8.2.3. When interests vest

Fragmentation of ownership 303

8.2.4. Alienation, management and control

When there are successive property interests in a thing, only the person with the absolute (i.e. unlimited in time) interest is entitled to the capital in the thing: the holder of an interest which is limited in time is entitled only to income/enjoyment type benefits. What these income/enjoyment type benefits are of course varies depending on the nature of the thing in question, whether it is a symphony, a piano, a sum of money or a piece of land. Whatever the nature of the thing, however, this immediately leads us into problems about alienation, management and control. Take alienation first. Each interest holder can of course deal independently with her own property interest in the thing (for example, sell or mortgage it or give it away), but none of them individually has the capacity to make an effective disposition of any greater interest in the thing (because of the nemo dat rule: see Chapter 10). If they do all want the whole thing sold (i.e. so that the buyer acquires absolute ownership) they are all going to have to act in concert – they must all get together, all agree the terms of the transaction, and all co-operate in the mechanics of carrying it out. This will be difficult enough when all interests in the thing are vested in people who exist (think of the holdout problems, and what you do if some of them are minors). When some interests are not yet vested, it will be impossible.

But alienation is not the only problem. What is to happen about management and control of the thing in which all these interests subsist? There would be advantages in giving practical charge of the thing to the person with the interest in possession, who has the present right of enjoyment, but there would be disadvantages too – it can put her in a very difficult position with serious conflicts of interest. Who is to ensure that she does indeed take only the income-type benefit and not consume any capital? And who is to ensure that the thing will continue to provide long-term income benefits for future interest holders, and that its capital value is preserved?

One way out of these difficulties is to use a trust. We look at this more closely below, but in essence it involves taking management and control out of the hands of the successive interest holders and giving them, together with absolute title to the thing, to a trustee (in practice, usually two trustees, for reasons considered below). The trustee then has the capacity to deal with the property as absolute owner, and also the power to manage and control it, but in all these matters he will be required to act in the interests of the successive interest holders, balancing their respective interests where they conflict. The use of a trust is in fact mandatory whenever an interest in land is divided into successive time slices (as for example when my aunt’s lease of her studio was given to me for my lifetime in the example above) and it is also usual where there are successive interests in money or in other things which are either fungible (consider why) or non-commercial (consider why), or where there are inchoate future interests, or interest holders who are minors (again,