Can you trust your trust?
In this issue
- Trusts over real estate are used and created in a variety of commercial transactions, tax planning and other scenarios.
- But ensuring these are documented and signed correctly is crucial.
- Failure to do so may lead to you having no entitlement to the underlying property and other hidden consequences.
About the author
Stephan Smoktunowicz is a banking & finance partner at the London office of the international law firm, gunnercooke. He helps businesses & people in the UK and across the world to achieve their commercial objectives and safely navigate issues that arise throughout any transaction lifecycle. He also provides training and mentoring to businesses, professionals and students on related topics.
Introduction
Trusts over real estate might be used in a number of scenarios, for example:
- tax and estate planning;
- property unit trusts; and
- joint venture type arrangements.
A trust, the rights of the beneficiaries under that trust and the responsibility of the trustees might relate to just the ‘physical’ property itself, or alternatively or additionally, to an underlying interest in that property (for example, the right to rental proceeds).
Either way, when documenting or ‘declaring’ the creation of a trust over land or an interest in land, there are strict legal requirements for how you go about that under English law.
Recent appeal court guidance
In the September 2025 English Court of Appeal judgment of National Iranian Oil Company and another v Crescent Gas Corporation Ltd [2025] EWCA 1211, the Court of Appeal has confirmed that under English law, a trust over land or an interest in land which is declared in writing cannot be done through an agent of the person or entity who wishes to declare that trust. i.e. it is the underlying person or entity (the Settlor) who has to do this themselves and they cannot get a separate agent to sign up to this on the Settlor’s behalf.
Therefore, when declaring the trust, the Settlor needs to observe any relevant statutory requirements on how it should sign or execute documents, for example, the Companies Act 2006 execution of documents requirements for English companies.
The importance of statutory requirements
Following the statutory requirements is important to:
- provide evidence of a clear intention to declare the trust;
- minimise fraud risk; and
- minimise the risk of future litigation which questions the existence of the trust.
Making sure that you have access to the signed document which declares the trust will also be important from an evidential perspective in the event of any future dispute or query regarding the trust’s existence.
Where to consider treading with extra care
Particular care should be taken where a trust is being created and the proposed trust property relates to:
- a general partnership or limited partnership (as the underlying property may not necessarily be held/owned by all partners and in some cases may be held/owned by nominees, managers or other persons); or
- an overseas entity.
In any event, always consider who the Settlor is before finalising documents containing trusts, as this will ultimately drive who needs to sign.
Why you may need to re-check trust arrangements once you think they are in place
If you think that you have created a trust, or are the beneficiary under a trust, there may be future circumstances in which you may wish to deal with the underlying trust property (whether that be the physical property itself, or an interest in it). For example, a future disposal to another person, or granting a charge or debenture in support of a loan made by a bank.
In doing so, you may be asked to provide representations and/or warranties to a party you are dealing with in relation to the trust property. For example, confirmation that you are the beneficial owner of the underlying property that you are dealing with.
However, it is important that any such representations and warranties are not ‘rubber stamped’ or given blindly without first checking that there were no irregularities around how the trust came into existence.
If it turns out that the trust documents were signed in a way that was not compliant with statutory requirements and there is no other sufficient evidence which demonstrates that a trust was correctly declared, this could result in challenges regarding who owns the ‘trust property’, transactions involving the trust property being unwound and unanticipated material liability being incurred as a consequence.
Key takeaway
Documenting a trust is not a straightforward exercise and there are dangers and risks for the unwary.
When considering putting a trust in place (whether as Settlor or beneficiary) or dealing with property which you think is or may be subject to a trust, always consider taking appropriate legal advice to ensure that you have robust arrangements in place.
NEED HELP OR ADVICE?
GET IN TOUCH
If you need any help or advice in relation to the matters discussed in this article or any other banking and finance law related matters, please do not hesitate to contact Stephan by email at stephan.smoktunowicz@gunnercooke.com.
You can also find out more about Stephan’s practice and experience here and connect with him on Linkedin here.
Important:
This article is for information purposes and contains personal views only – it does not constitute legal or professional advice, nor may it be read, taken or relied upon as such.
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