ACQUISTION OF IMMOVABLE PROPERTY IN THE NAME OF A TRUST
Where immovable property is being purchased, the purchaser/s has the option of transferring the property in the name of various entities, ie.
- In the name of the individual / personal capacity
- In the name of a Close Corporation
- In the name of a Company
- In the name of a Trust
Where a property is being purchased in the name of a Trust, the Trust Property Control Act regulates that a trustee cannot perform any act in his/her capacity as trustee until he/she has received Letters of Authority from the Master of the High Court authorising him/her to act on behalf of the trust.
The actions of a trustee acting on behalf of a trust prior to being authorised to do so are void. The unauthorised actions cannot be ratified by the trust after the fact. Therefore, when purchasing property on behalf of a trust, always be sure, amongst other things, that:
- The person signing the agreement of sale on behalf of the trust is authorised to do so in terms of the letters of authority issued by the Master of the High Court.
- The trust resolution signed by the trustees in compliance with the trust deed, authorising one of the trustees to purchase the property, is signed prior to that person signing the agreement of sale.
Often estate agents make the mistake by completing an offer to purchase in the individual’s names, where the parties’ aim is to register the property in the name of their family trust. As an agreement of sale becomes valid and binding upon final acceptance by the seller/s, an incorrect citing of the purchaser/s can have serious financial consequences for the purchaser/s.
Where parties sign an agreement of sale in a representative capacity, the agreement usually stipulates that whoever signs in a representative capacity, accepts personal liability in the event of transfer not being effected to the trust.
In effect it means that if a trust is not established at the signing of the agreement of sale, then the individual will be obliged to accept transfer of the property in his/her personal names and thereafter transfer the property into the name of the trust. In practice the purchaser/s will have to pay double transfer duty as well as attorneys’ costs.
With the above in mind, prospective buyers must be extremely careful when submitting an offer to purchase and where an estate agent is involved, ensure that proper instructions are given to the estate agent when completing the offer to purchase. For peace of mind, it is always in the purchaser’s interest to request the assistance of a property lawyer prior to submitting an offer to purchase.
Wietz Viljoen, WVA INC.
This article is for general information purposes and is aimed at advising the public. It should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.