Understanding Jersey Property Unit Trusts

Jersey Property Unit Trusts (“JPUTs”) continue to be a popular vehicle for UK real estate investment and joint ventures. This briefing summarises their key features and advantages, as well as the process for establishing them. Unlike companies, JPUTs do not have a separate legal personality. Instead, property is held by trustees on behalf of investors, who own units in the trust.

This structure offers flexibility and operational and efficiency, making it a preferred choice in various real estate transactions. In this article, we will explore what JPUTs are, how they are set up, and why they’re often chosen over other structures like companies or partnerships.

What is a JPUT?

A JPUT is a legal structure whereby the legal ownership of the assets is vested in one or more trustees who hold the assets on trust for the benefit of unitholders on the terms of a trust instrument. A JPUT does not have its own legal personality. An interest in the JPUT is typically unitised, with units functioning in a similar manner to shares.

Key features include:

• creation via a trust deed;
• the trustee of the JPUT acts as the legal owner of the  trust’s assets, holding them on trust for the unitholders of the JPUT, the beneficial owners of those assets;
• JPUT’s existence does not appear on any public register in Jersey.

Why use a JPUT?

JPUTs gained popularity in the mid-2000s, particularly for UK real estate holding structures. While certain tax-related incentives have changed over time, JPUTs, with their ease of establishment, flexibility and familiarity for investors and lenders, are still commonly used by real estate investors.

Benefits of a JPUT in the context of holding UK real estate include:

1. Tax efficiency

• No Stamp Duty Reserve Tax or Stamp Duty on the transfer of units if the JPUT qualifies as a collective investment scheme.
• Capital Gains Tax transparency election is available, allowing gains to be taxed at the investor level rather than within the trust.
• Income tax transparency can be achieved if the JPUT is structured as a Baker Trust (where the trust instrument is drafted in such a way that the income generated by the trust assets accrues directly to the unitholders as it arises, rather than forming part of the trust fund for later distribution by the trustees), enabling income to be taxed directly in the hands of investors.
• Non-Resident Landlord Scheme can be used to allow gross rent collection without deduction of income tax at source.
• No Jersey tax is payable, as JPUTs are typically exempt from Jersey income tax and capital gains tax.

2. Flexibility

• High level of governance customisation. Governance is set out in the trust deed, not by company law, meaning parties can tailor the rules to suit their commercial needs without being bound by statutory frameworks.
• The trust deed can include bespoke provisions on reserved matters, giving investors control over key decisions such as acquisitions, disposals, financing, and changes to the trust structure.
• Tailored Distribution Rights. JPUTs can issue multiple classes of units, each with different rights to income and capital. This allows for differentiated returns among investors.
• No Jersey Restrictions: Jersey law imposes no restrictions on how distributions are made. Provided the trust deed permits it, distributions can be structured in any commercially agreed manner.

3. Ease of establishment

• Quick setup. Only a trust instrument, initial trust fund, one or more trustees, and (if applicable) regulatory consent are needed to establish a JPUT.
• Strong network of professional support. Jersey offers a mature pool of service providers, sponsors, and administrators familiar with JPUTs.

4. Security

• The trust structure can provide security over assets, which is often preferred by lenders and investors.
• Security can be granted over the units themselves, offering an additional layer of protection for lenders.
• Trustees can give guarantees and indemnities, and can also grant security over trust assets, enhancing the structure’s utility in financing arrangements.

How is a JPUT established?

Establishing a JPUT, which is not regulated in Jersey as a fund, is a swift and well used process, with the most time sensitive element being obtaining COBO consent (see below) which in any case is quick (up to five business days). Specific matters to consider are:

1. Trustee Appointment: under Jersey law, a JPUT only needs one trustee – usually a Jersey private limited company. If it is intended for the JPUT to hold UK real estate, it is preferable to appoint two trustees so that upon a sale of assets, the beneficial interests of unitholders are overreached when the buyer pays the purchase price to the trustees.
2. Trust Instrument: the trustee must sign a trust instrument that sets out the terms of the trust. This document typically covers funding arrangements, governance structure, transfer regimes, and other key provisions. It does not need to be filed at any public registry. At the time of establishment, the trust must have two unitholders and must also hold trust property (such as a nominal sum or asset) to constitute the trust.
3. Regulatory Considerations:

• For single-asset trusts, with one or two investors, a Control of Borrowing Order (also known as a COBO consent), allowing the raising of money and issue of units is needed.
• Multi-asset JPUTs may be structured as Jersey Private Funds or Collective Investment Funds, which carry additional regulatory requirements.
• Trust Regulation Service. If the JPUT acquires an interest in UK land on or after 6 October 2020, it will generally need to be registered with HMRC’s Trust Registration Service. This applies to non-UK express trusts (such as JPUTs) where:
  • The trustees become registered owners of UK land (freehold or leasehold over 7 years).
  • The trust enters into a business relationship with a UK service provider (e.g. solicitor, accountant, investment manager) on or after 6 October 2020.
  • The trust is liable for UK taxes such as stamp duty land tax, capital gains tax, income tax, inheritance tax, or stamp duty reserve tax.
• JPUTs that acquired UK land before 6 October 2020 are generally not required to register, unless a new trustee is appointed and becomes registered as a proprietor of the land.

Conclusion and Our Experience

JPUTs offer a smart and efficient way to hold UK property. They are not companies, but trusts – which means they come with unique benefits. From tax savings to flexible governance, they are built for efficiency. Whether you are setting up a joint venture or managing a single asset, a structure involving a JPUT is worth considering, although the costs of running a JPUT (i.e. trustees; administrators etc.) can make the benefits harder to justify if the asset being held by it is relatively low in value.

Burges Salmon’s Corporate Real Estate team have in depth experience in acting for joint-ventures, disposals and acquisitions using JPUTs. With our international preferred firm network, we have ingrained relationships with a number of Jersey law firms and can work seamlessly to deliver clients’ objectives.

With a team of Built Environment lawyers qualified across England, Wales, Scotland and Northern Ireland, we support clients on real estate matters across jurisdictions and project types. Our Corporate Real estate team works closely with colleagues in construction, planning, tax, litigation, environmental and finance to provide integrated support throughout the lifecycle of real estate assets.

We have experience across many sectors including logistics, hospitality, office, residential (including build-to-rent and student accommodation), and large-scale regeneration schemes.

This paper must not be taken as containing any legal advice on matters of Jersey law. The advice of Jersey lawyers should always be taken when establishing or dealing with a JPUT.

If you would like to explore any of the topics discussed above, please contact Jonathan Cantor (Partner, Corporate and M&A) Oli Gingell (Senior Associate, Corporate and M&A) and Sam Booth (Solicitor, Corporate and M&A).