigation.

The Court ordered the property’s sale under Section 14 of the Trusts of Land and Appointment of Trustees Act 1996. It directed, however, that the defendants be afforded a reasonable opportunity to buy out the youngest brothers’ shares prior to the house being placed on the open market.

This case demonstrates the importance of a carefully prepared trust and highlights some of the issues that can arise years after a trust is created.

For more information on trusts, please click here. To discuss trusts in detail or for further information on this particular case, feel free to email me or contact me on 020 8305 4231.