Form B restriction will it affect my ability to remortgage?

by Readers Question

8:38 AM, 16th February 2016
About 3 years ago

Form B restriction will it affect my ability to remortgage?

Make Text Bigger
Form B restriction will it affect my ability to remortgage?

First off hi to everyone on this forum. I have been reading on this forum for a long time but I now have a question.from bb

I have a BTL property which has a form B restriction on registered at land registry. What I need to know is will this affect my ability to re – mortgage ?

Philip

Editors Note:

From Gov.uk >> https://www.gov.uk/government/publications/private-trusts-of-land/practice-guide-24-private-trusts-of-land

“The Form B restriction: where the trustees’ powers are limited

2.2.1 Its purpose and wording

The wording of this restriction is as follows (Form B, Schedule 4 of the Land Registration Rules 2003).

“No disposition [or specify details] by the proprietors of the registered estate is to be registered unless one or more of them makes a statutory declaration or statement of truth, or their conveyancer gives a certificate, that the disposition [or specify details] is in accordance with [specify the disposition creating the trust] or some variation thereof referred to in the declaration, statement or certificate.”

The general rule is that, for the purpose of exercising their functions as trustees, trustees of land have all the powers of an absolute owner (section 6(1) of the Trusts of Land and Appointment of Trustees Act 1996). However, under section 8 of the Trusts of Land and Appointment of Trustees Act 1996, a disposition creating a trust of land can contain provisions limiting the trustees’ powers. Any such limitation needs to be reflected by a restriction in the register in order to protect the rights of the beneficiaries. In the absence of a restriction, a purchaser of a registered estate from the trustees will not need to check whether any necessary consent has been obtained, or that any limitation on the trustees’ powers of disposition has been complied with. The purchaser’s title cannot be questioned even if the trustees exceeded their powers in making the disposition (section 26 of the Land Registration Act 2002).

2.2.2 When trustees must apply for a Form B restriction

Trustees must apply for a Form B restriction in the following circumstances (rule 94(4) and (5) of the Land Registration Rules 2003).

  • In respect of a registered estate, when a declaration of trust imposes limitations on the powers of the trustees under section 8 of the Trusts of Land and Appointment of Trustees Act 1996.
  • Also in respect of a registered estate, when a change in the trusts on which it is held imposes limitations on the powers of the trustees under section 8 of Trusts of Land and Appointment of Trustees Act 1996.
  • On an application for first registration of a legal estate held on a trust of land, when the powers of the trustees are limited by section 8 of the Trusts of Land and Appointment of Trustees Act 1996.

This applies not only when the legal estate is held by trustees, but also when it is held by the personal representative of a sole or last surviving trustee (rule 94(7) of the Land Registration Rules 2003).

An application by one of two or more trustees satisfies the requirement to apply (rule 94(9) of the Land Registration Rules 2003), although such an application should be made as an application by a person with sufficient interest in the making of the entry (rule 92 of the Land Registration Rules 2003) and be accompanied by evidence of that interest.

Where a Form A restriction is required (see Form A: the joint proprietorship restriction), it will be needed as well as the Form B restriction.

2.2.3 When a beneficiary may apply for a Form B restriction

Where a registered estate is held on a trust of land, and the powers of the trustees are limited by section 8 of the Trusts of Land and Appointment of Trustees Act 1996, any person interested in the estate can apply for a Form B restriction (under section 43(1)(c) of the Land Registration Act 2002 and rule 93(c) of the Land Registration Rules 2003). Unless the consent of the registered proprietors accompanies the application, the registrar will have to serve notice of the application on them (the application will be a notifiable one under section 45 of the Land Registration Act 2002). The notice will give them 15 business days in which to object (rule 92(9) of the Land Registration Rules 2003).

