Using trust instruments in real estate transactions

Transactions in real estate are conducted through a number of channels and one of such channels is the trust which  is an arrangement where a third party (the trustee) holds assets (property) on behalf of one or more beneficiaries.

Trusts are not new to the real estate scene and have been in place for many centuries.  They have been used as a method for protecting title to real estate and giving the investor and his/her assets an additional layer of security.

For example, there are some real estate transactions which allow buyers  to meet the payment terms by installments and when payments are made in phases, the owner of the property may not be comfortable to release the title document until payment is finished.

In the same vein, a buyer may not also be comfortable releasing his money by installments when the title document will still be with the owner of the property. In this situation, what does a buyer do?

Akinwumi Oni, Head of Trust Services/Legal at STL Trustees Limited (STL), says one solution is to have the services of a trustee to hold the title document in trust on behalf of both parties until the final payment is made.

“It may be that you want to enter into a joint venture agreement with a financier in developing a real estate asset or you have more than one financier. In all these situations, the services of a trustee would help hold the title documents in trust and also ensure that the terms you entered into in the joint venture are upheld. This gives comfort to all parties to the transaction and helps ensure that they all play their roles as expected under the agreement”, he informs.

His advice to clients who have properties but don’t have the means to develop them is to consult a trustee that will hold these assets and enable financiers partner with the owner of  these assets. It can even be a family property that the beneficiaries do not have the fund to develop.

Instead of just allowing the property to continue to lie fallow, he encourages them to go into a joint venture agreement with a financier, while a trustee holds the property documents in trust for all the parties involved. “At the end of the day, you realise that it is a win-win situation because you have the property developed which will definitely be of some benefit to you”, he assures.

Continuing, he advises that “for you to fully comprehend the benefits and nuances related to a real estate trust, it is essential that you visit a corporate trustee who has the experience and expertise in real estate and general trust administration”.