Are split legal and beneficial ownership of real estate (i.e. trust structures) recognised

Real Estate (2nd edition)

Cayman Islands Small Flag Cayman Islands

Yes, although it is not possible to register the beneficial ownership of real property as the land registration system only records the ownership of the legal estate.

France Small Flag France

There exists a form of split of legal and beneficial ownership of real estate which could be compared to trust, named "fiducie". It consists in the owner of assets transferring the ownership of such assets to a trustee (fiduciaire) which shall hold them (in a specially created estate separated from his own estates) and use/operate them according to rules provided for in the trust agreement (contrat de fiducie) in the interest of the beneficiaries of the trust (fiducie). Fiducie shall be registered at the tax administration and, as applicable, at the land registry. It can be used as a management tool or as a security. Fiducie exists since more than 10 years now, but it is still expensive and regarded as quite complex. It is, therefore, rarely used except in specific contexts such as insolvency proceedings, successions, complex and risky developments or complex transactions.

Security agent under French law has also been entrusted by French law with fiduciary rights and obligations so that to enable it to take, hold and enforce security on behalf of secured parties. Such mechanism is nevertheless not commonly used at this stage due to lack of consistency with, in particular, French security law and practical issues.

Germany Small Flag Germany

Generally, trust structures are possible, but not commonly used in Germany, as strictly speaking, German law does not foresee beneficial ownership. An exception can be seen in the open-ended fund structure, where the KVG as legal owner holds the property on behalf of the fund, which does not have a legal personality.

A person dealing with the owner who is registered in the land register can generally assume and rely on it having unlimited power to dispose of the property, unless there is a restriction or other limiting entry in the land register.

Hong Kong Small Flag Hong Kong

Split legal and beneficial ownership of real estate (i.e. trust structures) are recognized in Hong Kong. Parties to a declaration of trust may file such declaration at the Land Registry.

Hungary Small Flag Hungary

  • are legal and beneficial interests capable of registration; and
  • is a third party able to deal with just the registered legal owner of real estate without having to enquire about any beneficial ownership?

Under Hungarian law the split of legal and beneficial ownership of a real estate (i.e. these types of trust structures) is not recognised.

The law recognises acquisition of a real property outside the framework of land registry, e.g. by way of succession, marital common property, building on extraneous land, etc. In such cases, the ownership title is created not as a result of the registration into the land registry, but by the underlying event (e.g. succession, construction). Such parties may claim that their ownership title be registered in the land registry. Acquisition under the legal title of sale and purchase may only be created by way of registration, within the framework of land registry.

The ownership title of those who acquired ownership on a “quid pro quo” basis and in good faith (trusting the authenticity of the land registry, the rights registered and facts recorded therein) enjoy in rem protection against the ownership claims of those who acquired ownership outside the land registry.

Spain Small Flag Spain

No, these kinds of structures are not recognised under Spanish law.

India Small Flag India

The split of legal and beneficial ownership of real estate (trust structures) are recognised and common in India. While a third party may be able to deal with the registered legal owner of real estate without having to enquire about any beneficial ownership, it is advisable to make enquiries to determine whether there are any restrictions on the ability of the legal owner to act by itself and, if possible, obtain consents from beneficiaries for the transaction.

Ireland Small Flag Ireland

There is a split between legal title and beneficial ownership of property in Ireland. The 2009 Act provides that the entire beneficial interest in property passes to the buyer on the making of an enforceable contract for the sale or other disposition of land. The beneficial interest in property can also be held through a traditional “off-title” trust.

In respect of registered land, the Land Registry does not recognise a split between legal title and beneficial ownership and only the legal owner of property will be recorded in part 2 (the ownership section) of the folio. A beneficial owner may, however, protect his or her interest in the property by registering a caution or an inhibition against the folio in question. The purpose of a caution is to obtain notice of dealings by the registered owner so that the cautioner has an opportunity to assert his or her unregistered right(s). An inhibition, on the other hand, operates as a restriction on registration that prevents all registrations except those made in compliance with the terms thereof.

There are currently no proposals to change the split between legal title and beneficial ownership of property in Ireland.

Russia Small Flag Russia

Russian law does not recognize trust structures and does not distinguish between legal and beneficial ownership.

Switzerland Small Flag Switzerland

The Swiss legal system does not know the trust as it is commonly known in Common law jurisdictions. Nevertheless, trusts are recognized in Switzerland according to the Hague Trust Convention. Consequently, it is possible to register trust relationships in public registries and in particular in the land registries.

Therefore, the trustee of a trust holding real estate in such a capacity will be registered as the legal owner of the real estate, but can have the trust relationship specifically mentioned in the land registry. Trust relationships which are not specifically mentioned in the land registry are not opposable to bona fide third parties. Consequently, third parties can rely on the legal ownership as registered at the land registry without having to enquire about any potential trust relationship.

United Kingdom Small Flag United Kingdom

Yes, English and Welsh law recognises the splitting of legal and beneficial ownership; however, it is not possible to register the beneficial ownership of land at the Land Registry as the register only records the ownership of the legal estate.

A person dealing with registered proprietors can generally assume they have unlimited power to dispose of the property, unless there is a restriction or other entry in the register limiting their powers.

Where the Land Registry is notified that a property is subject to a trust, the Land Registry will register a trustee restriction which prohibits disposals of the property without the consent of at least two trustees (unless the trust is trust corporation) or pursuant to a court order. A trustee restriction is automatically entered on the register when two or more owners are registered (as this will necessarily mean that a trust exists).

A buyer does not need to investigate the terms and nature of the trust (e.g. that the trustees have power to sell the property) provided the buyer pays the purchase price to at least two trustees or a trust corporation. In such a case, the beneficial owners' interests are said to have been "overreached". Where there is only one trustee, who is not a trust corporation, buyers will generally insist that a second trustee is appointed in order to benefit from the overreaching rule.

