Deed of trust covering sale of foreign immovable property

l would be grateful to Forum members for their comments on the following Deed (an anonymized version); much has happened – which I’ll share if anyone is sufficiently interested - but for the time being, rather than overload with factual information, I thought it would help if we could treat this rather like an exam question: “Discuss” (Hint as to present situation: at the outset, seller gave buyer a POA to enable buyer to conduct the matter, which the seller has revoked in the last month; buyer has not yet complied with clause 5; both are British citizens, UK resident and domiciled, although originate from outside UK):

Date 30th October 2015
(1) Seller (the Trustee)
(2) Buyer [the Beneficiary].
1 Definitions
Purchase price €145,000.00
Mortgage sum: € 126, 000.00
Repair, unpaid service charge and other liabilities, estimated €6, 500.00
Total liabilities €132,500.00
Due to the Trustee on signing this agreement as a full and final consideration €12,500.
the property known as [property in Spain -apartment)
2 Trust of land
2.1 The Trustee is the owner of the Property
2.2 The parties declare that the Trustee:
2.2 .1 holds the Property in trust for the Beneficiary absolutely
2.2.2 will at the request of the Beneficiary transfer the Property or any part or parts of it either to the Beneficiary or to anyone else as the Beneficiary directs
2.2.3 will apply to the Land Registry or relevant authority in Spain as necessary to give effect to any required transfer or dealing or to enable the interest of the Beneficiary to be protected.
3 The Beneficiary covenants with the Trustee that it will keep the Trustee indemnified from all costs, expenses, claims, demands and liabilities in respect of the Property and any matters to which it may from time to time be subject.
4 The Trustee will not be required to incur any expenditure in respect of the Property unless and until monies have been provided by the Beneficiary for that purpose.
5 The Beneficiary undertakes to complete the transfer of the property to the Beneficiary or to anyone else within two years of the date of this agreement.
6 Nothing in this Deed is intended to confer on any person any right to enforce any term of this Deed which that person would not have had but for the Contracts (Rights of Third Parties) Act 1999.
7 Executed by the parties as a deed and delivered today
Signed as a deed by seller in the presence of a conveyancing paralegal at a firm of solicitors at which the Beneficiary worked at the time
Signed as a deed by the Beneficiary before the same witness.

If this were a property in England (or indeed any common law country) the effect would be to confer a beneficial interest in the property on the buyer. This is a right ‘in rem’ (against the thing) not merely ‘in personum’ (against the person). Since the property is in Spain it seems doubtful the document will have that effect. It probably bestows merely a contractual right against the seller to act in accordance with its terms. An order for specific performance of the contract may not be available/enforceable for various reasons in which case the only remedy in an English court would be damages.

Thank you very much ,Paul.

It appears that the fundamental applicable law problems cut both (but different) ways as between buyer and seller.

I believe that they both need to understand this and do a deal to avoid fruitless legal costs and it’s probably for the buyer to unlock this impasse by complying with her obligations but she’d have to know that damages may be the only remedy if it came to it and therefore following her money like that may not put her in a position to enforce the transfer from the seller.

I know that buyer is doing just that: instructing a Spanish lawyer to contact the seller in a routine way to ask for necessary details for the lawyer to prepare the conveyancing documents.

If a fight breaks out, it seems to me that there may be some mileage in the buyer treating it as a trust for her benefit. Then seller as trustee with fiduciary obligations might not find it plain sailing if she refuses to transfer the title, particularly if the measure of damages were the value of the property and she, the seller, could not pay the damages without selling the property.

Flaws in all this when we drill down no doubt!

I greatly appreciate your contribution on this.

David Martin

May I ask why the Trustees are selling a property to the beneficiary of the Trust when the Trustees only hold the property in Trust for them. It seems rather unusual and how then would the Trustees then complete their obligation to pass the Trust assets to the beneficiaries if it has already been sold to them?

I accept that it is a contradiction. The use of the concept of a trust in the context of a sale was “unusual”. I think the draftsman (the buyer) sought to achieve beneficial ownership at that point albeit conditions subsequent, as it were, were to be left to be complied with. It was in the buyer’s interest at the time to achieve ownership as best she could subject to post purchase obligations to be fulfilled before the transfer to her name could be achieved: essentially the discharge of the mortgage to Santander on the property in Spain.

I accept that this is flawed. That’s what makes it interesting and a challenge to sort out. Performance of the outstanding obligations seems to be essential. The danger to the transferee is that the transferor will claim that the whole thing is off because the transferee/buyer/beneficiary of the trust hasn’t complied with the 2-year time frame and will refuse to cooperate in the discharge of the mortgage and transfer of the title in Spain and not reimburse the buyer (sic) in respect of the payments she has made to the lender and the expenditure she has incurred improving and maintaining the property in reliance on the statement in the agreement that the owner holds it on trust for the buyer from that moment in 2014.

In what way(s), where and by whom is the agreement enforceable seems to be the question/problem.

David Martin

I do not believe that this is at all possible.

The Trustees hold the property on trust for the beneficiary and cannot dispose of it other than passing it to the beneficiary at the end of the Trust.

At present there are debts of a mortgage and other totaling £132,500, being the responsibility of the Trustees. The present asset is therefore only 12,500, which they are obliged to pass to the beneficiary on completion of the Trust.

Selling an asset of 12500 to the beneficiary, who will inherit it from the Trust seems to be some sort of intended deception, possible in connection with the laws in Spain. Those laws may have power to repossess the property if local charges have not been paid.

The beneficiary (buyer) should be advised that such action will involve costs and only add to her problem of only having a potential 12500 to inherit from the Trust.

It also seems that the Trustees have failed in their duty to protect the intended inheritance for the beneficiary, presumably as the Will would have wished.

Thank you very much for further thought on this. Not sure what you mean by “it” in you first sentence, but it’s certainly a very deep and winding rabbit hole.

I’m sure that no deception was intended. It was intended as a sale, but because of lack of funds on both sides to pay off the mortgage and the wish on the buyer’s part to secure it for herself, including the obligation to pay for everything, she tried to make “it” hers beneficially from the outset, “it” being the bundle of equity and debt at the time and the future obligation to pay outgoings for her own benefit. It was just the mortgage and not having enough to pay it off at the time or, it transpired, within the two year period provided for, that led to dismay on both sides.

Buyer still wants it and is getting the money together. Seller’s state of mind is unfathomable. She just says “the agreement is broken” but has done nothing other than to revoke the Spanish power of attorney given at the outset to enable the buyer to conduct all necessary business. Thus the buyer has lost the power to “run” the property in every way and the uncertainty now is whether buyer can oblige the seller to facilitate discharge of the mortgage and transfer of the property into the buyer’s name when she, the buyer, proffers the money, hence my comment:

“In what way(s), where and by whom is the agreement enforceable seems to be the question/problem”.

There’s no other trust instrument. There’s no will or anything else relevant.

David Martin.

From what you have stated, It (the property) is owned at present by the Trust .

It is not clear, but the mortgage on this property is presumed to have been obtained by the Trustees on purchasing the Spanish property, or obtained after it was past to the Trust by the Will of the settlor. More clarification would be helpful.

Any sale of this property by the Trustees would normally require the repayment of the mortgage, which would be registered against the property.

As I have indicated, to sell the property to ‘anyone’ the Trustees would then receive the value of that property in the Trust in order to manage their obligations to pass this Trust asset to the beneficiary when winding up the Trust. They should be careful not to place themselves in a position where an action could be taken against them should they not honor their Trustee obligations.

Clause 3. of the proposed Deed, although well intended, would seem to have little basis when there is so very little equity that is to be past to the beneficiary and her assets, as show so far, do not amount to a great deal and as such this undertaking seems to hold little substance if needed.

As to the so called Deed, the ‘seller’ in this situation would be the Trustees and I fail to see how they could give a POA to the buyer, as they already have a Trustees duty to perform and giving such a POA would not be in the Trust interest.

The more I read, the more I feel that this seems to be a fictitious exam question that will show such action cannot be valid. I may be wrong, but await other replies and follow with interest.

Thank you very much again; sadly, this is not a fictitious exam question; it is a very real, live case. Seller/trustee has now (5thy July) written to say that the agreement was “validly terminate some years ago” and that she’s no longer bound by the agreement and that she reserves the right to claims for losses caused to her.

So, again, can the beneficiary still rely on the agreement to result in the transfer of the title in Spain to her, if she can fund the discharge of the mortgage in the Trustees’ name.

I do agree that they were buyer and seller; but the trust idea was not a bad one, in the spirit of the deal done. The seller wanted out, she had other financial problems and was unhappy with her situation. The buyer offered to “buy” her out but couldn’t at the time produce the amount to discharge the mortgage in the seller’s name and so enable a transfer of title. Admittedly she didn’t achieve this in the two year period. The point here is, was that fatal to her position overall? Can she demand to have the title transferred now, if she can come up with money to discharge the mortgage and free the title to be transferred as originally envisaged.

Seems to me that the best she can do is to emphasise the fiduciary nature of the seller’s position and assert that failure to achieve the funding of discharge of the mortgage within two years is not fatal to her right to have the property transferred to her; but in which forum etc would she threaten to litigate this?

one goes round and round with this and concludes that it’s one of those car crash type situations in which we don’t know who can survive yet or how. I think that money can still talk in this and if the redemption money were on the table, the seller might well see sense and accept and exit. But we do not know her mindset on this…

David Martin

Sorry but it still looks wrong. The Trustees could have gifted the asset to the beneficiary and ended the Trust unless you have not revealed something that prevents it… Why did they not do just that?

Thank you very much for your continued effort with this.

I don’t understand what you say though; the owner did declare that the buyer owned it beneficially as from the date of the document in 2015; she couldn’t transfer the title then because neither of them had or could raise the money to pay off the mortgage. The trustee didn’t want to transfer it to the other party unless she was freed of all liability for it.

It is all “wrong” of course, but there’s nothing sinister behind what they did; they just didn’t know enough about trusts as contrasted with agreements, or conflict of laws to know a way round the sort of problems that arise now; but the intention was clear enough; to move the liability as much as was immediately possible for the property and its expenses, to the buyer, who was to find a way to discharge the mortgage upon which it would have been and would still be possible to free the seller of the whole thing; indeed, the buyer has done everything as owner, maintaiuning letting insuring and using herself; but the seller has lost patience with the delay and now seeks to treat the agreement as not binding her, yet sufficiently specific to give her a claim for damages – which would reflect what the buyer had covenanted to indemnify in respect of anyway.

Treating it at face value therefore, the question I have to decide is, what if any part of it is still enforceable, how, by whom and where?

David Martin

Thank you, but I am not sufficiently qualified to answer that.

It has made interesting reading for me and if a solution is found I feel sure that it will be of interest to many. I hope that the Lady in Spain is content with your efforts. She should be.


Thank you, Sam; nor am I, I think; I can’t decide who/what discipline to seek out to help; I think we i.e. our side, need to major on the trustee aspect and on maintaining that the failure to finance out within two years has been waived by the seller and the time extended in the past and so that provision isn’t a fundamental term that’s been breached or a fundamental breach, (or whatever is the way this concept is currently analysed in the law of contract – if that is still relevant at all) – so as to leave the right to buy out available. Time was not made of the essence … but as soon as we mention that, it will be, no doubt, so it’s the last chance saloon then and buyer needs all ducks and bucks in a row and to be ready, willing and able etc. I hope they come to a compromise somehow.

I greatly appreciate the contributions from all, thank you; I shall let you know how it pans out.

David Martin

Dear all

Here is an update.

“Seller”(owner of property and trustee for “buyer”) will not cooperate, has changed the locks, instructed letting agent to redirect to herself the rent that buyer was collecting to pay the mortgage on the flat and seller has told the buyer not to interfere with the property or the tenant arrangements or she’ll have the police attend the premises/take action against the buyer. presumably the Spanish police will only be interested in/comprehend the escritura and not the trust deed and comply.

