1973, April, Pg. 15. Trusts and Joint Ventures: How Trusting or Venturesome Should the Title Examiner Be?.

• Author: by G. H. Mayes

2 Colo.Law. 15

The Colorado Lawyer

1973.

1973, April, Pg. 15.

Trusts and Joint Ventures: How Trusting or Venturesome Should the Title Examiner Be?

15Vol. 2, No. 6, Pg. 15Trusts and Joint Ventures: How Trusting or Venturesome Should the Title Examiner Be?by G. H. MayesOne of the most vexing problems to a title examiner today concerns trusts and joint ventures and the question of whether either is an entity capable of taking title to real property. The current popularity of the real estate investment trust (or business trust) and the joint venture has given life to an old controversy. Because of the favorable tax treatment afforded trusts which qualify under the Real Estate Investment Trust Act of 1960,(fn1) and because of the widespread use of the joint venture in real estate syndications, we see many more instances of titles being acquired by or conveyed to trusts and joint ventures. How that should be accomplished is the subject of this article.

Neither the trust nor the joint venture is an entity recognized by Colorado law and, hence, neither can take title in its own name. Title must vest in one or more of the trustees or joint venturers or in a legally recognized nominee. It is a fundamental principle of law that a grantee in a deed of real property must be a legal entity.(fn2) A deed to an unincorporated association not an entity may be void or, at best, may vest title in the members of that association, namely the beneficiarcies or the joint venturers, individually.(fn3)

The American Land Title Association Owners Policy of Title Insurance authorized for use in Colorado insures that the vestee has marketable title and can convey in the insured name. It is improper, therefore, to insure title in a trust or a joint venture if in fact title is in the beneficiaries or the joint venturers, and certainly so if the deed is void.

The TrustContrary to the controversy that surrounds the joint venture, most authorities are agreed that a trust is not an entity and that title cannot be placed in the trust name.(fn4) Real Estate Standard No. 11 of the Colorado Bar Association (October 19, 1946) recognizes the requirement of an entity as grantee in a deed of real property. It holds that a conveyance to a decedent's estate is inadequate. Logic would dictate that the same result would be true in a conveyance to a trust.(fn5)

Because of the entity problem some states have enacted statutes that require title to real property to be placed in the name of the trustee(s): 1. Alabama: "Business Trusts," Title 58, § 29, Code of Alabama.

2. Georgia: "Deeds to Beneficial Interest," §§ 108-601 et seq., Georgia Code Annotated.

3. Kentucky: "Business Trusts," §§16386-390, Kentucky Revised Statutes.

4. Mississippi: "Investment Trusts," §§ 5570.01 et seq., ch. 7A, Mississippi Code Annotated.

Other states have hit the problem head-on and by statute allow title to vest in the trust name: 1. Indiana: "Indiana Business Trust Act," §§ 23-5-1 et seq., Burnes Indiana Statutes.

2. Maryland: "Real Estate Investment Trust," Article 78c, Annotated Code of Maryland.

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