Important aspects to remember should a trust acquire properties

In view of the fact that trustees cannot enter into agreements until they have been issued with Letters of Authority by the Master of the High Court, it should be noted that no person may enter into an agreement "on behalf of a trust to be formed". This is only possible in the case of companies and close corporations. With regards to a trust, the trust must already be in existence at the time the agreement is entered into. Any offer to purchase or agreement of sale signed by a trustee or trustees before they have been appointed in writing by the Master of the High Court (and a Letters of Authority has been issued) is void and unenforceable.

It is important to ascertain whether or not the trustees have the power to buy and sell property on behalf of the trust. The powers of the trustees are set out in the trust deed and the trustees are confined to the powers set out in this document. They have no powers wider than those provided in the trust deed.

In situations where the trust requires a mortgage bond, the power of the trustees to mortgage trust property must, as with the power to buy and sell property, be specifically provided for in the trust deed. The commercial bank granting the mortgage bond will require a copy of the trust deed as confirmation of this power. The bank will also usually require that an individual, or individuals, stand surety for the loan on behalf of the trust.

The trust deed also stipulates how the decisions of trustees are to be taken. For example, certain trust deeds require that all decisions of trustees be taken unanimously, while others only require that a majority of the trustees currently in office agree to a purchase or a sale by the trust. In a situation where the trust deed requires a unanimous decision of the trustees, for example, and only three of four trustees sign an agreement of sale to buy or sell a property owned by the trust, the agreement will not be binding on the trust and the sale itself will be unenforceable. The necessary resolution signed by the required trustees will be required for such transactions.

Trustees always have to ensure that the required number of trustees are in office as required in the trust deed, and that decisions are properly taken and documented (Thorpe v Trittenwein case of 2006). If the trust deed requires to at all times have two trustees in office, and one has resigned, any agreement authorised and signed by the remaining trustee only, will be void.

If only one trustee is going to sign the agreement of sale and/or the conveyancing documents required to give effect to the transfer of the property, he/she must be authorised to do so by a resolution which has been signed by all of the other trustees (Thorpe v Trittenwein case of 2006).

An asset register must be kept of each property acquired in a trust.

Any repairs, maintenance, insurance or other bills such as water and rates and taxes will be for the trust’s account. It is accepted practice that if the beneficiaries stay in the house for free, that they pay for these costs. Even if the beneficiaries do not pay rent, it is advisable to draft a rental contract stipulating these arrangements, in order to avoid having the trust labelled an alter ego trust (First National Bank v Britz case of 2011).

Ensure that the house insurance and the insurance on its contents is registered in the name of the trust and that the trust pays for that.