Trusts and Property Transactions
Difficulties often arise when trusts enter into agreements for the purchase or sale of property. It is trite law that trustees must act jointly when acting on behalf of the trust and so we are often asked if all the trustees need to act on behalf of the trust, for example to sign the agreements, and, if not, whether the appointed delegated person needs to be a trustee of the transacting trust.
To answer these questions there are two factors that need to be considered. First, one must ascertain whether the trust deed authorises the delegation of power to another trustee or a third party; and then, if this delegation or authorisation has been properly and timeously effected.
If the trust deed does not allow the delegation, the enquiry ends because no resolution or other attempt to authorise the trustee or third party will be of any effect if it is in contradiction to the trust deed.
If the trust deed allows for the trustees to delegate the authority to act on behalf of the trust then a resolution authorising the representative must be in place and must be signed before the representative acts. The timing is of particular importance because unlike companies or close corporations, the authorisation of the representative cannot be ratified ex post facto and the agreement would be considered void if the requisite authority is not in place.
Lastly in terms of whether or not the representative must be a trustee, this will also depend on the trust deed. Provided that there is nothing in the trust deed requiring that the representative must be a trustee, a third party can also represent the trust if he or she is duly authorised by the trustees in terms of the necessary resolutions.
In short therefore trustees will still be considered to be acting jointly when a trustee, or even a third party, acts on behalf of a trust in a property transaction, to sign documents and do whatever else may be necessary. This is provided that the trust deed allows for this delegation and that the necessary resolutions are in place.
It is therefore imperative that the conveyancer scrutinises the trust deed as well as the resolutions in place to avoid a situation where someone without the necessary authority purports to act on behalf of the trust, and because of the lack of authority, causes the agreement to be void.
Written by: Nicholas Kassier- Associate
Reviewed by: Sifiso Msomi- Partner