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A trust can last a long time, often at least five or six generations. Charitable trusts are not subject to rules against existing in perpetuity and may last significantly longer. Throughout the lifetime of a trust therefore there will almost certainly be changes in the makeup of the trustees as existing ones retire and new ones are appointed.
As a trust is not a legal entity in its own right, unlike for example a limited company, any assets held by the trust must be in the names of the individual trustees. A change to those trustees means a certain amount of administration must take place as all assets are transferred into the names of the new trustees. Often, land and buildings are overlooked in this process; however, as they are potentially one of more valuable assets a charity can own, it is vital that the Land Register is kept up to date with the names of the current trustees.
Normally, the transfer of registered land, after a change in trustees, involves the execution of a transfer deed (in the form of a Land Registry form TR1) by the old trustees and the new trustees, following which an application is made to the Land Registry to change the register. This attracts a fee of between £50 and £260, depending on the value of the land.
There is however an easier and cheaper way to update the Land Register following a change of trustees. Section 40 of the Trustee Act 1925 enables trustees to vest legal title to land in the new trustees by way of a deed of retirement and/or appointment.
In addition, under section 83 of the Charities Act 1993 charities can also add or remove trustees by resolution of a meeting of the charity trustees, members or other persons (as appropriate, according to the terms under which the charity was established). To be effective to transfer land, the resolution must be executed as a deed by the person presiding at the meeting or in some other manner directed by the meeting, and be witnessed by two people.
In both of these cases, no formal transfer deed is required and the application to the Land Registry to update the register attracts a fixed fee of £50. Where a charity owns several buildings or plots of land, or where there are changes to the trustees on a regular basis, significant sums may be saved for charitable activities by using either of the above methods of transfer.
Finally, if the land owned by the charity is currently unregistered, a change of trustees will now trigger first registration of the land at the Land Registry. This attracts a fee of between £50 and £920 depending on the value of the land, although this can be reduced by 25% if registration is undertaken voluntarily; so if the trustees are aware that there will soon be a change of trustees, any unregistered land they own should be registered before the change.
Compliance and administration costs are a fact of life, however with forward planning these can be minimised, freeing up valuable cash at a time when the charitable sector is facing reduced income.
For advice on setting up or administering charitable trusts contact Iain Aitken.
A person who administers an estate is known either as an executor or administrator. An executor is appointed in a Will; if there is no Will then an administrator must be appointed by the Court.
Following on from my previous blog regarding the risk in the property passing to the buyer on exchange, the question arose (thanks to one inquisitive reader) whether when the risk in the property passes to the buyer on exchange, does the buyer then have an insurable interest in the property from exchange and therefore have the ability to be able to insure the property?
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