If your Trust is buying or selling immovable property, extra care must be taken with the drafting of the agreement of sale to ensure it is a binding and valid agreement.

Here are some of the points to be considered for the agreement to be valid:

Authority of Trustees

Trustees may only enter into a sale agreement for the purpose of buying or selling property on behalf of a Trust once they have been duly appointed by the Master of the High Court. In terms of the Trust Property Control Act, any person who has been appointed to act as a Trustee may only act in that capacity once he or she has been authorised to do so, by the Master, in writing. The Master issues a Letter of Authority [‘LOA’] which reflects the names of all trustees in compliance with this provision.  A conveyancer must obtain a copy of the most recent LOA in order to verify both the names of the duly appointed Trustees and the fact that they have been duly authorised by the Master to act as Trustees.  SO: if an Offer to Purchase or Deed of Sale is signed by a Trustee prior to the date of issue of this LOA by the Master, the agreement will be void and unenforceable.

Powers of Trustees

  • Buy or Sell: The Trustees must have the relevant power to buy or sell property on behalf of the Trust. The powers of the Trustees will be found in the Deed of Trust, or in the case of a testamentary trust, in the will of the deceased. This Deed of Trust is signed by the first Trustees when the trust is formed and the Trustees are limited to the powers which are set out in it. A conveyancer must request a copy of the Deed of Trust to ascertain if the Trustee who signed the agreement had the relevant power to do so. If the Deed of Trust does not provide the Trustee with this power to buy or sell, the conveyancer will not be able to proceed with the transfer as, in terms of the Deeds Registry Act, a Conveyancer must investigate and certify that the Trustee had the relevant power to buy or sell the property.
  • Borrow Money: If the Trust requires a mortgage bond to secure the purchase price, the Deed of Trust must provide the Trustees with the relevant power to mortgage Trust property.

Decisions of Trustees

The Deed of Trust also sets out how decisions are to be taken by the Trustees. A Trust Deed may require that all decisions pertaining to the buying or selling of property must be made unanimously. In this instance, if only 2 of the 3 Trustees then in office, signed an offer to purchase a property, the agreement will not be binding on the Trust and the sale will be unenforceable. A Conveyancer must examine the Deed of Trust to ensure that the provisions of the Deed of Trust were strictly complied with.

Authority to Sign on behalf of the Trust

If the Trustees nominate one of the Trustees to sign the Deed of Sale and related transfer documents required to pass transfer of the property, the signatory must be authorised to do so by a Resolution which must be signed by all the Trustees prior to the date of signature of the Deed of Sale and transfer documents.

Clearly, the buying or selling of property by a Trust is a tricky business so it is best to seek professional advice from a Trust attorney and Conveyancer when doing so.

Contributor: Hayley Pillay
Director: Conveyancing & Estate Planning

Email: Hayley@pgpslaw.co.za