Fabrica Trust

The Fabrica Trust is a legal structure that enables real estate ownership through blockchain technology. Developed since 2017 and now in its 8th major iteration, it has been used in the transfer of millions of dollars worth of real estate across hundreds of properties in close to a dozen U.S. states.

How It Works

The trust operates as a nominee trust where:

• The token holder is the beneficiary with full ownership and control
• The trustee holds legal title but has limited duties (primarily signing documents when instructed)
• The beneficiary can also serve as trustee, eliminating third-party involvement

This structure creates a direct link between the NFT and the property -- wherever ownership of the token goes, beneficial ownership follows, while recorded title stays within the trust.

Owner Rights

The token holder (beneficiary) receives comprehensive property rights:

The beneficiary also receives all income from the property and bears all liabilities and taxes. For tax purposes, the beneficiary is treated as the property owner -- the trust is not a separate taxable entity.

Transfers

When a token transfers to a new wallet, beneficial ownership automatically transfers to the new holder. The trust agreement distinguishes between different types of transfers based on where the token goes.

Direct Transfers

Transfers to personal wallets (standard wallets or smart wallets like Safe and account-abstraction wallets) constitute full ownership transfers. The new wallet holder becomes the beneficiary with all owner rights.

Functional Contracts

Transfers to smart contracts that serve a specific function -- such as lending protocols, escrow contracts, or bridges -- do not transfer beneficial ownership. The original beneficiary retains all owner rights while the contract holds the token as collateral or for processing.

This distinction is built into the trust agreement (Section 7.3) and ensures that using your property as collateral or listing it for sale does not inadvertently transfer ownership until the transaction completes.

Wallet types at a glance: Standard wallets (EOAs) and smart wallets (multisig, Safe, account abstraction) convey full beneficial ownership to whoever controls the wallet. Functional contracts (lending, escrow, bridges) hold custody only -- the original owner retains beneficial ownership. See Lender Protections for how this protects lenders.

Unauthorized Transfers

A transfer resulting from unauthorized access to a wallet -- including theft, compromise, or misappropriation of private keys -- does not constitute a valid transfer of beneficial ownership. The prior beneficiary retains their owner rights regardless of the on-chain record of the transfer.

The trust agreement also provides protections for good-faith purchasers. A transferee who obtains control of the token for value, in good faith, and without notice of any competing claim may qualify as a "qualifying purchaser" under UCC Article 12 and take free of adverse claims. In such cases, the prior beneficiary's remedy is against the party who effected the unauthorized transfer, not against the good-faith purchaser.

Trust Dissolution

The trust can be dissolved through several paths:

Standard Dissolution (Off-Ramp)

1. Beneficiary burns the Property Token (via burn or burnBatch function)
2. Trustee executes a recorded deed transferring property out of the trust
3. Property transfers to the former beneficiary in traditional form

See Off-Ramp for the complete redemption process.

Token Recovery (Lost Keys)

When the beneficiary has lost access to their wallet, the trust provides a self-service recovery path that works without Fabrica's involvement and without going to court:

1. Owner records a sworn affidavit (Notice of Lost Token Control) with the county recorder
2. Interested parties are notified by certified mail
3. A 90-day Quiet Period begins, during which any party can contest and any wallet activity halts the process
4. After the Quiet Period, the trustee executes a Deed of Distribution transferring the property out of the trust
5. The original token becomes a Void Token with no ownership rights

The sworn-affidavit format ensures universal acceptance by county recorders across all US jurisdictions. Filing a false affidavit constitutes perjury.

See Token Recovery for the complete step-by-step process. For a deeper look at the design, see Lost Keys, No Lost Land on the Fabrica blog.

Estate Succession

When the beneficiary has died, a modified recovery process allows legal successors to recover the property:

• If the heir has access to the wallet, they can transfer or off-ramp the property directly
• If the heir does not have wallet access, they can use the self-service recovery process by presenting valid proof of legal succession (letters testamentary, court order, or equivalent) under the laws of the state where the property is located

See Death & Estate Planning.

Court Order

For contested situations -- theft, disputed ownership, or any case where the self-service process cannot complete -- a court can order dissolution of the trust. The court order substitutes for the token burn requirement and the cryptographic signature requirement.

Trust Naming Convention

Fabrica trusts follow a standardized naming convention: Fabrica XXXXX Trust, where XXXXX is the token ID encoded using Crockford Base32.

Benefits:

• Compact names: Short and manageable for legal documents
• Easy lookup: Direct mapping from trust name to token ID
• Reduced ambiguity: Excludes confusable characters (I, L, O, U)
• Uniqueness: Each token ID produces a unique trust name

Custom or vanity trust names are possible but the standard format is recommended.

---

Agreement Structure

The trust agreement is organized into the following sections:

---

Legal Framework

Governing Law

The trust agreement is governed by California law. Matters related to deed recording, title transfer, lien priority, and probate follow the mandatory laws of the jurisdiction where the property is located.

Jurisdiction

Disputes can be brought in California state or federal courts (San Francisco County), or in courts where the property is located for title-related matters (quiet title, foreclosure, lien disputes). See Dispute Resolution for details.

UCC Compliance

The trust agreement incorporates provisions under both UCC Article 12 and UCC Article 8, enabling property tokens to be used as collateral with perfected security interests. See UCC Article 12 for the detailed framework and Lender Protections for how this works in practice.

Securities Treatment

The trust agreement explicitly states that the Property Token is not intended to be a security under federal or state securities law. The UCC characterizations are for collateral purposes only and do not affect this position. See Securities Analysis for the detailed reasoning.

No Merger

When the beneficiary also serves as trustee (the default), there is a theoretical risk that a court could find the trust has "merged" (collapsed because the same person holds both legal and equitable interests). The trust agreement addresses this through:

• Beneficial Interest Holders: The trust recognizes a broader class of interest holders (future buyers, lenders, etc.) beyond just the current beneficiary, preventing the conditions for merger
• Springing Continuity Trustee: If a court does find merger, a temporary Continuity Trustee is automatically appointed to preserve the trust. This trustee has no discretion, acts only as a placeholder, and is not appointed by Fabrica. It auto-terminates when a new trustee is appointed or the token transfers

See Dispute Resolution for details.

Trust Evolution

Open Source

The Fabrica Trust instrument is open source under CC0-1.0 (public domain). You can review the agreement, track changes, and contribute improvements:

Repository: github.com/fabrica-land/fabrica-connectors

The trust agreement is located at connectors/us/us-trust-agreement.md.

While we are confident in our trust model, it has never been tested in court. Property owners should be aware they are using their property in a way not contemplated by most real estate professionals. We're building a new model of ownership, and there will be hurdles to overcome.