Are split of legal and beneficial ownership of real estate (ie Trust structures) recognised?

Real Estate

Japan Small Flag Japan

Yes. Title to real estate property may be held in trust, with a trustee holding legal title and beneficial title held by separate beneficiaries. To secure the property as a trust property against third parties, registration of transfer of legal title from trustor to trustee must be filed, as well as registration of trust. Generally speaking, the trustee must obtain consent from beneficiaries to sell the trust property. Therefore, a purchaser of a trust property should confirm that each beneficiary has consented to the transfer of such property.

In practice, sale of trust properties are not so common because it is more cost effective to acquire trust beneficiary interests than fee properties, as real estate acquisition tax would not apply to the acquisition of trust beneficiary interest, and amount for registration tax for trust beneficiary interest is minimal (1,000 yen as of December, 2017). Also, generally, a trustee is not flexible regarding the terms of the purchase and sale agreement to avoid any liability associated with the property, and so purchasers tend to prefer entering into a purchase and sale agreements with a beneficiary rather than with the trustee.

Portugal Small Flag Portugal

Trusts are not recognized in Portugal. Therefore the buyer needs to deal only with the registered legal owner and does not need to enquire about any beneficial ownership.

Ireland Small Flag Ireland

Yes and are common. However, only legal interests are capable of registration. The beneficial ownership of land cannot be registered. However, equitable interests which affect the interest of a registered owner can be protected by registration of an appropriate inhibition or caution in the case of registered land and by registration of the document creating the beneficial interest in the case of unregistered land.

As part of the standard form enquiries made of sellers, purchasers make enquiries as to beneficial ownership. In addition, searches carried out may reveal the existence of a split between the legal and beneficial owner.

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).

The Netherlands Small Flag The Netherlands

The legal and beneficial ownership of real estate can be split. The legal entitlement is registered with the land registry. If the entity entitled to the legal ownership is not entitled to the beneficial ownership, the land registry does not reflect this split at all times. The split of legal and beneficial ownership is apparent from the land registry if the legal owner acquired the legal ownership in its capacity of, for example, custodian of the beneficial owner, or if the legal ownership and beneficial ownership was transferred by a seller to the purchasers in the same deed of transfer. However, if the full title was transferred and the titleholder transfers solely the beneficial ownership, this is not registered with the land registry. Therefore, obtaining a warranty from the seller that it is entitled to the legal and beneficial ownership is of high importance.

Norway Small Flag Norway

Split of legal and beneficial ownership of real estate (i.e. trust structures) is not recognised under Norwegian law.

However, it is possible to establish a lending syndicate where a security agent (bond trustee) takes care of third-party financial entitlements on a contractual basis. This contractual obligation is enforceable under Norwegian law (see Q21).

Romania Small Flag Romania

Yes, the Romanian Civil Code provides for a fiduciary relationship in which the first party (the trustor) transfers assets to a second party (the trustee) for the benefit of the third party (the beneficiary). The beneficiary may be the trustee itself.

Banking institutions and investment funds/advisors, insurance companies, notary publics and attorneys may act as trustees.

Russia Small Flag Russia

The Russian legal system does not recognise split of legal and beneficial ownership of real estate or “beneficial ownership” as a type of in rem interest.

The similarly sounding contract of trust of estate known to the Russian legal system is close to the asset management concept and, as mentioned, does not result in split of legal and beneficial ownership. All transactions made by the trustee are executed in the name and on behalf of the recorded owner of the real estate.

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.

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.

Turkey Small Flag Turkey

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

Brazil Small Flag Brazil

As previously mentioned, the Brazilian legislation establishes the usufruct. Such doctrine provides that a person may transfer the beneficial ownership to another person and reserve the usufruct for himself. Accordingly, such person, the usufructuary, may use and enjoy the real property while the beneficial owner holds the title of the real property without the right to use it or to enjoy it.

Example: a common example is the donation of a real property from a father to his son reserving a lifetime usufruct for himself. Accordingly, the son becomes the beneficial owner of the real property and the father (the donator) becomes the usufructuary, so that he can have the usufruct of the real property while he is alive (lifetime nature). After the father’s death, the son will have the real property’s full ownership.

The usufruct must be registered in the real estate record and the sale of the property will depend on the consent of the usufructuary in the act or the previous cancellation of the usufruct with the competent Real Estate Registry Office.

United States Small Flag United States

Title to real property may be held in trust, with a trustee holding legal title and beneficial title by the beneficiaries of the trust. 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.

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.

Bulgaria Small Flag Bulgaria

Bulgarian law does not recognise the split legal and beneficial ownership of real estate (i.e. trust structures).

France Small Flag France

Split of legal and beneficial (i.e. French fiducie) has been recognised under French law since February 2007 and allows, in theory, real estate assets to be registered in the name of a trustee (fiduciaire). It is, however, rarely the case, in practice, since the activity of a trustee is extremely regulated and reserved to banks, insurance companies, investment companies and lawyers. The French fiducie is mainly used within the framework of restructuring/insolvency proceedings. It is not a usual instrument/tool to manage real estate assets.

Germany Small Flag Germany

Generally, it can be said that only the legal owner is registered as owner in the land register and, 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 registered proprietors can generally assume and trust they have unlimited power to dispose of the property, unless there is a restriction or other entry in the register limiting their powers.

Hong Kong Small Flag Hong Kong

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

Spain Small Flag Spain

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

Nigeria Small Flag Nigeria

Split legal and beneficial ownership of real estate such as trust structures are recognised in Nigeria and capable of registration. 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 in some cases, it is advisable for enquiries to be made to determine whether there are any restrictions on the ability of the legal owner of the property to act by itself.

Updated: January 25, 2018