Trust sales: follow rules

Check that the trust has an IRD number - you will need one to sell the property. Photo / Getty

Selling a property that's part of a trust can get complicated, so it's a good idea to get a handle on the process before you start.

Each trust is different. First, talk to the trust's lawyer — ideally the one who was involved in setting it up. They will be able to check the terms to ensure whether its assets can be sold (some are protected from sale).

Check the trust has an IRD number — you will need one to sell the property. There may also be tax implications, depending on when it was bought and whether it is the main family home. If the property can be sold, all the trustees must agree.

A legal resolution documenting the decision to sell must be signed by the trustees.

Once this is in train, start thinking about how to sell the property. Selling it privately will need a registered valuer's assessment, a requirement of the Trustee Act. But while a private sale can save you money on commission, it can be complex.

If you use an estate agent, the trustees must agree on the particular agent.

It's a good idea to nominate one or two trustees to be in control of the process. Ensure they document all conversations and decisions. Again, ask your lawyer for advice.

A trustee has to meet a number of legal obligations. For example, if you allowed the property or other assets to be sold cheaply, you could be liable for breaching your duty of diligence and prudence.

The trustees, even if they are not all involved in selecting the estate agent and method of sale, must sign the agency agreement to list the property.

It's a contract between the trust and real estate agent that sets out how the property will be marketed and what the commission will be if it is sold.

Again, this must be documented in trustee resolutions in case something goes wrong later. When the property is sold — again, when all trustees are happy with the price and conditions — they must sign the sale and purchase agreement.

The buyer's deposit will be held in a lawyer's or estate agent's trust account. After settlement, the trust's assets register should be updated to reflect the sale.

Upon settlement, you need your lawyer or conveyancer to hold proceeds (less any fees) in the family trust's bank account. The proceeds will remain in the family account until they are distributed in accordance with the trust deed.