What Happens When a Change of Trustee Cannot Be Recorded by Transfer?
Changes of trustee are a common part of administering family trusts, discretionary trusts and self-managed superannuation funds (SMSFs). A trustee may retire, die, lose legal capacity or be replaced in accordance with the terms of the trust deed.
Ordinarily, a change of trustee is documented by the appropriate deed or other appointment and retirement documents. Where the trust owns real property, the necessary documents are then lodged with Landgate to place the property into the name of the incoming trustee.
Sometimes, however, a conventional transfer cannot be completed.
This can occur where there is a break in the chain of trustee succession, historical trustee changes were not properly documented, a former trustee has died, a trustee company has been deregistered, or the person shown on the Certificate of Title is no longer available or legally able to execute the necessary documents.
The result can be a significant problem: the current trustee may have been validly appointed under the trust deed, but the Certificate of Title still records a former trustee as the registered proprietor.
Until the title issue is resolved, the current trustee may be unable to sell, mortgage, refinance or otherwise deal with the property.
What Is a Vesting Order?
Section 182 of the Transfer of Land Act 1893 (WA) provides a mechanism by which trust property can, in appropriate circumstances, be vested in the person entitled to be registered as the new or replacement trustee.
Importantly, an application under section 182 does not necessarily require proceedings in the Supreme Court. The Commissioner of Titles has power, concurrently with the Supreme Court, to make a vesting order in appropriate circumstances.
This can provide a practical solution where a conventional transfer cannot be completed because there is a missing link in the history of the trustees or some other impediment prevents the registered proprietor from transferring the property.
A vesting order will not, however, ordinarily be granted simply as an alternative to a transfer. If the desired result can be achieved by transfer, a vesting order will generally not be granted.
When Might a Vesting Order Be Required?
A vesting order may be relevant where the current trustee is entitled to hold the trust property but cannot become the registered proprietor through the usual transfer process.
Examples can include circumstances where:
- there is a break in the documented chain of trustees;
- a former trustee has died and the necessary transmission or transfer cannot be completed in the ordinary way;
- historical changes of trustee were not properly reflected on the Certificate of Title;
- a trustee company that remains registered as proprietor has been deregistered; or
- the registered proprietor is otherwise unable to execute the documents required to transfer the property.
What Evidence Is Required?
An application for a vesting order requires more than simply establishing that a different person or company is now acting as trustee.
The applicant must establish their entitlement to become the registered proprietor.
A statutory declaration will generally be required setting out the relevant facts and supported by appropriate documentary evidence. Depending upon the circumstances, this may involve establishing:
- when and how the trust was created;
- when and how the property was acquired by the trust;
- the chronological chain of trust deeds and changes of trustee;
- the circumstances surrounding the retirement, death, removal or replacement of previous trustees; and
- why the applicant is now entitled to be registered as trustee of the property.
Relevant trust deeds, deeds of appointment and retirement, death certificates and other supporting documents may need to be produced as evidence.
For older trusts, reconstructing this history can sometimes be the most important - and difficult - part of the application.
What Happens After the Commissioner Makes the Vesting Order?
If the application is approved, the Commissioner of Titles instructs Landgate staff to prepare the vesting order.
The vesting order is then subject to assessment for transfer duty by RevenueWA. Once the order has been assessed and appropriately endorsed, or a duty certificate has been issued, it is returned to Landgate for final processing.
Importantly, the making of the vesting order does not, by itself, complete the change in registered ownership.
Under section 182 of the Transfer of Land Act 1893 (WA), the order has no effect in transferring or vesting the land until the appropriate entry has been made on the Certificate of Title.
Once that occurs, the applicant becomes the registered proprietor and can then deal with the property, including selling or otherwise transferring it where appropriate.
Why Is This Important for Family Trusts and SMSFs?
Problems with trustee succession often remain undiscovered for many years.
A family trust or SMSF may continue operating without difficulty until the trustee attempts to sell or refinance a property. It may then become apparent that the entity or individuals recorded on the Certificate of Title no longer correspond with the current trustee.
What initially appears to be a straightforward property transaction can then become considerably more complicated.
A vesting order can provide a practical solution where historical changes, missing documentation or a break in trustee succession prevent the current trustee from becoming registered through the ordinary transfer process.
Correcting the title allows the current trustee to be properly recorded as the registered proprietor and enables the trust or SMSF to deal with its property in the future.
How Fort Knox Legal Can Assist
Determining whether a vesting order is available requires a careful examination of both the history of the trust and the history of the property's registered ownership.
At Fort Knox Legal, we can assist with reviewing the trust deed and subsequent variations, tracing historical trustee appointments and retirements, reviewing the Certificate of Title and supporting records, and identifying any gaps in the chain of trustee succession.
Where a vesting order is appropriate, we can prepare the application and supporting statutory evidence, liaise with the Commissioner of Titles and Landgate, attend to the RevenueWA requirements, and manage the matter through to registration of the current trustee on the Certificate of Title.
If your family trust or SMSF owns property that remains registered in the name of a former trustee - or you have discovered a break in the history of trustee appointments - contact Fort Knox Legal to discuss the steps required to correct the title.
You are welcome to call us on (08) 9200 1833 or email info@fkls.com.au to arrange an appointment.