What is a security trust ?

A temporary transfer of ownership to serve as security

A security trust is a legal mechanism whereby a debtor (the “settlor”) transfers ownership of an asset (in this case, a property) to a trusted third party (the “trustee”), in order to guarantee the repayment of a debt to a creditor (the “beneficiary”). This transfer is a real transfer: the asset is legally removed from the settlor’s estate and placed into an autonomous trust estate, distinct from that of the trustee themselves.

Three parties, three roles

• The settlor: the debtor (the operator) who transfers ownership of the asset as security.
• The trustee: the trusted third party who receives and manages the asset, without deriving any personal gain from it; they act as the “nominal owner”, within the strict framework defined by the trust agreement.
• The beneficiary: the creditor (the investor, or the body of bondholders they represent), whose claim is secured by this arrangement.

What sets it apart from a mortgage

With a mortgage, the borrower remains the owner of the asset: the creditor holds only an accessory right, the enforcement of which requires a judicial seizure procedure, which can be potentially lengthy. With a security trust, ownership of the asset has already been transferred to the trustee: in the event of the borrower’s default, realising the security is generally quicker and more predictable, without having to go through the same cumbersome legal proceedings.

An asset that is ‘set aside’, but not frozen

The transfer to the trust assets isolates the asset from the settlor’s personal creditors, including in the event of the settlor entering into insolvency proceedings, thereby strengthening the investor’s protection. This does not necessarily prevent the economic use of the asset during the term of the trust (letting, continuation of works, etc.) if the trust deed explicitly provides for this.

What happens if the borrower defaults?

If the borrower fails to repay their debt, the trustee may dispose of the property for the benefit of the creditor, in accordance with the terms set out in the trust agreement, without the need for further legal proceedings to seize the property, as would be the case with a conventional mortgage.

Updated on: 17/09/2026