It is difficult to define the word 'Trust' in the legal sense.The Indian Trusts Act 1882, defines Trust as an obligation connected to property
ownership, and arising out of a confidence reposed in. and accepted by the
owner, or declared and accepted by him, for the benefit of another, or of
another and the owner. Even this definition does not fully capture the essence
of the term.However, it is easier to describe what a Trust is.
An operational Trust has at least four ingredients. One
is the 'Author of the Trust' who creates the Trust. He reposes confidence or trust
in one or more persons to execute the objects of the Trust.The persons in whom
the confidence is reposed are the 'Trustees.'The person for whose benefit the
Trust is created is the 'Beneficiary.' The initial money raised for the trust
is its 'Corpus.' The Trust mayor may not have immovable properties. If you are
dealing with a Trust property or planning to purchase property from a Trust, you
have to first check out whether it is a Private or a Public Trust, or whether
it is a Religious Trust. Depending on the type of Trust, the approach will vary.
One of the ways of finding out whether a Trust is a Private
or a Public Trust is to see what its objects are, and who the beneficiaries are
by checking out the Trust Deed. If the beneficiaries are identifiable, then most
probably it is a Private Trust. If specific beneficiaries are not identifiable
and the beneficiaries are the general public or sections of the public, then it
is a Public Trust.
Bequests
This is very critical in dealing with the properties of a
Trust. The next thing is to see as to how the property was acquired by the
Trust. The Trust can acquire properties by bequests, that is, testamentary
dispositions made by persons through a will. It can acquire properties by
outright purchase or by other modes.Frequently, properties are also endowed or
orally transferred to the Trust. Separate declarations are made confirming the
transfer. Though there may not be any registered document, giving property to a Trust by a valid endowment or oral transfer is valid.This has to be ascertained
from the documents.
A distinction has to be made on how the property is
brought in, and on the constitution of the Trust. As per the Indian Trusts Act
1882, a Trust connected with an immovable property has to be constituted by a non-testamentary
instrument in writing signed by the Author of the Trust or the Trustee and
registered.The Will of the Author of the Trust or the Trustee can also constitute
it. As far as movable properties are concerned, a Declaration of Trust has to
be made and ownership of the property transferred to the Trust. A Trust cannot
be constituted in a fraudulent manner or to defeat the rights of persons
claiming interest in the property.
You also have to check whether there is a complete
divestment of right, title and interest of the Author of the Trust or the Donor
in the property. The documents to be checked could include declarations, tax
records, and other documents evidencing dealings of the Trust. As far as sale
of Trust property is concerned, especially a Public Trust, it is the deed,
which governs the same.
There should be a clear provision in the Sale Deed
enabling the Trustees to sell property. If this provision is not clearly found
in the Trust Deed, then court permission is required for the sale.This
permission has to be obtained depending on whether the Trust is a Private or a Public
Trust. Any direction contained in the relevant Trust Deed for effecting the sale has to be strictly met. In the case of
Public Trust or Charities ,permission from the Income Tax Department may be
required.
The Trust must be able to give you the title deeds and
deliver vacant possession of the property, unless otherwise agreed. The persons
signing on behalf of the Trust should be empowered under the Trust Deed or as
per directions of court. The Sale Deed or Conveyance has to be stamped and
registered as usual. Any litigation pending against the Trust should not affect
the transfer of property.
The sale of the Trust property should have been made
during the term of the Trust. A Public or a Charitable Trust is, however,
irrevocable and is designed to have perpetual existence, unless terminated by
an order of court. In certain Public and Charitable Trusts, the competent court can frame a scheme and the property has to be dealt with in accordance with the
directions or provisions of the said scheme. If authorization is required from
the Board of Trustees or any other formality has to be fulfilled, then the same
has to be complied with.
Sale of properties by Trusts, which are basically
educational institutions, or religious trusts is governed by different
procedures.It is best to obtain competent professional advice on various aspects of the purchase, especially, the necessity of approaching the court for
obtaining suitable orders or electing to purchase the property based on the terms
and directions contained in the Trust Deed.
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