Club Property Problems
29 July 2024
- Unincorporated associations (which include clubs and associations) are extremely varied and range from barristers’ chambers, which are commercial in nature, to party political associations and working mens clubs, which are directed towards improving the lives of their members and the larger community. No specific statute applies to unincorporated associations. The general law of trusts and property does.
- Under English law a trust for a (non-charitable) purpose is void under the Rule Against Perpetuities. In particular, party-political purposes are not charitable. As a result, any gift of land or any other asset to an unincorporated association has to be made to (and will be construed by the Court as having been made to) the members for the time being of that unincorporated association and subject to its rules (see Re Recher’s Will Trusts [1972] Ch 526). Land has to be held by up to four trustees upon such trusts. The rules of an unincorporated association may restrict the right of members to occupy or make use of specific parts of the premises held on trust for them (such as separate changing rooms), but it would be very rare for such rules to restrict entirely the right of a member to use the premises. Accordingly, each member of an unincorporated association has a largely unrestricted right to occupy and make use of the premises of that unincorporated association.
- This article deals with five practical issues affecting the ownership of club property, being as follows:
1) Issues relating to joining and leaving
2) Alienation
3) Adverse possession
4) Missing or deceased trustees
5) Missing conveyances
1) Issues relating to joining and leaving - The fact that the premises are held upon trust for the members of the unincorporated association for the time being means that (unless the rules state otherwise) no introduction payment is made when a member joins and no exit payment is made on departure. No document has to executed in either case. Beneficial ownership is tied to the list of members. The adequacy is such a list is a problem for many clubs especially where the rules provide for automatic cessation of membership on non-payment of subscriptions.
- An unincorporated association may decide that its premises should be held in a different way. This could be by way of a separate trust or a company. In either case, the decision has to be made as to whether each member of the unincorporated association is to have an equal interest in the separate trust or an equal shareholding in the company or whether there should be fixed interests in the separate trust and set shares in the company. Fixed interests and set shares may create an “us” and “them” problem particularly where senior members have beneficial interests in the separate trust or shares but junior members do not. However, tying beneficial interests in the separate trust or share ownership to membership of the unincorporated association also carries with it problems as it is necessary to acquire such interests on joining and sign away such interests on cessation of membership. In practical terms, this can be difficult. In many unincorporated associations it is often assumed that the beneficial interest in premises held on a separate trust or shares in a company holding the same will be relinquished on cessation of membership. However, if this assumption is not set out expressly in the rules (or in the trust deed or the articles of association), this may cause disputes if the premises have to be sold. The issue should not be considered retrospectively when this occurs. I dealt with a case some years ago (Faulkner v Bennett [2011] EWHC 3702) where it was necessary to obtain the approval of the Court to enable shares in a company incorporated to hold premises used by an unincorporated association to be expropriated on cessation of membership even where it was accepted that share ownership was tied to membership.
2) Alienation - Trustees of premises held upon trust for an unincorporated association often assume that they have a right to decide whether such premises are to be sold. This is not the case. Such trustees hold the premises upon trust for the members of the unincorporated association for the time being and subject to its rules. Invariably, rules provide that management is vested in the management committee and not the trustees. Accordingly, the trustees hold the premises at the direction of the management committee. In any event, as each member has a beneficial interest in the premises there is no power for the management committee, or the trustees or for a majority of the members to alienate the premises of the unincorporated association against the wishes of a “significant minority” of the members (see Ashton & Reid, Second Edition, paragraph 8.5; Murray v Johnstone (1896) 23 R 981). “Significant minority” is not defined as this is case law. Each member is allowed to vote and “significant minority” is tied to voting rather than membership. I have always taken the view that 10 per cent of voting members is a “significant minority”.
- As regards premises, “alienation” involves either a sale or the grant or a long lease or the grant of a tenancy subject to the provisions of Part II of the Landlord and Tenant Act 1954.
- As the trust is now a trust of land, the trustees could apply to the Court for a direction as to whether the premises ought to be alienated under section 14 of the Trusts of Land and Appointment of Trustees Act 1996. There is no suggestion that the principle described above does not apply. However, the trustees might be able to persuade the Court that an alienation ought to be made against the wishes of a “significant minority” of the members in exceptional circumstances. Such exceptional circumstances might arise if the premises became dangerous or impossible to maintain.
- Subject to the difficulty described above, the ability of the members of an unincorporated association to alienate premises is crucial because it prevents premises from becoming unused if not required. This is against the public interest and is the main reason for the Rule Against Perpetuities. Subject to any rules to the contrary, if the premises are alienated, the members can in theory merely divide the proceeds between them equally even if there is an underlying party political or moral purpose to the unincorporated association.
3) Adverse possession - As the members of an unincorporated association are entitled to occupy at least the majority of its premises (by reason of their beneficial interest), there can be no question of members claiming adverse possession as against the trustees. Claims for adverse possession of other land which is not within the “paper” title of the trustees are problematic because the membership fluctuates from year to year. It is the members who are in possession and not the trustees. It is also far from clear who would make a claim for adverse possession.
4) Missing or deceased trustees - Trustees of the premises of an unincorporated association are usually selected for long-service or status. In practical terms, this does not make sense because such persons are likely to die first or leave the area. As unincorporated associations continue to operate for decades without change, it is inevitable that situations will arise when some or all of the trustees have died or cannot be located.
- Section 44 of the Trustee Act 1925 gives the Court the power to vest the property of an unincorporated association in new trustees where the Court has appointed new trustees or when it is “uncertain” as to who the trustees are. In practice, the Court is reluctant to exercise this power where the same result can be obtained by other means. The identity of trustees cannot be uncertain merely because no efforts have been made to trace. Other means usually involve extensive research by the current officers or members of the unincorporated association. Where premises are conveyed to the unincorporated association (whether by gift or otherwise), it will usually be possible to identity the original trustees. There may be a minute which records this or articles in the local newspaper. The legal title is held on joint tenancy and survivorship applies. It will usually be possible (albeit difficult) to identify when each original trustee died and thereby identify the last original trustee to die or a surviving original trustee. The surviving trustee or (if dead) his or her personal representatives can use section 36 of the Trustee Act 1925 to appoint new trustees. If necessary, a chain of representation with grants of probate can be used. Where there is no such chain, it may be possible to persuade a relative of the last trustee to die to take out a grant of letters of administration or for a member of the unincorporated association to take out a limited grant (a grant de bonis non) merely in relation to the premises.
5) Missing conveyances - Compulsory registration of title commenced area by area in 1975 and only affected the whole country in 1990. Where premises are conveyed to the trustees of an unincorporated association, it would be rare for any necessary compulsory registration to be omitted. Even so, there are many situations where conveyances were made before 1990 and there has been no requirement to register since such time. Inevitably, pre-1990 conveyances are often lost particularly when the same are held by trustees who have died. More often than not, this problem is combined with the missing trustee problem described above.
- The position adopted by HM Land Registry on an application for first registration of premises held upon trust for an unincorporated association can be difficult to predict. It is necessary to provide evidence of the existence of the lost conveyance (whether by minutes or press articles or the like), and any documents necessary to perfect title but HM Land Registry is often overly concerned as to the possibility that there might be alternative claimants even where this is unlikely. A period of long-user by the unincorporated association might persuade HM Land Registry that potential alternative claims are to be ignored. If HM Land Registry is not prepared to grant first registration on the evidence tendered to it, it will be necessary to apply to the Court for a declaration that particular trustees hold the premises upon trust for the unincorporated association. HM Land Registry will then be obliged to give effect to such declaration.
