Introduction
Trust properties can be complex, particularly when it comes to buying or selling them. Understanding the foundational aspects of trust properties and their management is essential to navigate these transactions effectively. Here are 17 important points to consider regarding trust properties.
- Purpose of Trusts
Trusts, including public trusts, charitable trusts, and private trusts, are established to
provide benefits in areas such as education, healthcare, welfare, spirituality, food,
clothing, and housing. These trusts are often founded by individuals with a
commitment to improving public welfare. - Trust Deeds
When a trust is established, a document known as the Trust Deed is created. This
document outlines the purpose of the trust, the activities it will undertake, and the
initial funds or assets that the trust will manage. It serves as a legal framework for the
trust’s operations. - Assets Held by Trusts
Trusts often acquire and hold various assets, including land and buildings. When such
assets are put up for sale, specific considerations must be addressed. - Reviewing the Trust Deed
When purchasing a trust property, it is crucial to review the Trust Deed rather than
just the property title. The Trust Deed will specify the conditions under which the
trust’s assets can be sold. - Selling Trust Properties
If the Trust Deed does not permit the sale of trust assets, even if all trust members
agree to the sale, it cannot proceed. Ensuring that the Trust Deed allows for the sale of
assets is essential. - Common Issues with Trust Properties
Many trust properties face complications due to restrictions in the Trust Deed. Often,
the Deed explicitly forbids the sale of assets or lacks clear provisions for such
transactions. - Modifying Trust Deeds
Efforts to sell trust properties might involve amending the Trust Deed. It is crucial to
verify the original Deed to ensure that any modifications are properly documented. - Obtaining Trust Deed Copies
If necessary, obtain a copy of the Trust Deed from the relevant registry office where
the Deed is filed. This step is important to confirm the trust’s conditions and
restrictions. - Court Permission for Sales
If the Trust Deed does not permit the sale of assets, all trust members must seek
permission from the court. This process ensures that the sale aligns with the trust’s
objectives. - Court Approval Process
The court will not grant permission for the sale immediately. It will assess whether
the sale serves the trust’s purpose and promotes its growth before granting approval. - Court Supervision
The court will oversee the sale process, including who can purchase the property.
Typically, the court may approve the sale to another trust with a similar purpose. - Case Study: Chennai’s OMR
An example from Chennai involves the Tamil Nadu Hospital trust, which was sold to
Sriram Properties at a high price. However, Global Hospital, seeking a lower price,
challenged the sale. The court ultimately favored Global Hospital, emphasizing the
trust’s purpose in its decision. - Trust Purpose Consideration
The court ruled in favor of Global Hospital based on the trust’s original purpose and
Global’s commitment to maintaining existing medical staff. This demonstrates the
court’s focus on the trust’s intended objectives. - Historical Examples
Historically, some properties were established with conditions that prohibited their
sale. These conditions are often embedded in documents such as settlement deeds or
endowment documents. - Selling Restrictions
Even if a trust deed appears to permit the sale of assets, if there are additional
conditions or specific directives in the trust’s founding documents, those must be
considered. Court permission may still be required. - Trust Deeds and Restrictions If a trust’s founding documents explicitly forbid selling the assets and mandate that
income be used for specific charitable purposes, these restrictions become legally
binding. - Comprehensive Understanding
To purchase trust property, ensure that all trust members agree to the sale and that it
aligns with the Trust Deed. If there are any restrictions, seek court permission. This
comprehensive understanding will help navigate the complexities of trust property
transactions.
Conclusion
Understanding the intricacies of trust properties, including the legal framework and restrictions outlined in Trust Deeds, is essential for anyone involved in buying or selling such assets. Thorough due diligence and legal consultation can help ensure that transactions comply with trust regulations and serve the trust’s intended purpose.
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