Equity Holding Trust - Posted by Brett

Posted by Rich-CA on September 17, 2007 at 20:44:46:

I would consider this a convoluted way to get control of your property without actually paying for it. If you own 10% and the other owns 90% and the Trustee is a friend of the other party, where does this leave you? Even if they make decisions based on a vote of the ownership, you get 10 votes to their 90?

If they want a triple net lease, write one up. if they want an option to buy, write one up. Why should they get your advantages of ownership without paying you?

Equity Holding Trust - Posted by Brett

Posted by Brett on September 17, 2007 at 14:22:51:

I tried posting this on the legal forum, but wanted to post it here as well.
An investor has offered to purchase a property I have for sale using an Equity Holding Trust Transfer. It sounds similar to taking the property Subject To where I remain on the loan, but in this structure the title is placed with a trustee in a trust and I am a beneficiary and the purchaser is a co-beneficiary with me. The buyer would have 90% ownership of the trust and I would have 10%. I was told that I would still have control of the ownership of the property, but by using this structure, the buyer can gain immediate tax advantages of owning the real estate. They would have a triple net lease on the property and after a period of 2-3 years they will get financing and pay off my loan and then I get my equity out.
My question is if this is a safe structure for me to use as a seller and will I be able to claim the property if the buyer does not make his payments? Am I protected if I have a disagreement with the buyer?

Re: Equity Holding Trust - Posted by Dave T

Posted by Dave T on September 18, 2007 at 14:08:11:

This does sound like a Subject To deal. The difference here is that by retaining a 10% beneficiary interest in the property, the lender can not invoke the due on sale clause and call your loan due.

Your attorney will have to answer your other questions.

Putting this on every forum? - Posted by blucat

Posted by blucat on September 18, 2007 at 09:13:59:

Since you’ve already put the question on legal forum why do you want it here too?

You really interested in non-lawyer answers?

Re: Equity Holding Trust - Posted by Eric

Posted by Eric on September 17, 2007 at 22:44:25:

If the RB doesn’t make the payment it is a simple eviction.

What do you mean by a disagreement with the RB? If he doesn’t live up to the contract evict him.

The trustee can only act on unanimous direction of the beneficiaries which protects you and him. There is no 90 to 10 voting disparity as mentioned in the other reply.