Amandine Naudin, Legal Director at RAIZERS and Sandro Lamay-Cubeddu, Account Manager at PONO FINANCIAL SOLUTIONS

1. The security trust, a flexible guarantee

The trust is a particularly secure guarantee adapted to real estate crowdfunding because it is also characterized by its great flexibility, especially when it concerns company shares.

Focus on the security trust

A trust is a guarantee whereby a person (the settlor, who may be the borrower or a third party guarantor for the borrower), temporarily transfers ownership of an asset (shares, real estate, movable property) or a right into an "appropriation asset" (the trust), managed and held by a trusted third party (the trustee) who acts for the benefit of one or more beneficiaries (often the lenders), until repayment of the financing, at which time ownership of the asset is automatically returned to the settlor.


The benefits of the trust are:

Flexible basis: the trust can relate either to the direct real estate asset or to the shares/units of the company holding the real estate asset or even combine several types of assets within a single guarantee ;

Activation of the trust at the option of the lender in the event of default: the lender and borrower may agree to have the trustee/trusted party activate the trust for the benefit of the lender, either by:
○ the assignment of all or part of the assets transferred into trust;
○ the assignment of all or part of the shares/units;
○ the assignment of all or part of the underlying real estate assets.

Different possible trust structures: The assets transferred into trust may:
○ either be retained in the hands of the trustee until fully repaid;
○ instead be made available to the settlor of the trust for the duration of the transaction (in this case, only the legal ownership of the asset is transferred into trust, the settlor then retains economic ownership of the asset during the transaction).

2. The legal effectiveness of the trust for real estate crowdfunding investors

For crowdfunders financing a real estate transaction, the appeal of the trust lies in its effectiveness when activated.

In particular, the trust allows:

In the event of the borrower's insolvency, the trust is activated immediately: the trust is realized extra-judicially (no need to go before a judge to request the activation of the trust, unlike other guarantees such as mortgages, which require a real estate seizure or a judicial allocation) and is not impacted by the borrower's possible insolvency.

Exclusivity on the value of the collateral asset: crowdfunding investors do not suffer from competition from any other creditor.

3. Economic efficiency of the trust for the benefit of all

The trust benefits both the lender and the real estate operator: unlike the exercise of a mortgage or pledge, the parties agree together on the terms of sale of the real estate assets or the shares of the company holding the real estate. Furthermore, the parties may agree that the trustee will refrain from selling the asset in a depressed market, in order to maximize value. Finally, it is often less costly for the grantor than a mortgage.

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