Bulletin: SLS2022001

Dear Associates:

The Company has seen an increase in transactions involving Delaware Statutory Trusts (“DST”), most commonly as buyers/borrowers in commercial transactions. One reason may be that DSTs are recognized as vehicles for 1031 tax deferred exchanges in certain circumstances. DSTs are created under Delaware law, 12 Del. C. §3801, et seq. Under the statute a statutory trust is a separate legal entity, unless otherwise provided in its certificate of trust and its governing document (see 12 De. C. §3801 (i)). While detailing all requirements of the statute is beyond the scope of this bulletin, some requirements of note include 12 De. C. §3807, which provides, subject to limited exceptions, that every statutory trust “shall at all times have at least 1 trustee which, in the case of a natural person, shall be a person who is a resident of this State or which, in all other cases, has its principal place of business in this State.” The trust must also file a certificate of trust containing specific information.

You may be asked to insure title held directly in the name of the trust, such as “ABC Multifamily DST, a Delaware Statutory Trust” and issue a lender’s policy insuring a lien secured by property held in the name of the trust. In many states trusts are generally not separate legal entities, but are a fiduciary relationship and title to property held in trust is typically taken in the name of the trustee, as trustee of the trust. For example, “__________, trustee under the (declaration of trust) (trust agreement) dated _____, made by ____________, settlor, (for the benefit of ______ ), and recorded in Book _____ , Page _________.”

A careful review of the trust documents and state law is necessary to determine if title is insurable in a DST. Therefore, underwriter approval is necessary if your state does not recognize trusts as separate legal entities and you are being asked to issue a policy in which title is held in the name of a trust, or in which title is being transferred directly into a trust.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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