This section is from the book "Dart's Treatise On The Law And Practice Relating To Vendors And Purchasers Of Real Estate", by J. Henry Dart . Also available from Amazon: A treatise on the law and practice relating to vendors and purchasers of real estate.
The general rule has been that trustees should sell for a gross sum of money, unless any other consideration is specially authorised; for instance, a 6ale in consideration of a rent-charge (z) or annuity was formerly invalid (a); but a mortgagee, selling under a general power of sale, may allow a part of the purchase-money, of course not exceeding the amount due on the security, to remain on mortgage of the estate, provided that he debits himself in account with the mortgagor with the whole price, and the sale and mortgage are distinct transactions (b). Owners under the L. C. C. Act, whether owners in fee or under disability, may sell in consideration of an annual rent-charge (c).
As to the consideration: they must sell for gross sum.
Sect. 10 (2) of the T. Act, 1925, provides (in effect) that on a sale for an estate in fee simple or for a term having at least 500 years to run, by trustees or by a tenant for life or statutory owner, two thirds of the purchase-money may (in cases where the proceeds are liable to be invested) be left on mortgage of the land sold.
Sect. 39 of the S. L. Act, 1925, provides that, save as thereinafter provided, every sale shall be made for the best consideration in money that can reasonably be obtained; but a sale may be made in consideration wholly or partially of a perpetual rent, or a terminable rent consisting of principal and interest combined, to be secured upon the land sold. The rent reserved on any such sale shall the the best rent that can be reasonably obtained, regard being had to the circumstances of the case. The consideration on a sale to a company incorporated by special Act of Parliament may, with the consent of the tenant for life, consist, wholly or in part, of fully-paid securities of any description of the company (d).
Sales under S. L. Act, 1926.
(x) But see now s. 29 of the S. L. Act, 1925.
(y) T. Act, 1925, 8. 16 (2).
(z) Read v. Shaw, (1807) Sag. Pow. 8th ed. 953.
(a) Reid v. Shergold, (1805) 10 Ves. 381.
(b) Davey v. Durrant, (1857) 1 D. & J. 535; 26 L. J. Ch. 830; Thurlow v. Mackeson, (1868) L. R. 4 Q. B. 97; 38 I*. J. Q. B. 57; Bettyes v. Maynard, (1883) 31 W. R. 461.
(c) Ss. 1, 2.
Trustees should use all reasonable diligence, as if the estate were their own, to obtain a fair price (e); and, therefore, should ascertain its value, even at the expense of a valuation, where circumstances seem to render that course expedient (g); but they are not justified in agreeing to sell, at a price to be fixed by valuation, or in any other manner, as that would be delegating their power. The price, whatever means they may take of ascertaining what it ought to be, must eventually be determined by a free exercise of their own judgment. Trustees are not justified in entering into an agreement with an intending purchaser, giving him a future option to purchase at a fixed price (g). By the S. L. Act, 1925, however, a tenant for life may, either with or without consideration, grant by writing an option to purchase or take a lease of the settled land or any part thereof, at a price or rent fixed at the time of granting the option (h); every such option to be made exercisable within an agreed number of years not exceeding ten (i). And by s. 49 (2) of the S. L. Act, 1925, a sale of land may be made subject to a stipulation that any timber or other trees on the land sold or any fixtures 6hall be taken by the purchaser at a valuation. It is important to bear in mind that under s. 28 (1) of the L. P. Act, 1925, trustees for sale have the powers conferred by the S. L. Act, 1925, upon a tenant for life.
(d) Sub-s. (5).
(e) See L. C. C. Act, 1845, ss. 10, 11, as amended by the L. C. C. Acts Amend. Act, 1860; Ord v. Noel, (1820) 5 Mad. 438, 440; and see Mortlock v. Buller, (1804) 10 Ves. 309; Sug. 14th ed. 61; Harper v. Hayes, (1860) 2 D. F. & J. 542.
(f) See Campbell v. Walker, (1800) 5 Ves. 680; Conolly v. Parsons, 3Ves.p.627,n. (a).
(g) Clay v. Bufford, (1852) 5 De G. & S. 768; Oceanic Steam Navigation Co. v. Sutherberry, (1880) 16 Ch. D. 236; 50 L. J. Ch. 308; and see Johnson v. Clarke, 1928, Ch. p. 858.
(h) S. 51 (1). This is an enlargement of the power conferred by the S. L. Act, 1889, of inserting an option for purchase in a building lease.
Under the L. C. C. Act, 1845, statutory owners have no power to fix the price; this must be determined either by a jury, or arbitration, or valuation (k). Where a satisfactory title cannot be made, the company should go to a jury; and they then get a price fixed which binds the true owner, whoever he may be (l); unless the person contracting to sell to the company has no title at all, or a positively bad title (m). If, however, the land is being acquired by a Government Department or a local or public authority (mm), then under s. 1 of the Acquisition of Land, etc. Act, 1919, questions of disputed compensation or as to the apportionment of rent must be referred to one of the panel of official arbitrators; and by s. 9, where the land is so acquired at the value certified by the official arbitrator, the price is deemed to be the best that could reasonably be obtained.
Price under L. C. C. Act, 1845.
If a trustee offers property for sale by private contract, and there are rival bidders for it, he ought to promote competition between them; but he is under no obligation to recede from his acceptance of an offer, in order to entertain a higher bid (n). And as a general rule, fiduciary vendors, selling by auction, and using all proper precautions to effect an advantageous sale, incur no responsibility if the estate sells below its value; and Equity will help the purchaser in his bargain (o).
Competition, should promote.
(i) Sub-s. (2). (k) S. 9.
(l) Ss. 76, 77; Douglass v. L. & A. W. It. Co., (1857) 3 K. &. J. 173. (m) Wells v. Chelmsford Local Board, (1880) 15 Ch. D. 108; 49 L. J. Ch. 827.
(mm) For definition of " public authority," sec s. 12 (2). (n) See Harper v. Hayes, (1860) 2 D. F.& J. 542.
Where estates are vested in trustees in trust to sell at the request of the tenant for life of the proceeds it may be convenient for the tenant for life, who has the strongest motive for obtaining the highest possible price, to enter into a conditional contract of sale, and subsequently obtain the assent of the trustees, after they have satisfied themselves that the proposed purchase-money will be sufficient. And a trustee capriciously refusing to adopt a contract so entered into, has been fixed with the costs of a suit for removing him from the trust (p).
Contract by cestuis que trust.