Summary:
A property owner appeared in a San Francisco superior court to evict a tenant to make room for a family member.
Property owners sued in Superior Court to evict the tenant under a provision of the San Francisco, CA, rent control ordinance that allows a landlord to evict tenants from a unit to make the unit available for a close relative of the landlord. The issue is referred to as the family-in provision.
In the initial superior court trial, the tenant demurred to the complaint, which is a legal term meaning they objected to the complaint, arguing that the landlord was no such natural person or a group of natural persons because the family revocable living trust held the title to the apartment building. The trial court accepted the argument, sustained the demurrer without leave to amend, and entered a judgment in favor of the tenants in December 2019.
The court's ruling, which stated that the family trust was not 'a natural person' and had no authority to bring the litigation, carries significant legal implications. The sustain without leave means that the complaint does not state the cause of action and cannot be amended to state a cause of action, further highlighting the profound legal intricacies and the gravity of the situation.
There has been a decades-old misconception that a family trust may hold title to real estate.
Appeals court decision:
In the appellate court decision, Boshernitsan v. Bach (2021) 61 Cal. App. 5th 883, the court ruled that a family trust is framed in a way where the 'trustee owns the property on behalf of the Trust, as a matter of law.' This decision necessitates a shift in our understanding of how a family trust title ownership is held and possibly requires a new signature block on the documents.
The property owners appealed the verdict:
The appeal court rendered an opposite verdict. After arguments, the appeals court agreed that a family trust is framed when the trustee owns the property on behalf of the Trust as a matter of law. The court reversed the lower court's ruling and awarded judgment to the Appellants (property owners) with attorney fees for the appeal process.
The court stated that the laws of trust state that trusts do not, as entities, hold title to a property. A trust has a fiduciary relationship concerning the real property, not as a legal entity. However, the trust property is held in trust in a divided ownership scheme. The trustee holds legal title on behalf of the trust, but the beneficiaries have equitable title.
Legal title to a trust property refers to the ownership that comes with control rights and compliance with the laws. As the legal owner, the trustee has the right to manage and control the property. An equitable title, on the other hand, gives the beneficiaries the right to enjoy the future benefits that will eventually come with the ownership of the property as the trust assets are distributed. This means they have a beneficial interest in the property, even though they do not have direct control over it.
The bedrock principle states that a trustee holds title to the trust assets until the trustee is replaced or the assets are distributed to beneficiaries out of the trust.
Comments:
A family or any other form of trust cannot own real estate without a trustee. A trustee is a person or entity appointed to manage the trust assets and carry out the terms of the trust. Also, a trust has no authority to act without a trustee. A trust is a legal arrangement whereby the trustee holds title and manages the assets on behalf of the beneficiaries. The Trustee is the legal owner of the trust assets on behalf of the trust. Drawing up the signature block on documents is essential.
As the legal owner of the trust assets, the trustee has a fiduciary duty. This means they are legally bound to act in the best interest of the beneficiaries and manage the trust assets according to the terms outlined in the trust document. A fiduciary duty is the highest standard of care, requiring the trustee to act in good faith, honestly, and always in the best interest of the beneficiaries. The trust document is a legal agreement that clearly defines the trustee's powers, authorities, and responsibilities in managing the trust assets, and it must be followed in all trust-related matters.
Only trustees can hold legal title to real property, not a trust. Unlike a company, a trust is not a separate legal entity. The trust document is a contractual agreement between the trust's key parties.
Given the complex nature of trust law, it is always advisable to consult a competent lawyer for further inquiry. Their expertise can provide crucial guidance and support in navigating legal matters related to family trusts and real estate, reassuring you in your legal affairs.