The law of trusts developed in England and Wales during the Middle Ages under the jurisdiction of the King of England. Whereas the common law historically regarded property as an indivisible entity, the Lord Chancellor had the discretion to declare that the real owner in equity (i.e. in all fairness) was a person other than the title holder. Thereafter the legal and equitable rights in property were separable. Trust law emanates from the common law and remains an accepted and widely used legal construct within the American legal system. The Uniform Trust Act is now widely adopted and provides consistency state to state.
A Trust is a legal entity created by a transfer of property from one person (grantor or settlor) to the trustee to hold for the benefit of others (beneficiaries). A Trust is often employed to transfer some, but not all, of the bundle of rights associated with real estate.
The Trust model is ideally suited to any product or industry where rights in property are divided between different people or entities. Trust-based ownership or membership structures are particularly useful for;
- Timeshare Resorts
- Vacation Clubs
- Private Residence Clubs
- Fractional Interests
- Travel Clubs
Together with other shared ownership type products.
In a traditional deed-based structure a developer-grantor drafts and records up to 52 deeds for every unit, and then owners pay recording fees and taxes upon every transfer – sales, non-arms-length transfers, re-sales and default-based foreclosures. This structure is cumbersome, unwieldy and expensive.
As compared to traditional deed-based ownership, the benefits of the trust structure are numerous:
Added Due Diligence and oversight provided by an independent trustee with fiduciary obligations to the member-owners;
No Conflicts of Interest. The Trustee’s duty of care (among other legal obligations) is to the beneficial owners;
Reduced Transactional Costs (deed preparation, transfer taxes, recording fees, title insurance and foreclosure procedures),
Reduced Operational Costs,
Improved Inventory Control, and
Greater Flexibility with respect to substituting properties in and out of club inventory;
For more information on how FNTC America can help your business please email FNTC America or contact by phone at (+1) 866 978 2571