Bare trusts are increasingly being used when investors acquire investment properties as they provide a number of significant advantages. Anyone considering purchasing an apartment building should fully examine the potential use of a bare trust arrangement.
What is a bare trust? A bare trust is a legal structure that facilitates the division of the beneficial and legal ownership. Typically a bare trust is the use of a company to hold the legal or registered title to property as nominee, in trust for the “real” or beneficial owner of the property.
The beneficial owner as the “real owner” of the property is entitled to receive all revenue from the property and is the decision maker with respect to all aspects of the property. The beneficial owner determines the rents charged, the terms of any leases or tenancy agreements, who to hire as property manager, who to finance the property with and when to sell the property. The bare trustee typically has no significant powers or responsibilities as the beneficial owner continues to have complete control over the property. The bare trustee can only act, and must act, at the direction of the beneficial owner.
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