Offers in Trust and Assignments

An agreement of purchase and sale can be executed “in trust” by one individual on behalf of another. However, simply inserting the words “in trust” into the agreement, without including any sort of clause or provision, is not sufficient enough to remove personal liability for the trustee who signs the document. When a trustee signs an agreement of purchase and sale they will be considered liable for all obligations under the agreement, even though they are only signing “in trust”.

It is possible for the trustee to assign the offer to a third party, referred to as the “assignee”. In these circumstances, the trustee who is currently holding the property in trust (referred to as the “assignor”) would transfer the obligations under the agreement to the assignee. However, when this occurs, the assignor is not automatically relieved of liability when the agreement is transferred to the assignee. As a result, the assignor should ensure that the agreement contains a clause which allows for an assignment and removes all obligations and personal liability on the part of the assignor. Here is an example of a clause to insert:

The offer is made by [assignor name] in trust, with the right to assign, and without personal liability. Upon assignment by the assignor to the assignee, and upon the assignee accepting the obligations herein, the assignor shall be relieved of all liability under the agreement of purchase and sale.

Also note that specific issues can arise in assignment-of-agreement transactions. Realtors should be aware of these issues so that they can advise their client in the early stages of the transaction. For instance, the assignor may retain the services of a home inspector or other type of consultant. It is important to ensure that if any documents/ reports are required for the transaction that the person obtaining them indicates that another individual (the assignee) is involved with the transaction, and should therefore be identified within the documents that are obtained so that the assignee can rely upon these documents if necessary.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.