Property in the ACT, especially commercial property, is often held by a company as trustee for a trust. This can be for many reasons, two of which are asset protection and to manage how income from the property is distributed.
It is a relatively simple process to remove a trustee to appoint a new trustee, or to appoint an additional trustee. What is often overlooked though, is that the change of trustee must be registered with the ACT Land Titles Office (Land Titles) if the trustee holds land.
Changing trustee on title
Legislation provides that in the event that a new trustee replaces a retiring trustee, or where an additional trustee is appointed, the registrar-general may effect the change on the title registry upon receipt of the relevant documents and fees.
# 1 Declaring the trust When a transfer of land occurs in the ACT, the registrar-general cannot register a trust on title and, as is often the case in practice, the trust is not declared to Land Titles.
Therefore, to effect a change of trustee or appointment of an additional trustee, the trust deed must first be declared to Land Titles.
Following this declaration, the registrar-general will lodge a caveat to protect the trust’s interest in the property. The costs of registering the caveat and withdrawing the caveat are to be borne by the trustee.
# 2 Stamp duty Prior to lodgment of the application to effect the change of trustee or appointment of additional trustee with Land Titles, the form must be lodged with the ACT Revenue Office and $20 stamp duty paid. It is, however, important to note the following:
If the trust is in place prior to entering into a Contract to purchase land and the Contract identifies that the property is being purchased on trust, only $20 stamp duty would have been paid on the declaration of the trust.
However, if you establish the trust after the Contract is entered into, or declare that the property is held on trust after the Contract is entered into, then you will be liable to pay stamp duty on the declaration of trust, being a similar amount of stamp duty as paid on the Contract.
# 3 Mortgage Where you have a mortgage over the land you will need to go through the additional hurdle of having your bank produce the title to register the change of trustee or appointment of an additional trustee.
In most instances your bank will provide the title, however, there may be costs incurred in the bank producing title, and you may have to vary or enter into a new mortgage.
How does this affect you?
Firstly, if you wish to purchase property, careful consideration must be given as to whether the property is to be bought on trust. If you purchase property on trust be sure to properly document that the trustee has purchased the property as trustee for the trust.
Secondly, if you seek to remove and appoint a new trustee, or appoint an additional trustee, you must go through the above process to have the change noted with Land Titles. Whether the trust was declared prior to or at the time of entering into the Contract to purchase the land will have a considerable impact on the costs incurred in noting the change of trustee.
In conclusion, you must be aware of the intricacies in the process to account for delays and costs which may be incurred. If you intend to remove a trustee and appoint a new or additional trustee, where the trustee holds land for the benefit of the trust, feel free to give us a call and we can assist you.
For more information contact the Commercial, Property and Finance Team: