Trustee expenses where no trust fund

Hi, interested in opinions. Freehold of a building was purchased by a number of the leaseholders. It was set up a little unusually - Freehold legal title is in Company name. Declaration of Trust by Company holds the legal title on behalf of the leaseholders in equal shares.

Company has incurred legal fees as Trustee. There is no money in the trust (the freeholder is practically valued at nil).

We’ve come to the conclusion that company as trustee is therefore personally liable for the costs but as it also has no assets, it will be insolvent.

Is that correct or is there any provision to claim the money from the beneficiaries. This is a bare trust and so the plan is to ask the beneficiaries to pay the fees themselves but just trying to get our heads around the correct position (and how to do things differently going forward - seek an indemnity from the beneficiaries to cover the trustee fees…)

Thank you


Freehold legal title is in Company name

The company as the legal owner may issue invoices to the leaseholders - ‘service charges’. It should be noted the directors of the Company are bound by the Company Act 2006 and have specific duties they must perform. One of which is to exercise reasonable care, skill and diligence.

“We’ve come to the conclusion that company as trustee is therefore personally liable” - Agree.
I’d suggest it is now prudent, the Directors issue invoices for the legal fee’s and settle the companies liabilities.

Richard Bishop

Thank you Bish, my Company team tell me that the service charge clauses are restricted and so the fees can’t be recovered this way at the moment.

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In which case, does the company need to increase its capital reserves by the issue of new shares to its members?

Alternatively, might the members provide a guarantee to meet the company’s liabilities which, I understand will avoid the company “trading whilst insolvent”?

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

Thank you, yes we are going direct to the members as you suggest in the latter part of your note. And reviewing what’s best to cover any future expenses.

Thank you for all your suggestions.