A real estate trust agreement is a legal document that sets out the terms and conditions entitling one or more individuals or entities to hold a specified real estate asset in their name for a third party, called the beneficiary. Under a real estate trust, the trustee(s) hold(s) legal ownership of the real property for the benefit of the beneficiary who retains beneficial ownership of the property. The trust agreement will set out the power of the trustee and their duties or responsibilities to the beneficiary, including the trustee’s ability to sell, lease, or dispose of the property. If the real property is used for investment purposes and produces income, the trust agreement will also set out how the trustee is to distribute the income to the beneficiary or beneficiaries. It is important to note that a trustee has a fiduciary duty to act in the best interest of the beneficiary and to avoid conflicts of interest. Generally, trust agreements will have strict wording that limits the power(s) of the trustee when dealing with the property. For example, most real estate trust agreements will have a clause that the trustee must obtain the beneficiary’s consent in dealing with the property. It is possible that a trustee is also the beneficial owner of a portion of the property.

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Disclaimer: The information contained in this article is not to be construed as legal advice. The content is drafted and published only for the purpose of providing the public with general information regarding various real estate and business law topics. For legal advice, please contact us.

About the Author:

Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here.