United States Small Flag United States

Title to real property may be held in trust, with a trustee holding legal title and the beneficiaries of the trust holding beneficial title. Such a structure is typically implemented for estate planning purposes. In such a case, the trustee, with reference to the trust he, she or it is holding for, would appear as the record owner of the property. In the case of a sale of a property by a trust, the title insurance company will require evidence of the trustee's authority to sell the property. Also, some states permit the use of a nominee structure, whereby a nominee would hold the property on behalf of another and may engage in transactions with respect to the property.

Peru Small Flag Peru

Yes, the surface right allows to separate (temporarily, up to for 99 years) the ownership of the land from the constructions. The surface right beneficiary can own the constructions built on and under the land, title to the land remaining with the creator of the right.

In addition, a trust agreement allows the transfer of certain privileges pertaining to the property to a trustee, legal ownership of the property remaining with the trustor.

Mexico Small Flag Mexico

Trusts are structures frequently used for commercial real estate transactions in Mexico; nonetheless, ownership is not split into legal and beneficial title as in common law jurisdictions. Under Mexican law, real estate trusts are agreements under which the owner conveys title to the trustee (a Mexican financial institution), which acquires the real property for the benefit of the parties acquiring a beneficial interest in the trust. The beneficiaries have the rights accruing to them under the trust, which could include the right to use, enjoy, occupy, possess and obtain proceeds from the real property. Moreover, beneficiaries instruct the trustee in connection with the real estate.

However, the only title subject of registration with the Public Registry is the one held by the trustee, which is considered for all legal effects as the sole owner of the real property. In other words, beneficiaries cannot record separately their beneficial rights derived from the trust agreement (some states have allowed for such registrations; however, there is no legal basis for such registrations).

Italy Small Flag Italy

The placement of real estate properties in a trust is commonly used in Italy to better manage prospective hereditary issues as well as to protect assets from potential creditors, in full compliance with Italian laws.

Real estate trusts are also accustomed in our country to keep both the family's real estate assets gathered over time and for the benefit of minor children in the framework of judicial separation or divorce, with the purpose of protecting their own residence.

Following the approval of L. 112/2016 (so called “Legge sul dopo di noi”), aimed to promote the well-being, social inclusion and autonomy of people with severe disabilities, real estate trusts have also become a useful tool to guarantee residence to the weakest family members.

In real estate trusts the settlor can transfer to the trustee either the full ownership or the bare property of the immovable good, which can be given in usufruct, rented, sold or be burdened by the right of residence, according to the rules settled in the Trust Deed.

Turkey Small Flag Turkey

In Turkey the concept of “beneficial ownership” doesn’t exist. The owner is the person registered in the land registry.

Cyprus Small Flag Cyprus

Trust are recognized in the republic of Cyprus. Specifically, Cap224 allows the creation of trusts. A trust can be declared in a trust deed or by will. If the trust relates to immovable property, it must be registered at the land registry. When a person is selling immovable property which is held under a trust, such a trustee is obliged to reveal the existence of the trust. If the trust is properly registered at the land registry and/or properly revealed to the purchaser, the latter has to enquire about the beneficial ownership and whether the trustee is entitled to sell the property. If the trust is not properly registered and the existence of the trust is not revealed to the purchaser the latter shall be considered as “bona-fide” purchaser, which means purchasing in good faith.

Japan Small Flag Japan

Trust structures are recognized under Japanese law, in which case a trustee holds legal ownership of real estate, while benefits arising from real estate belong to a trust beneficiary. Trust structures are commonly used for real estate transactions mainly for tax reasons (please refer to Question No. 14). A trustee to be retained is usually a trust bank, or a qualified trust company since the Trust Business Act requires that a trustee obtain a license before they engage in the trust business.

As trustees substantially review a property when they undertake a trust business, there are cases where a trust structure cannot be selected because a property has compliance issues.

Thailand Small Flag Thailand

No, this concept is neither regulated nor recognized under Thai law.

Greece Small Flag Greece

Greek law does not recognise the trust structure. However, under circumstances a foreign trust may be registered. A third party is not able to deal with just the registered legal owner of real estate without having to enquire about any beneficial ownership.

Bulgaria Small Flag Bulgaria

They are not recognised under the Bulgarian law.

Brazil Small Flag Brazil

There are certain rights that may cause split of legal and beneficial ownership, as:

  • Surface rights, mentioned in question #5 above, splits ownership of the land and the surface for a determined period (i.e., throughout the respective effective term).
  • The in rem “chattel mortgage” (“alienação fiduciária” under Brazilian law), mentioned in questions #12 and #19 hereof, causes the creditor to hold ownership of a property while debtor enjoys beneficial ownership of the property until all debtor’s obligations under the relevant agreement are fulfilled.
  • Usufruct, mentioned in question #12 above, allows grantee to use, enjoy and profit from a third parties’ property during a term.

Note that there are no trusts under Brazilian law. Please refer to question #21.

Sweden Small Flag Sweden

Split of legal and beneficial ownership of real estate is not recognized under Swedish law. There is no Swedish legal equivalent to the Anglo-Saxon definition of a trust structure. Fund structures resembling a trust structure could be formed through contractual arrangements, but cannot form independent legal entities under Swedish law. Non-profit foundations (Sw. stiftelser) can be formed under Swedish law as independent legal entities without external ownership, and may own and manage real estate and other assets for specific (often charitable) purposes.

Indonesia Small Flag Indonesia

No. A trust structure, as understood under common law-based legal systems, is not formally recognised under Indonesia’s civil law system.

Updated: February 1, 2019