Q&As

How is security taken over land held by trustees for a beneficiary who is a borrower?

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Produced in partnership with Brian Cain
Published on LexisPSL on 25/05/2018

The following Banking & Finance Q&A produced in partnership with Brian Cain provides comprehensive and up to date legal information covering:

  • How is security taken over land held by trustees for a beneficiary who is a borrower?
  • Summary
  • Dealing with trustees
  • Security in support of beneficiary borrowings
  • Two trustees or a trust corporation
  • Beneficiary security

How is security taken over land held by trustees for a beneficiary who is a borrower?

This Q&A describes the steps that a lender should take to ensure that it gets valid security over land held by trustees for a beneficiary.

For general information on taking security over land, see Practice Note: Taking security over land and for a discussion of enforcing security over land, see Practice Note: Enforcement—security over land.

Summary

Trustees may hold the legal title to land (and be registered as such at the Land Registry) for a beneficiary for any number of reasons eg to maximise the tax efficiency of an investment property finance transaction.

When dealing with trustees and their beneficiaries, a lender must make additional checks to ensure valid security interests are created and these are described below. A security holder of or with a mortgage over land must deal with at least two trustees or a trust corporation. This is to ensure that any beneficiary interests in the land are overreached (see sections 2, 27, 208(1)(xxi) of Law of Property Act 1925 (LPA 1925)).

A lender must also conduct checks in relation to the capacity and powers of the trustees.

Dealing with trustees

An English law trust has no separate legal personality. Security over trust assets can only be created by the relevant trustees and they must act in accordance with the powers conferred upon

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