Selling a House Held in Trust

Property held in trust is more common in England and Wales than many people realise. Trusts are used to manage inherited property, protect assets for vulnerable family members, hold property for minors, and structure ownership for tax planning purposes. When the time comes to sell a trust property, the process is broadly similar to a standard sale but with additional legal steps that trustees must follow to comply with their obligations and protect both the beneficiaries and the buyer.

This guide covers the key types of trust that hold residential property, the powers and duties of trustees when selling, the tax implications of a trust sale, and how the conveyancing process differs. If you are a trustee preparing to sell, or a beneficiary wondering how the process works, this guide will help you understand what to expect.

Types of trust that hold property

The type of trust determines who has the power to sell, whether beneficiary consent is needed, and how the sale proceeds and tax liabilities are handled. The three most common types of trust holding residential property in England and Wales are:

Bare trust

In a bare trust, the trustees hold the property as nominees for the beneficiary, who has an absolute right to the property and its income. The beneficiary (provided they are over 18 and of sound mind) can direct the trustees to sell the property at any time under the Saunders v Vautier principle. Bare trusts are commonly used to hold property for children until they reach 18, or where property is held by nominees on behalf of the true owner.

For tax purposes, bare trusts are transparent — the gain on sale is treated as the beneficiary's gain, and they use their own CGT rate and annual exempt amount. This makes bare trusts the simplest type for tax purposes.

Life interest trust (interest in possession trust)

A life interest trust gives one beneficiary (the life tenant) the right to occupy the property or receive income from it for the rest of their life. When the life tenant dies, the property passes to another beneficiary (the remainderman). This structure is frequently used in wills — for example, a husband may leave the family home to his wife for her lifetime, with the property then passing to his children.

Selling a life interest trust property can be more complex because the life tenant's right to occupy must be addressed. If the life tenant agrees to the sale, the proceeds are typically reinvested to provide income for them. If the life tenant objects, the trustees may need to apply to the court under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) for an order permitting the sale.

Discretionary trust

In a discretionary trust, no beneficiary has an automatic right to the trust property or its income. Instead, the trustees have discretion to decide which beneficiaries receive what, guided by the trust deed and any letter of wishes left by the settlor. This gives maximum flexibility but means the trustees carry significant responsibility.

Discretionary trusts are the most heavily taxed type of trust. They are subject to the relevant property regime, which can include entry charges, ten-year anniversary charges, and exit charges when property is distributed to beneficiaries. Trustees should always take specialist tax advice before selling property held in a discretionary trust.

Trustee powers and the duty of care

Before selling, trustees must confirm they have the legal power to do so. The power to sell may come from the trust deed itself or from statute. The Trustee Act 2000 provides trustees with a general power of investment (section 3) and a power to acquire land (section 8), but the power to sell existing trust property typically derives from the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA), which gives trustees of land all the powers of an absolute owner (section 6).

Crucially, the Trustee Act 2000 imposes a statutory duty of care on trustees (section 1 and Schedule 1). When exercising powers of investment or dealing with trust property, trustees must act with the care and skill that is reasonable in the circumstances, taking into account any special knowledge or experience they have or hold themselves out as having. In practice, this means trustees selling property should:

• Obtain a professional valuation to ensure the property is sold at the best price reasonably obtainable
• Market the property properly rather than accepting a quick, below-market offer
• Take professional advice from a solicitor and, where appropriate, a surveyor or estate agent
• Consider the interests of all beneficiaries, including those with future interests (such as remaindermen in a life interest trust)
• Act unanimously — all trustees must agree to the sale unless the trust deed provides otherwise

Trustees who breach their duty of care may be personally liable to the beneficiaries for any resulting loss. This is why it is essential to keep records of all decisions, valuations, and professional advice obtained during the sale process.

Beneficiary consent requirements

Whether trustees need the consent of beneficiaries before selling depends on the type of trust and the terms of the trust deed:

In addition, some trust deeds include specific provisions requiring the consent of named individuals (such as a protector or guardian) before property can be sold. Trustees should review the trust deed carefully and take legal advice before proceeding. For property originally acquired through inheritance, see our guide on selling after probate for additional context on the process.

Capital Gains Tax on trust property sales

The capital gains tax position when a trust sells property depends on the type of trust. Trustees should understand the rates and reliefs available before marketing the property, as the tax liability can significantly affect the net proceeds available to beneficiaries. For background on how CGT applies to inherited property, see our dedicated guide.

The gain is calculated as the difference between the sale price and the acquisition cost (or probate value if the property was inherited), less allowable deductions including solicitor fees, estate agent commission, and the cost of any improvements (but not maintenance or repairs). Trustees must report and pay CGT within 60 days of completion using HMRC's online CGT reporting service.

Principal private residence relief is not generally available to trusts. However, there is a limited exception: if a beneficiary with a life interest or a right to occupy the property under the trust deed has used the property as their main residence, the trustees may be able to claim the relief on their behalf. This is a technical area and specialist tax advice is essential.

Trust Registration Service (TRS)

Since 2022, most express trusts in the UK — including those holding property — must be registered with HMRC's Trust Registration Service (TRS). This requirement was extended by the Fifth Anti-Money Laundering Directive, which was transposed into UK law through the Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022.

Trustees must register the trust within 90 days of its creation and keep the information up to date. The register records details of the trustees, beneficiaries, settlor, and the trust's assets. After a property sale, trustees must update the TRS to reflect the change in trust assets. Failure to register or keep the information current can result in penalties from HMRC.

There are limited exemptions from TRS registration. Certain will trusts that are wound up within two years of death and trusts that arise solely under intestacy rules are exempt. However, any trust that holds UK land or property at the point of sale will almost certainly need to be registered. Trustees should confirm their registration status early in the sale process.

