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A common misperception of trusts is that they are legal entities that, like corporations, can hold title to real estate and other property.  A new California appellate decision, Boshernitsan v. Bach (2021) 61 Cal.App.5th 883, addresses that misunderstanding.

The litigation arose in San Francisco County Superior Court under the local rent control ordinance.

Mark Vinokur and Rimma Boshernitsan held a two-unit property as trustees of the revocable living trust that they created.  They lived in one unit and tenants rented out the other.  They served a notice of termination on the tenants, saying that they intended to move Vinokur’s mother into the unit under a family move-in provision of the ordinance.

Per the ordinance, only landlords who are “natural persons” may evict tenants for the purpose of moving in family members.

A Superior Court judge ruled in favor of the tenants on the ground that the property was owned by the Vinokur and Boshernitsan Living Trust, not a “natural person.”

The Court of Appeal reversed.  The vesting deed to the property showed that it had been deeded to Vinokur and Boshernitsan as trustees of the Trust such that the “plain terms” of the deed confirmed title was held by the trustees, not the Trust.

Moreover, “the law of trusts” confirms that “trusts do not themselves as entities hold title to property.”  A trust is a “fiduciary relationship with respect to property,” not a legal entity.  When property is “held in trust,” there is a divided ownership of the property, “generally with the trustee holding legal title and the beneficiary holding equitable title.”  The trust itself owns nothing because it is not an entity capable of owning property.

The court added, perhaps gratuitously, that when a person (known as a “settlor”) transfers property to a revocable living trust, “there is even more reason to conclude that the property’s title is held by the trustees, not the trust.”  This is so because the settlor retains the equivalent of full ownership of the property.

As to several cases suggesting that a trust may own property, the Boshernitsan court observed that “these imprecise references are hardly compelling, particularly when the issue being disputed did not involve an ownership distinction between a trust and a trustee.”  Instead, the “bedrock principle” is that the trustee “holds legal title to property held in trust.”

The appellate court thus classified Vinokur and Boshernitsan as “natural persons” eligible as landlords under the ordinance to invoke the family move-in provision.  However, given the ordinance’s purpose to protect San Francisco tenants, the court limited its holding “to the situation in which a landlord is settlor, trustee and beneficiary of a revocable living trust.”  The court suggested that trustees might be deemed “natural persons” under the ordinance even if they are not also settlors and beneficiaries, but left that question for another day.

In sum, precision as to how a California trustee holds property can be a distinction with a difference in some legal contexts, a point that trustees, attorneys and courts should keep in mind.