Robert Cartmell explores how to establish that a property is owned subject to a Trust and how to deal with the Trust appropriately on sale.
How to sell a property that is subject to a Trust restriction. The reasons why expert assistance is required to deal with Trust protections on property ownership, by Trust Management expert Robert Cartmell.
I, Robert Cartmell, have worked in estate planning and trust management work for over 25 years and there have been many instances where people have created trusts which are ‘dormant’ due to the fact that the Trust’s value is tied up within a property owned. This most usually applies where a trust is a Discretionary Trust or a Life Interest Trust and the general circumstances are such that the assets are vested in a named beneficiary (such as a widow(er)) who manage the assets or property day to day – and therefore the trust itself being largely dormant save for a restriction notice protecting a Trust interest in a loan advancement or life interest to such beneficiary.
When a sale of property takes place, the process is to seek a consent to the sale from the trustees of the Trust and that process can include a full removal of the restriction notice or indeed a removal and replacement of the notice to a new property purchased out of the proceeds of sale.
What does a Trust restriction notice look like on the Title Deeds?
Commonly, it will look like this (and in this case below, I am a named Trustee alongside the existing property owners and therefore my details are included):
RESTRICTION: No disposition of the registered estate by the proprietor of the registered estate is to be registered without a written consent signed by Robert Ian Cartmell of 25 North Row, Marble Arch, London W1K 6DJ.
The named persons are any remaining Trustees of the Trust (who are not already named as property owners on the Title Register)
If a property subject to a Trust restriction is to be sold, what is required to help the process and to ensure that the Trust’s interest is protected?
There are three usual processes on behalf of the Trust:
- Communication: holding a meeting or discussion with co-trustees;
- Evaluation: undertaking a due process along the lines as set out below and;
- Decision-Making: agreeing a course of action for the Trust
What is involved in evaluation?
Some of the matters to consider are:
- Understand the value of the Trust Fund being protected by the property restriction
- Noting who are the current legal owner(s) of the property
- Who are the beneficiaries of the Trust currently protected by the restriction?
- What is the reason for requiring consent or removal of the restriction; is the property being sold or is it a re-mortgage that is required?
- Is there a related purchase of property by the owner using the sale (and trust) proceeds? Can simply a new restriction for the Trust be created on the new property?
- What is the value of the new property? Is the value commensurate with the existing property?
- What are the wishes and instructions of other co-Trustees?
- Do the remainder beneficiaries know and consent to the removal or consent?
- What are the instructions contained in the Trust; particularly the Memorandum of Wishes or Supplemental Trust Deeds?
- Is there any other existing security for the loan or value of the Trust Fund? (this could be a restriction on another property for example)
- If not, are there any other assets on which security or restriction notices could be placed?
Once evaluation has happened, what are the options for the Trust(ees)?
- Consenting to a sale of property
- Consenting to a mortgage or re-mortgage.
- Retaining the existing restriction in favour of the Trust on the existing HMLR title.
- Consenting to removal of the restriction on condition that a new Equitable Charge restriction notice is placed on the new property purchased from the proceeds or other suitable property.
- Removal and agreement that no further Equitable Charge or restriction shall be entered and/or instead that a Deed of Promissory Note executed to replace the existing restriction and Equitable Charge.
In summary, the process can involve:
- A review of the Trust
- A discussion or meeting with any co-trustees and with relevant beneficiaries
- Completion of Minute of Decision covering all aspects
- Communications with any co-trustee on decision and subsequent documentation
- Assisting with preparation or execution of appropriate documentations
Consult with us at the earliest opportunity.
Make sure you prepare and plan to consult with the Trustees.
Consult with those persons as soon as possible and take advice from us and as soon as it is known that the property is to be sold.
We have seen cases where conveyancing solicitors dealing with the sale only contact the trustees at the point of exchange of contracts (i.e. at the last minute). In such circumstances, the sale can be delayed while the necessary steps are carried out.