Earlier this summer, Florida’s land trust statute underwent a substantial revision. Below are the major highlights:
1. Florida has separated out the title aspects of land trusts from the other provisions. This is because the title aspects apply both to land trusts under the land trust statute, and trusts that are not land trusts (i.e., Chapter 736 trusts). The title rules are now in Fla.Stats. §689.073(1). The land trust provisions remain in Fla.Stats. §689.071.
2. The title aspects (relating generally to a trustee having full authority to sell, mortgage, and similarly deal with the subject real property) are pretty much the same as they used to be, and are triggered by the designation of the titleholder in a recorded transfer instrument as “trustee” or using “as trustee” language, and specifically conferring on the trustee the power and authority to protect, to conserve, to sell, to lease, to encumber, or otherwise to manage and dispose of the real property described in the recorded instrument. As noted above, these provisions apply both to land trusts and Chapter 736 trusts. The purpose of these title rules is to allow persons dealing with the trustee in a sale or conveyance or similar title transactions to deal only with the trustee and to not be concerned about rights of beneficiaries or other provisions of an unrecorded trust instrument.
3. The law is now clear that a land trust is generally not subject to Chapter 736 (the provisions of Florida law governing trusts). This is in accord with the general difference between a land trust and other trusts subject to 736. Land trusts are principally only title holding devices, with the trustee subject to substantial beneficiary control. Because of the limited authority and discretion of a land trustee, the more extensive provisions of Chapter 736 do not apply.
4. So what is a “land trust” that is subject to Fla.Stats. §689.071? For trusts formed after June 28, 2013, there are two elements: (a) A recorded instrument confers on the trustee the title powers and authorities described in Fla.Stats. §689.073(1) (as discussed under 2. above), AND (b) the trustee’s duties under the trust agreement, including any amendment made on or after such date, are no greater than those limited duties described in paragraph (2)(c) of Fla.Stats. §689.071. Whether earlier trusts are land trusts will turn on an express designation as such in a recorded instrument or intent of the parties to have a land trust can be discerned, and whether an express or implied intent to be governed by Chapter 736 exists.
5. The beneficiary’s interest in a land trust will now be treated as personal property (and not real property) ONLY IF such a declaration is made in a recorded instrument or in the trust agreement.
6. The UCC is coordinated with the statute in regard to granting security interests in a beneficiary’s interest. If the interest is treated as personalty, the personalty provisions of the UCC secured interest rules apply – if it is real property, a mortgage will be needed.