Section 14 TOLATA: When Can the Court Order a Sale?
Disputes about jointly owned property are common. One co-owner may want to sell; another may want to remain. One beneficiary may wish to buy out the others; another may insist on an open market sale. Where the property is held on a trust of land, the court’s powers are found principally in section 14 of the Trusts of Land and Appointment of Trustees Act 1996, usually known as TOLATA.
Section 14 allows a trustee of land, or any person with an interest in property subject to a trust of land, to apply to the court for relief. The court may then make an order relating to the exercise by the trustees of their functions, or declare the nature or extent of a person’s interest in the property. In practical terms, this often means that the court is asked to decide whether a property should be sold, whether sale should be postponed, who should conduct the sale, or what beneficial shares the parties have.
The jurisdiction is broad, but it is not unlimited. The court can make orders concerning the trustees’ functions. Trustees have a power of sale, so the court may direct how that power is to be exercised. However, the court cannot simply order one beneficiary to sell his or her beneficial interest to another. That would not be an exercise of the trustees’ powers over the land; it would be a direct transfer of a beneficiary’s separate interest.
This distinction was central in Bagum v Hafiz. The property was held by family members. One beneficiary wanted the property sold on the open market. Another wished to buy it. The judge ordered that one beneficiary should have the first opportunity to purchase the property at a price determined by the court. If that purchase was not completed within six weeks, the property would then be sold on the open market, with liberty for all parties to bid.
The Court of Appeal upheld that order. It accepted that the court had no jurisdiction to order one beneficiary to sell his interest directly to another. However, that was not what the order did. Properly analysed, it was an order for sale of the trust property. The fact that the sale might produce the same economic result as one beneficiary buying out another did not take it outside the court’s powers. A sale to a beneficiary is still a sale by the trustees.
Bagum is therefore important because it shows the flexibility of section 14. The court is not confined to a simple choice between “sell on the open market” and “do not sell”. It may approve a structured sale process, including giving one beneficiary the first chance to buy the property at a court-determined valuation, before resorting to the open market.
That flexibility is reinforced by section 15. When deciding what order to make, the court must consider a range of factors, including the intentions of the person or persons who created the trust, the purposes for which the property is held, the welfare of any minor occupying or expected to occupy the property as a home, and the interests of any secured creditor of a beneficiary. The court must also have regard to the circumstances and wishes of the adult beneficiaries entitled to an interest in possession, although their wishes are not decisive.
In Bagum, the Court of Appeal emphasised that section 14 gives the court a very wide discretion. If Parliament had intended the court always to be bound by a requirement to obtain the best possible price, one might have expected that requirement to appear expressly in section 15. It does not. That does not mean price is irrelevant. Plainly, it will often be very important. But it is one discretionary factor among others.
The risk of undervalue is usually central where the property is to be sold at a valuation rather than exposed to the market. In Bagum, that risk was considered low because the property was one of a number of similar properties in the same area, meaning that there were likely to be good comparables. The court was entitled to conclude that a valuation would be sufficiently reliable.
The later decision in Kingsley v Kingsley clarified that this does not create a formal “valuation threshold”. The applicant does not need to prove, as a condition of jurisdiction, that the risk of undervalue is low. Rather, valuation risk is part of the overall discretionary assessment. The court will ask whether, in all the circumstances, a court-assessed value is a fair and appropriate mechanism.
Kingsley also rejected the argument that such an order necessarily infringes property rights under Article 1 of Protocol 1 to the European Convention on Human Rights. Where the beneficiary receives value determined by the court through a proper and fair process, there is no unlawful deprivation of property merely because the sale process does not involve open market bidding.
The practical lesson is that section 14 TOLATA gives the court a powerful but carefully bounded jurisdiction. It cannot rewrite beneficial interests or compel a direct transfer between beneficiaries. But it can direct the trustees’ power of sale in a way that is commercially and practically sensible. In the right case, that may include giving one beneficiary a first opportunity to buy the trust property before any open market sale.
For parties in co-ownership disputes, the real question is therefore not simply whether the court can order a sale. It can. The more important question is what form of sale best reflects the trust’s purpose, the parties’ interests, the evidence of value, and the justice of the case.
