A somewhat common problem with estates and trusts is that the personal representative or trustee is already living in, or moves into, property held by the estate or trust. The personal representative or trustee, of course, refuses to move out or pay rent, at least until litigation begins. Is this conduct a breach of trust? Does the trustee need to pay rent?
The recent case of Kersey v. Abraham, 6D23-1505 (6th DCA 2024) explains how damages are calculated when a trustee moves into trust property and refuses to pay rent. A residential property was held in the mother’s revocable trust, which became irrevocable upon her death. The trust stated that the property was to be distributed two-thirds to the sister, and one-third to the brother. The sister became the trustee at the mother’s death. Instead of distributing the property, the sister moved into the property, and refused to sell or distribute the property.
The brother brought suit for breach of trust and demanded an accounting. The sister stepped down as trustee and an independent trustee was appointed. The trial court found that the sister breach her duty as trustee and ordered the sister to pay rent to the trust for the time she occupied the property.
The appellate court cut the rent that the sister owed, limiting the damages to the time she served as trustee:
However, because the damages were based on a breach of fiduciary duty, and Appellant no longer had a fiduciary duty as Successor Trustee after she resigned on February 18, 2020, the trial court’s calculation of damages was erroneous. “Whether the trial court applied the correct measure of damages is a question of law reviewed de novo.” DFG Grp., LLC v. Heritage Manor of Mem’l Park, Inc., 237 So.3d 419, 421 (Fla. 4th DCA 2018). Appellant moved into the Grantor’s former home on August 16, 2018. As noted above, she ceased to be the Successor Trustee as of February 18, 2020, but remained in exclusive possession of the property. Thereafter, she made a demand for distribution of the Boggy Creek Property, but that motion was denied. While there was no compensation to the Trust during that period, there is no evidence that the Successor Trustee, Mr. Finkbeiner, presented Appellant with a lease or that he demanded she vacate the property or provide compensation for her occupancy of the Boggy Creek Property. Accordingly, Appellant should only have been ordered to compensate the Trust for her breach of fiduciary duty for the time period from August 2018 until February 18, 2020,…
Two good lessons can be learned. First, when suit is brought against a trustee for breach, determine whether damages not based solely on breach can be asserted. In this case, another claim should have been brought against the trustee for unpaid rent, regardless as to whether the nonpayment of rent is a breach of trust.
Clearly, the appellate court found fault with the independent trustee for not making a demand on the sister to vacate or pay rent. The independent trustee may have believed that the existing lawsuit covered all the possible damages, or may have felt that increasing the dispute level in the case might have been counterproductive. In these types of situation, it is very common for rolling settlement discussions to be taking place. The last thing an independent trustee brought into a hostile situation wants is to make matters worse by making new demands, especially if the independent trustee believes that a resolution is close at hand.
But this opinion may not be the last word on the dispute. The appellate court did not rule that the sister did not owe rent – indeed, the court said that she did. But she did not owe the rent under a breach of trust theory, only potentially under a landlord-tenant type theory. Therefore, if the independent trustee is still in the case, he may feel compelled to now file a new lawsuit against the sister for unpaid rent. The brother might also be able to bring such suit as well, in his name or under a derivative theory as a beneficiary of the trust.