Informal friendly counsel advice: anonymised etc:

[F is the seller/trustee]

I am sure you agree the 30th October 2015 agreement is a very odd hybrid. Parts of it (the “consideration” section under paragraphs 2.2.2, 2.2.3 and 5 ) appear to be a sale agreement with the € 12,500 price paid now but completion delayed to some dates before 30th October 2017, which completion you could have actioned, but for whatever reason did not. It also could not have been actioned, of course, without Santander’s consent. But other parts, presumably to apply up to any point when the flat was transferred, are a declaration of trust recording unequivocally that F remained owner (clause 1) but held on trust for you with you having use and having to pay all outgoings. I get that you did in fact pay variously the €12,500 and have paid everything since. Now, that trust is not expressed to be limited in time, which I suppose explains why the two of you allowed things to drift for seven years. Because you failed, using the power of attorney, to effect the transfer by 30th October 2017, I guess F could have sued to force you to, but she did not. So, in my view, the trust subsists, for there was nothing to limit it to 30th October 2017 in the agreement or to provide for its discharge, if clause 5 was breached.

Thus, we say F continues to hold on trust for you and your line is you are therefore entitled to continue to use and let out. However, if you are thinking of suing here for example a declaration to that effect, no way. For any number of reasons e.g forum conveniens and the cause the subject is property, the English court will tell either of you to litigate in Spain. That could be her suing to remove you from the flat or you suing for a declaration she cannot because she holds only as trustee. I guess if such litigation ever comes about, your Spanish lawyer can deal with it in Malaga County Court.

As to any reply to F’s weird 5th July 2022 letter, I would write to her saying the 2015 agreement has never been terminated or cancelled and remains in force and that under it she holds, having received the full agreed price, and you having paid all outgoings for the last seven years, on trust for you with you being entitled to the full use of the flat as you have had for the last seven years. But I do not think (Spanish lawyer may disagree in Spanish law) you can now force completion, and I’m not sure you would want to. I also can’t see how you can claim repayment of outgoings when you agreed to pay those. I suspect F is hoping you will pay a bit more (and pay off Santander) for a completion now. Negotiation is up to you, but the greedy old witch must know shifting you would be expensive and difficult.”

Weird letter referred to will not ad anything useful to this very long post; Buyer did write to seller in strong terms requiring her to act as her trustee etc and as is self-evident, (re final comments in Counsel’s note) seller has indeed shifted the buyer, by changing the locks etc and the onus is on us to do something to make the seller pay attention.

My only idea at the moment (and it goes against the second paragraph of Counsel’s comments) is that E&W is indeed the forum for a trust claim under an E&W law trust; repatriation of the income hardly seems a barrier to every other suitability of going in E&W. If the trust subsists, perhaps we should explore the idea of seeking to make a claim in equity, in England, as beneficiary of the trust, for the net rents and profits, use and benefit of the trust property. I don’t know if this is viable, but if the trust remains in existence, this seems to follow. A claim in equity does require the claimant to come with clean hands and we can’t deny failing to follow through with the two year point, but we have done everything else in good faith to date and if we could establish implied waiver of that two year condition point by seller/trustee accepting the benefit of buyer/beneficiary bearing the cost of the property throughout the period to when recently deprived of the benefit of the trust, may be that would find favour with the court; presumably it would increase beneficiary’s chances if she were also to demonstrate that she is ready, willing and able to complete forthwith, although strictly speaking, if the trust subsists independently of the rest of the agreement, I don’t see why this would be a critical factor.

Would that approach to the problem in an English court gain some traction? I am not suggesting that any outcome would be recognised in Spain and I wouldn’t even bother to take it there to show Spanish legal representation; the purpose of doing it would be solely to put the seller/trustee under financial pressure in England, so that she might think more positively about off-loading the property and attached liabilities to the buyer, ready, willing and able etc.

if anyone has any comments on my latest suggestion above - or any other ideas, I would be glad to hear of them please.

David Martin