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Frequently Asked Question: Real Estate Law

"What are the legal consequences of signing Offers to Purchase "in trust"?"

Where a party purports to contract as the trustee rather than in his personal capacity, this must be expressly and unequivocally maintained if he to avoid personal liability. In a 1982 Ontario case (Shuper v. Noble), the Court refused to accept the defendants's purchaser's contention that he was not liable for damages arising from breach of an agreement of purchase and sale on the basis that he had entered into it as a trustee for someone else. The Court found that the purchaser being named in the agreement as "Karl Noble (In Trust)" was, of itself, insufficient to establish that he had entered into the contract in anything other than his Trustee v. Galway, Trustee), the Court held that a purchaser who purportedly bought a property and gave back a mortgage on it to the vendors in trust for an unnamed principal was personally liable when the mortgage went into default. The court found that the purchaser's use of the words "trustee" and "in trust" in connection with his name throughout the various documents connected with the transaction were, in the absence of something more, insufficient to grant personal immunity.

Therefore, to protect oneself from liability, a trustee executing an offer to purchase must state, or example, "John Smith, in trust. without personal liability". The pitfall, if such language is used, is that a vendor may not want to sign a contract with such an entity, because the vendor will have more course if the trustee purchaser breaches the agreement. Another way a purchaser may hide his identity from a vendor is to have the offer to purchase signed by a limited company. However, in this case, the purchaser would have to go to the expense of incorporating a company if he or she does not already have one. In such event, the purchaser would want to ensure that the limited company has no assets so that, in the event of breach of the agreement or other dispute with the vendor, no assets of the purchaser's company would be potentially subject to seizure pursuant to a court judgment.

The foregoing offers legal information of general concern and is not intended to provide legal opinions. Readers should seek professional legal advice on the particular issues which concern them. We would be pleased to elaborate on any information contained above and how it may apply to your specific circumstances.