Many of us have spent the lion’s share of the last six months trying to juggle remote working, home-schooling children and dealing with a general sense of existential angst. Sounds like overreaching, no?
Though we don’t doubt it feels that way… that’s not quite the sort of overreaching we were thinking of.
Overreaching is actually another one of those technical lawyer-ly terms that might as well be double-dutch to anyone who isn’t in the industry. It refers to a process that sometimes comes into play during a sale, though only in cases where the property or land that’s being sold is held in a legal trust.
What do you need to know about overreaching?
If you’re the trustee of a property or piece of land and are considering selling it, you’ll need to know whether the principle of overreaching will apply. The key question here is who the beneficiaries of the trust are, and whether or not they’re named on the title deeds of the property or land in question.
For example, if you’re the trustee of a property that’s being held in trust for children, the children themselves won’t be named on the title deeds. Even though they’re not legally named as the owners of that property, the children would obviously still be entitled to the proceeds of that property if it was sold.
The process of overreaching is when the rights of the beneficiaries of a trust transfer from the right to hold an interest in the property or land itself to the right to hold an interest in the proceeds of the sale of that property or land.
Why is overreaching needed?
The sale of property or land that’s subject to a trust with beneficiaries is a bit of a touchy subject. Us legal types need to make sure that the interests of both the trust beneficiaries and the buyer of the property are being met.
A big concern here is that if the beneficiaries of a property-holding trust are not named on the title deeds of that property, they would not be required to give their consent for the property to be sold. It would therefore be entirely the responsibility of the trustees to decide whether the sale was in the best interests of the beneficiaries.
There’s also the worry that the buyer of the property might hand over the cash for the property only to find that it came with proverbial hangers-on who were still legally entitled to benefit from it. This would clearly be what’s known as a bad receipt!
Overreaching ensures that all parties end up with interests over the right thing at the end of the sales process.
Will you need to appoint a second trustee?
A sole trustee cannot choose to sell property or land that’s held in trust and use overreaching to convert all interests to interests over the proceeds. A second trustee is needed to confirm that the sale is in the best interests of the beneficiaries of the trust.
The good news is that it can be reasonably straightforward to appoint a second trustee. This can usually be done as part of the conveyancing process.
If you have any questions about overreaching or appointing a second trustee, please do get in touch. (Apologies, but we can’t promise to be helpful with any queries about home-schooling or existential angst).