Real Estate Investor Magazine South Africa August 2014 | Page 8

ASK THE EXPERTS Q Q A A Acquiring investment property in a trust Falatsi Mofokeng Asks: Where do I start to open a trust in which to acquire property for buy-to-let, so I can earn a passive rental income? Meyer de Waal of Oosthuizen & Co Meyer de Waal Attorneys Answers: A Trust is a legal entity created by a person – called the Founder/Donor - who places assets (usually an initial cash donation) under the control of a group of selected people – called the Trustees – who are tasked with managing the current and future assets of the Trust for the benefit of certain third parties, called the beneficiaries. The Trust, as a legal entity, is created through a founding document, called a Trust Deed, which must be drawn up by a qualified attorney with experience in Trust Law. An attorney will be able to advise regarding the wording of the Trust Deed as well as the immediate and long-term implications thereof for the Founder, the Trustees and the beneficiaries; the legal registration of the Trust; and obtaining Letters of Authority from the Master of the High Court which will allow the Trustees to act on behalf of the Trust. Thereafter, the Trust must be administered correctly according to the stringent requirements prescribed in the Trust Property Control Act, and the terms of the Trust Deed. If administered correctly, a Trust offers property investors many advantages. The correct administration of a Trust, however, can be burdensome, but it is absolutely necessary if the investor is to enjoy the advantages of owning investment property in a Trust. It is highly advisable to get advice from a registered and qualified professional that specialises in Trusts before you make this decision, as there are tax and cost implications, as well as other considerations, that need to be taken into account. Q Q A A Trustees making unpopular rules Kim Allen Asks: What is the legal position regarding trustee rule-making? What can property owners in a sectional title scheme do about trustees making unpopular rules? Anton Kelly of Paddocks Answers: A sectional title scheme must be run in accordance with the provisions of the Sectional Titles Act and the set of management and conduct rules prescribed in the regulations, unless these rules are changed by the developer at the opening of the register for the scheme. Once the scheme is up and running, only the body corporate can change the rules or make new rules, through unanimous resolution for management rules and by special resolution for conduct rules. So, although many trustees make, or try to make, scheme rules, they are not entitled to do so. They are, however, entitled to make procedural policy which, like the rules, can be roughly divided into management processes (for trustees and managing agents) and conduct policies (for residents). Section 44(1)(d) and (e) are general enough to apply to the kind of things on which trustees could make policies. But, whatever the nature of the policies, they must be made by a properly minuted trustee resolution, published to owners and occupiers, and reviewed at least every year, perhaps at the AGM, when any directives or restrictions on the trustees’ activities and changes to policies can be accommodated. Two basic principles can be applied to trustee policies: they must be reasonable and made to achieve an appropriate end; and owners can give directions to trustees and restrict their activities. So, if enough owners don’t like a trustee policy, they can get it changed at a general meeting. Do you have a property question you would like answered by our experts? If so, post it on ASK THE EXPERTS on www.reimag.co.za or email [email protected] 6 August 2014 SA Real Estate Investor www.reimag.co.za