SELLING YOUR HOME WHEN IT'S OWNED BY A TRUST
Most people understand that when a motor vehicle is sold, the owner of the car has to sign the sale papers. These days, the buyer also has to sign the sale papers. The same analogy applies to houses owned by a Trust. Vendors and Purchasers have to sign an Agreement for Sale and Purchase ("Agreement"). Unfortunately, this often doesn't occur and disastrous consequences can follow.
When your home is owned by a Trust, it's legal ownership is vested in the Trustees of the Trust. Those Trustees should be noted on the ownership papers of the home. It's common sense therefore, that the Trustees have to sign the Agreement - after all, they're the owners of the home! Common sense however, isn't always so commonly practiced.
In a recent case, a property was owned by a Trust which had two Trustees. We'll call these Trustees Y and Z. Both Trustees decided to sell the property. The property was marketed and went to auction but failed to sell. Subsequent to auction, an offer was put forward by a Purchaser. Y Trustee then signed the Agreement as Vendor. No consultation was made with Z Trustee. If fact, Z Trustee wasn't even aware of the Agreement. When Z Trustee did become aware of the existence of the Agreement, they refused to sign it on the basis it wasn't in the best interests of the Trust. Eventually, the whole matter ended up in Court.
The Court made a couple of valuable points which apply where a home owned by a Trust
is being sold:
An Agreement will only come into existence when all Trustees have signed it; and
All Trustees must sign the Agreement in order for the Agreement to be binding, unless there is power to the contrary contained in the Deed of Trust.
Prior to this case, I made the very same point in my book Family Trusts 101
. In that real life client example, the Trustees really suffered.
Applying this to your own Trust remember:
Always have all the Trustees of your Trust sign the Listing Agency Form with the Real Estate Agent when the house is placed on the market for sale;
Always ensure all the Trustees as Vendors sign the Agreement for Sale and Purchase;
Document the signing of the Listing Form and the Agreement for Sale and Purchase in Trustee Resolutions, having all Trustees sign and date these Resolutions.
If the Trust is purchasing a property, ensure all Trustees as the Purchaser sign the Agreement for Sale and Purchase together with appropriate Trustee Resolutions.
If you fail to do the above you run the risk of the sale or the purchase not being binding or the Trustee who was omitted at the time the decision was made, not consenting to the sale or the purchase. No one want's these types of headaches so an ounce of communication will be worth a pound of Court cure to you.
As always, if you have any questions or I can help you, email me at [email protected]
or call us on (09) 522 7955.