Can trustees decide to sell property?

When it comes to selling property held in trust, the process isn't always straightforward. As a trustee, you have specific legal obligations and responsibilities to consider before putting a property on the market. Let's explore everything you need to know about trustees' authority to sell property and what steps they need to take.

Can trustees decide to sell property?

Short answer? Yes, trustees can usually decide to sell property - but there are important conditions and considerations to keep in mind.

Understanding trustee authority

The legal authority of trustees to sell trust property primarily comes from two sources: the trust deed and trust law. The trust document typically outlines the specific powers granted to trustees, including whether they can sell trust assets. Before making any decisions about selling property, trustees must carefully review these documents to ensure they're acting within their remit.

Different types of trusts have different rules:

• Bare trust: In a bare trust, trustees must act according to the beneficiaries' wishes. If beneficiaries want to keep the property, trustees generally can't force a sale.

• Discretionary trust: Trustees of a discretionary trust often have more flexibility in deciding whether to sell trust property, but they must still act in the best interests of all beneficiaries.

• Irrevocable trust: These trusts typically have stricter rules about selling property, and trustees must carefully follow the terms set out in the trust deed.

Legal obligations when selling property

Trustees have several key responsibilities when considering selling property:

1. Acting in beneficiaries' best interests

Trustees must ensure that selling the property serves the beneficial interests of all parties. This might mean weighing factors like maintenance costs, potential rental income, and market value against the benefits of selling.

2. Getting proper valuations

Before selling trust property, trustees should obtain professional advice from estate agents to ensure they achieve market value. Selling below market value could mean the trustee breaches their duties.

3. Keeping beneficiaries informed

While trustees may have the authority to sell, it's good practice to keep beneficiaries informed of any decisions. This transparency can help prevent disputes and potential legal action later.

When can trustees decide to sell?

Trustees can generally decide to sell property when:

• The trust deed explicitly allows it
• It's necessary for trust administration
• The property's maintenance costs are unsustainable
• The sale would better serve the beneficiaries' interests
• Both trustees (if there are multiple) agree to the sale
• The title company confirms their authority to sell

Tax implications

Before proceeding with selling property, trustees should consider various tax implications:

• Capital Gains Tax may be payable on any profit from the sale
• Inheritance tax consequences might arise depending on the trust structure
• Professional advice from tax experts is often necessary to navigate these complexities

Potential challenges

Sometimes, selling trust property isn't straightforward. Common challenges include:

• Disagreements between trustees if there are multiple
• Opposition from beneficiaries
• Complex trust deed requirements
• Family members with emotional attachments to the property
• Difficulties establishing clear legal authority to sell

Working with professionals

Given the complexities involved, trustees often benefit from working with:

• Solicitors specialising in trust law
• Estate agents experienced in trust property sales
• Tax advisers who understand trust taxation
• Property valuers who can provide independent assessments

What if beneficiaries object?

While trustees may have the legal authority to sell property, they should carefully consider any objections from beneficiaries. If beneficiaries receive notice of a planned sale and disagree, they might:

• Request a meeting to discuss alternatives
• Seek their own professional advice
• Challenge the decision if they believe the trustee breaches their duties
• Take legal action if they believe the sale isn't in their best interests

Pre-sale improvements: Should trustees renovate?

An important consideration that trustees often face is whether to invest in property improvements before selling. This decision requires careful balance, as any money spent on renovations comes from trust assets and must be justified.

When considering improvements, trustees should evaluate:

1. Essential repairs

Sometimes properties held in trust have been neglected, especially if they've been vacant. Trustees must address any structural issues, damp problems, or safety concerns before sale. Failing to fix these could result in lower offers or difficulty selling.

2. Cost vs value analysis

Not all improvements will increase the property's value enough to justify their cost. Trustees should focus on changes that offer the best return on investment. For example, a fresh coat of paint might be worthwhile, but a complete kitchen renovation might not recoup its costs.

3. Local market expectations

Understanding what buyers in the area expect is crucial. If most similar properties have modern bathrooms and your trust property's bathroom is dated, this improvement might be necessary to achieve market value. However, installing high-end features in an area where they're uncommon might not be a wise use of trust assets.

4. Timing considerations

Major renovations can delay the sale process significantly. Trustees need to weigh whether the potential increase in value justifies the extra time the property will be held in trust, especially considering ongoing maintenance costs and market conditions.

Remember, any decisions about property improvements must still align with the trustee's duty to act in the beneficiaries' best interests. It's often worth consulting with local estate agents about which improvements would most impact the property's saleability and value.

Summary: Proceed with caution

While trustees can decide to sell property, they must ensure they're acting within their legal authority and fulfilling their duties to beneficiaries. The key is to:

1. Check the trust deed carefully
2. Get professional advice when needed
3. Keep detailed records of decisions and reasoning
4. Maintain open communication with beneficiaries
5. Ensure the sale achieves market value
6. Consider all tax implications

By following these guidelines, trustees can make informed decisions about selling trust property while fulfilling their legal obligations and protecting the interests of all parties involved.

Looking to sell a property? Whether you're a trustee or not, getting an accurate valuation is crucial. Try our Online Valuation Tool for an instant estimate of your property's worth.