Unit Trust Explained

A unit trust is a legal structure where a trustee holds assets (like land/property) on behalf of unit holders. Each unit holder owns fixed units in the trust, similar to shares in a company, and their entitlement to income or capital is proportional to the number of units they hold.

Roles in a Unit Trust

• Settlor: Creates the trust (lawyer).

• Trustee: Day-to-day manager, legal owner of property.

• Unit Holders: Investors who buy units in the trust. Their ownership and profit rights are fixed based on units held.

• Trust Deed: The rulebook — sets out how units work, how profits are shared, and how units can be transferred.

Benefits of a Trust for Property Investors

Clear Ownership Structure

Each unit holder’s interest is fixed according to the number of units they hold. This makes it easy to calculate ownership percentages, profit entitlements, and decision-making rights. It’s particularly useful where unrelated parties pool funds into one property project.

Profit Distribution Certainty

Unlike a discretionary trust, the trustee of a unit trust does not decide who gets income. Profits, rents, and capital gains must be distributed to unit holders in proportion to their units. This certainty can make investors more comfortable, as their entitlement is locked in.

Ease of Transfer & Entry/Exit

Units can be bought, sold, or transferred without changing the property title. This allows investors to enter or exit the trust without stamp duty on the property itself (only on the unit transfer). It’s a flexible way to raise capital or replace investors mid-project.

Joint Venture Friendly

Unit trusts are often used for joint ventures, as they provide a clear and fair structure where different investors or partners contribute capital and receive proportional returns. This is why many property development syndicates use a unit trust structure.

Bank Loan Benefit

When property is purchased in a trust, the loan is taken out by the trustee on behalf of the trust, not in your personal name. This means the debt usually doesn’t appear on your personal credit file, helping protect your individual borrowing capacity.