Have you noticed the banners across Las Tunas between Kauffman and Golden West? There are two, side-by-side:
‘Wednesday Concerts in the Park,’ and
Isn’t it great that you can go to the park and get bitten by some random rabid dog on Wednesday, and then go for your rabies shot on Saturday?
That is some great civic planning!
Seriously, though, sometimes you really can have your cake and eat it, too.
Last week I threw out the concept of the Title Holding (Land) Trust, and I thought I would follow up with a little more about that.
As I mentioned, most people think of holding title in a land trust for privacy reasons . . . a land trust owns the property (the trustee owns legal and equitable title), and you, the beneficiary, retain the power of direction. Judges and police officers find this feature very appealing.
In essence, this converts real property into chattel, personal property. You don’t own realty, you own personalty. You’re not on title, but you have 100% of the power and benefits of traditional ownership, plus some other nice features.
When you’re ready to sell, the land trust is also a great way to go if you’re carrying paper (offering terms, seller financing, etc.) for the next buyer, especially if he has less than a 20% down payment.
Since personalty is not deemed subject to partition by judgment creditors, unrelated parties holding property in this manner needn’t fear the property ever becoming the subject of: a creditor judgment, lien or charging order.
Neither would the property be the subject of a tax lien, any party’s bankruptcy, marital dissolution or probate . . . comforting when you’re the one extending credit.
This is why the land trust is superior to a regular old seller carry back, lease option or contract for deed.
In these scenarios, either parties ‘issues’ could affect the property in some way, which can be a real bummer.
Additionally, like I mentioned last time, if the buyer defaults, I don’t have to foreclose to regain possession of the property. I only have to evict him according to tenant law.
Why? Because in the land trust system, the buyer is really a ‘resident beneficiary,’ leasing the property from the Trustee (who ‘owns’ the property). So if they don’t perform on their ‘lease,’ they get a 3-day-pay-or-quit and lose occupancy.
Do you know that you can end up having to foreclose to regain possession of your property with a lease option or contract for deed?
A lease option (if an option fee is taken or rent credits given) can lead to an inability to evict a defaulting tenant. Such a tenant in default can claim having “Equity” in the property, and in so doing, force a judicial foreclosure process versus an eviction. Yuck.
With the contract for deed (buying property on a layaway plan), there is no means for eviction; the vendee (resident/buyer) holds an “equitable” interest in the property, allowing only for foreclosure, ejectment and quiet title in the event of a breach of contract.
The only reason I wouldn’t use a land trust to carry paper for someone is if I intended to sell (or thought I might need to sell) all or part of a real estate note (trust deed) created to raise additional cash.
[Always consult with your CPA, tax attorney and/or financial advisor before selling any real estate.]