2.2.4 Wording which should be used for a Form B restriction

In many cases, the limitation on the trustees’ powers will not apply to all dispositions, but only those of a certain kind. In such cases, the word ‘disposition’ may be replaced with ‘transfer’, ‘lease’ or ‘charge’. It should not however be replaced with a more complex provision, for example ‘lease for a term of more than 21 years’ (rule 91A(8) of the Land Registration Rules 2003). You should not specify the nature of the consents required, or any similarly complex provision in the restriction. The restriction contains the qualifying words “unless one or more of them makes a statutory declaration or statement of truth, or their conveyancer gives a certificate, that the disposition [or specify type of disposition] is in accordance with…”. The purpose of this is to allow the restriction to reflect the terms of the disposition creating the trust without requiring the registrar to consider those terms or whether they have been complied with. The normal way of complying with the restriction will be to supply a certificate by the proprietors’ conveyancer. A statutory declaration or statement of truth will only be needed if the conveyancer is unwilling to give a certificate for any reason or if no conveyancer is acting.”



Comments

Neil Patterson

8:41 AM, 16th February 2016
About 3 years ago

Hi Philip and Welcome 🙂

I will ask one of our IFA's for you.

Howard Reuben CeMap CeRER

10:16 AM, 16th February 2016
About 3 years ago

My (non legal basis, i.e I am a financial adviser not a legal adviser and so all of the following is to be substantiated by legal advisers and my comments below are suggestions and not to be taken as formal advice) understanding is that if a trust is declared, then the applicants will have to INITIALLY apply for a restriction using Form A, BUT if the trust contains limitations on the trustee’s powers, then the applicants must also apply for a restriction in Form B.

And therein lies the potential issue for any mortgage applications. This is because Form B is not held on it's own, it is part of the initial Form A structure and once the Form A restriction has been entered, then the land / legal estate cannot be sold or charged if there is only one sole registered proprietor. However, the one sole registrant may be able to effectively charge the legal estate held in the trust, if another trustee is also appointed to act concurrently. But, since that is not a charge on the land, it will not be registered and cannot be noted.

It is a complex area and one that cannot be adequately summarised here

As I say, I am not a legal adviser and the above is my layman's understanding. To obtain full clarification, a trust expert legal adviser should be consulted to confirm if such an estate could be used as suitable security for mortgage purposes.

In the meantime .... I will ask a few lenders for their thoughts too! 🙂

Mandy Thomson

19:45 PM, 16th February 2016
About 3 years ago

I ran this passed a former member of Land Registry staff, who says:

"Not a restriction I'm familiar with but wording suggests a remortgage will be caught by it. They need to take this up direct with Land Registry."

I suggest contacting Land Registry General Enquiries who should be able to answer this: http://landregistry.custhelp.com/app/contactus_general/

Philip Cooper

17:02 PM, 17th February 2016
About 3 years ago

Thank you for you comments and the time you took to reply . I contacted land registry and this was there reply.

Dear Sir,
Thank you for your e-mail of 16/2/2016.
We cannot comment on how a Form B restriction would affect a re-mortgage application from the lenders point of view
Please see Practice Guide 24 - private trusts of land and specifically the wording of the form B restriction 2.2
You may wish to seek legal advice before placing the Form B restriction in the register.
Yours faithfully,
Debra Howe
Durham CCC2

Unfortunately I still do not have answer.

If I have a trust deed and it has 2 trustees and the trustees hold legal title of the property can it still be held legally in trust without placing a restriction on property ?

Thanks

Howard Reuben CeMap CeRER

17:26 PM, 17th February 2016
About 3 years ago

Reply to the comment left by "Philip Cooper" at "17/02/2016 - 17:02":

Philip, I said above "To obtain full clarification, a trust expert legal adviser should be consulted" and you state that the LR have said "You may wish to seek legal advice before placing the Form B restriction in the register."

In summary, have a chat with a property trust-expert solicitor and I am sure you will secure the answers you are looking for.

Philip Cooper

19:39 PM, 17th February 2016
About 3 years ago

I have got in contact with two trust solicitors, when I know more I will post here incase anyone else may find the information helpful .


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Change to Universal Credit rent arrears payments

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More