Can trust property be vested in trustees by a restriction only?

Good morning,

A new client has provided the following:

2 x IIP trusts dated 2013 (mirror trusts for spouses with the settlor as the life tenant) and the trust asset being a 1st class stamp
4 x RX1s and register views showing form B restrictions have been registered on all 4 properties making reference to 1 trust with 2 settlors (Mr and Mrs) - there were actually 2 separate trusts set up each with an individual settlor
The trusts appoint four trustees however the legal title for all 4 properties remain in the joint names of the two settlors (Mr and Mrs) subject to the aforementioned form B restrictions

My understanding is that the legal title of the freehold property must be transferred to the names of all 4 trustees to vest the property in the trusts. Therefore, the properties are not trust assets and remain in the sole names of the settlors. The settlors have always declared the income from the rental properties in their individual tax returns.

The will writer who prepared the trusts in 2013 outsourced the transfer of the properties to a law firm which was closed down in 2017.

Has anyone else come across this before? Any comments would be greatly appreciated.

Thank you.

It isn’t necessary to go to this extent, for example the settlors might declare that they hold the properties on trust for the trustees of the settlements. The legal title could stay where it is.

However, you do need something transferring an interest in the property, be it a transfer, declaration or assignment of the beneficial interest. At first sight it doesn’t appear to have been transferred. If the settlors are also trustees, you may require less, but you still need “something” showing an intent to hold the properties on the trusts of the settlement(s). I don’t think the restrictions count - not least because their purpose is presumably ambiguous.

Somebody should have taken over the files of the firm that shut in 2017. It might be worth contacting the SRA to ask as it would be really weird (for want of a technical phrase) to just file restrictions.

Andrew Goodman
Osborne Clarke LLP