Overreaching: why two trustees are needed

One of the most important conveyancing requirements when selling trust property is overreaching. Under sections 2 and 27 of the Law of Property Act 1925, when the purchase price is paid to at least two trustees (or a trust corporation), the beneficiaries' interests are automatically transferred from the land to the sale proceeds. This protects the buyer by ensuring they receive the property free of any beneficial interests.

If overreaching does not occur — for example, because only one trustee signs the transfer deed — the buyer may take the property subject to the beneficiaries' rights. This is a serious risk that any competent buyer's solicitor will refuse to accept.

If there is only one surviving trustee, a second trustee must be appointed before the sale can proceed. This appointment is made under the terms of the trust deed or, if the deed is silent, under the provisions of the Trustee Act 1925 (section 36). The appointment should be made by deed and the new trustee must be registered at the Land Registry before or at the same time as the sale completes. This process can add several weeks to the conveyancing timeline, so it should be addressed as early as possible.

How conveyancing differs for trust property

The conveyancing process for a trust sale follows the same broad stages as a standard sale — instruction, contract pack, enquiries, exchange, and completion — but with several additional steps. For an overview of the standard process, see our guide on how long conveyancing takes. Here is what differs for trust sales:

1. Trust documentation. The seller's solicitor must provide the trust deed (or will creating the trust), evidence of the trustees' identity, and confirmation of their authority to sell. For a full list of what you need, see our guide on documents needed to sell a house.
2. Two trustees required. The buyer's solicitor will check that there are at least two trustees (or a trust corporation) to ensure overreaching can occur. If a second trustee needs to be appointed, this must be done before exchange.
3. Land Registry restrictions. Trust property is often subject to a Form A restriction on the title register, which states that no disposition (sale or transfer) can be registered unless the purchase money is paid to at least two trustees or a trust corporation. The buyer's solicitor will verify this restriction and ensure it is satisfied on completion.
4. Additional buyer enquiries. The buyer's solicitor will raise enquiries about the nature of the trust, the trustees' power to sell, whether beneficiary consent has been obtained (where required), and whether the trust is registered with the TRS. These additional enquiries can add one to three weeks to the conveyancing timeline.
5. Transfer deed. All trustees must execute the transfer deed (TR1 form). If a trustee is unable to sign in person, a power of attorney may be used, but this creates additional checks for the buyer's solicitor.

For a breakdown of what conveyancing typically costs, including the additional work involved in trust sales, see our guide on conveyancing costs.

Step-by-step process for selling a trust property

Here is the full process from initial preparation through to completion:

1. Review the trust deed. Confirm the trustees have the power to sell and identify any consent requirements or restrictions.
2. Check the number of trustees. If there is only one trustee, appoint a second by deed before proceeding.
3. Instruct a solicitor. Choose a conveyancer with experience of trust property sales. Not all firms handle trust conveyancing regularly.
4. Obtain a professional valuation. The Trustee Act 2000 duty of care requires trustees to take proper advice and achieve the best price reasonably obtainable.
5. Obtain beneficiary consent where required. For bare trusts, the beneficiary must consent. For life interest trusts, engage the life tenant early.
6. Check TRS registration. Confirm the trust is registered with the Trust Registration Service and that the information is up to date.
7. Gather documents. Assemble the trust deed, title deeds, trustee identification, EPC, and the completed TA6 and TA10 forms.
8. Market the property and accept an offer. List through an estate agent. Instruct your solicitor to prepare thedraft contract pack.
9. Respond to enquiries. Expect additional trust-specific enquiries from the buyer's solicitor. Respond promptly with supporting documentation.
10. Exchange contracts. All trustees must agree to exchange. The buyer pays the deposit.
11. Completion. All trustees execute the TR1 transfer deed. The purchase price must be paid to two trustees or a trust corporation to achieve overreaching. After completion, update the TRS and report any CGT liability within 60 days.

Common pitfalls when selling trust property

Trust property sales can encounter problems that do not arise in standard transactions. Being aware of these issues and addressing them early can prevent costly delays:

• Only one trustee. If the other trustee has died and no replacement has been appointed, the sale cannot proceed until a second trustee is in place. This is the most common cause of delay in trust sales.
• Missing trust deed. If the original trust deed has been lost, obtaining a certified copy or reconstructing the terms can take considerable time. Solicitors should address this at the outset.
• Beneficiary disputes. Disagreements among beneficiaries — particularly in life interest trusts where the life tenant does not want to move — can delay or prevent a sale. Mediation or a TOLATA application may be necessary.
• Unregistered trust. If the trust is not registered with the TRS, this must be remedied before completion. The registration process typically takes two to four weeks.
• CGT reporting deadline. Trustees must report and pay CGT within 60 days of completion. Missing this deadline incurs interest and penalties from HMRC.
• Lack of professional valuation. Selling without a proper valuation risks a breach of the trustees' duty of care and potential claims from beneficiaries that the property was sold below market value.

Costs of selling a trust property

Trust property sales involve some additional costs beyond the standard expenses of selling. Here is what trustees should budget for:

Sources

• Trustee Act 2000 — legislation.gov.uk
• Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) — legislation.gov.uk
• Law of Property Act 1925 (sections 2 and 27) — legislation.gov.uk
• Trustee Act 1925 (section 36) — legislation.gov.uk
• HMRC — Trust Registration Service guidance, gov.uk
• HMRC — Capital Gains Tax rates and allowances, gov.uk
• HM Land Registry Practice Guide 24 — Private trusts of land
• Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 — legislation.gov.uk
• Law Society Conveyancing Protocol, 5th edition — lawsociety.org.uk

Related guides

• Selling Property as a Trustee

Frequently asked questions