We are members of Family real estate trust containing 4 comercial buildings in Massachusetts that generates rental income to us beneficiaries. My uncle has been serving as Trustee (and is beneficiary also ) since trust started (1970). My uncle had agreement drawn up in year 2000 telling all beneficiaries that he decided he needed to be paid for all his work, pay equal to 7% of gross income. He generated a document and had all benificiaries sign. Now in 2013 he has formed a property management LLC with his 2 children and himself as manager. He has hired his LLC as management company without our consent or knowledge. Salary and compensation we feel are way out of line. Now he charges us 14% of gross and takes a months rent for any new lease or lease renewal, all office supplies and other needs are billed to us as additional expenses. He gives his company full control over trust finances. We are left in the dark. Is this fair and legal or is he breaking his duties and creating a illegal conflict of interest. Do we have any legal rights to stop this? Should he have notified us before contracting himself and determining his compensation? Help please We do not want to disrespect our uncle but this seems to be a move that is not in everyone's best interest. It serves only him and his immediate family. Thanks for any advice you can provide.
1 Answer from Attorneys
I would have to review the trust and the charges to determine what is being done is proper. However, if he as Trustee has delegated the management duties he was being paid to the LLC, then the 14% is out of line. Without knowing more, it is difficult to determine what is fair and what is not.
An independent property manage would charge 5-6% depending on size and location and for that the due general management, collecting rent, making sure the properties are maintained, paying the bills and providing monthly statements; then the management company charges for repairs plus a mark-up, on-site management if any, maintenance services, and may contract for such things as elevator maintenance, snow removal et cetera. If they prepare bidding specs et cetera they charge a fee above the regular management fees.
Without reading the paper and the trust it is impossible to determine what can or cannot be done. Assuming the majority of beneficiaries are dissatsified with the Trustee's self-dealing you can take action by filing a complaint in Probate Court for breach of fiduciary duty.