PURCHASING IMMOVABLE PROPERTY IN THE NAME OF A TRUST

When considering purchasing immovable property in the name of a trust, one needs to be mindful of various legal requirements. This is besides the financial and taxation implications that also need to be carefully considered in making the decision, and which are not discussed in this article. This article is only concerned with trusts created in terms of a written trust deed and does not deal with oral/ verbal trusts.

Any written trust deed / instrument must first be submitted to the Master of the High Court for registration and for the letters of authority to be issued, appointing the trustees of the trust. The trustees of the registered trust may only act on behalf of the trust once the letters of authority are issued by the Master of the High Court.

The SCA in Thorpe and Others V Trittenwein and Another 2007 (2) SA 172 confirmed that the trustee/s who enter/s into a sale agreement on behalf of a trust must be duly authorised, prior to signing on behalf of the trust. This requires the trust to have been registered with the Master of the High Court, letters of authority to have been issued and a resolution of the trustees authorising signature to have been passed and signed.

A trust deed and the letters of authority usually appoints two or more trustees with the authority to act on behalf of the trust. If two or more trustees are appointed, the trustees can sign a resolution authorising one of the trustees to act on behalf of the other trustees for a specific task / duty, such as signing a sale agreement for the purchase of immovable property and to thereafter sign the transfer documents for the transfer of the immovable property. With specific regard to a trust purchasing an immovable property, the trustees’ resolution must be a dual authorisation, firstly, authorising the specific transaction, which must include a brief description of the immovable property, the seller and the purchase price, and secondly, appointing one or more of the trustees to act on behalf of the trust in respect of the conclusion of the transaction (i.e. the purchase).

Section 2(1) of the Alienation of Land Act, 68 of 1981 reads as follows:

“No alienation of land after the commencement of thissection shall,subject to the provisions of Section 28, be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority.” It is clear that a trustee acting on behalf of a trust must be appointed in terms of the trust deed and issued letters of authority and if acting on behalf of other trustees, authorised in terms of a resolution signed by all the trustees. This was also confirmed in Thorpe and Others V Trittenwein and Another, where the seller successfully argued that oral authority was not sufficient and that the signed sale agreement was void due to the non-compliance with Section 2(1) of the Alienation of Land Act.

In terms of the Trust Property Controls Act, 57 of 1988 a sale agreement signed by an unauthorised trustee cannot be ratified and is thus not valid and unenforceable.

Furthermore, it is important that special care is given when drafting the trust deed and setting out the powers of the trustees. If the trust deed does not provide the trustees with the power to purchase or sell immovable property or register a mortgage bond or stand surety or guarantor, the trustees will not be able to do so without first having the trust deed amended. Provided the trust deed is capable of amendment, this requires a deed of amendment to be filled with the Master of the High Court, signed by the founder, the trustees and where a benefit has already accrued, by the beneficiaries.

To summarise, it is important to ensure that when deciding on purchasing immovable property in the name of a trust, the trust is authorised to conclude the specific transaction and the trustee who will be signing the sale agreement is authorised to sign in terms of the trust deed, the letters of authority and a trustees’ resolution signed by all the trustees. The authority given to the trustee/s must exist at the time of the signing of the sale agreement, if not, the sale agreement will be void and unenforceable.

If you require any further information or assistance, please contact our office.