Posted by Dave - CA on August 09, 1999 at 13:04:15:
Bill and others,
Thanks for the feedback. The property is a rental so it is a DOS type clause and not a residency clause.
Dave
Property transfer question - Posted by Dave - CA
Posted by Dave - CA on August 05, 1999 at 12:45:18:
I am purchasing a property from my brother which he refinanced less than a year ago. The lender has some conditions in the loan which prevent the property from changing hands before a year is up without having to pay some penalties. I don’t mind leaving his name on the deed, but I want to protect my equity interest in the property in case he should be sued by someone else, etc. Is there a way to do this without alerting the lender that ownership has changed?
Thanks,
Dave
Re: Property transfer question - Posted by Bill Gatten
Posted by Bill Gatten on August 06, 1999 at 21:07:48:
Charles,
Though I think you are referring to “Residency” changing in a year, rather than “Ownership,” I’ll answer your questions this way.
Ownership has changed if the property is put into a trust, and all of the interest in the trust is sold or transferred. And…in so doing there is still no asset protection! Although the lender will likely (probably) not be alerted to the change, you have violated their wishes none-the-less. And and that still doesn’t answer your questions.
The answer is (re. the “Ownership Change” issue: You can have your brother place the property into a land trust in his own name; then he can silently (though fully legally) assignment a Co-Beneficiary Interest in the trust to you. 10% would be enough, though it could be 90% and still accomplish the same objective and give you exactly the same advantages. He would agree then to relinquish his percentage to you upon the termination of the trust. You then need only lease the property back from the trust on a triple-net basis in order to have 100% of the ownership advantages and benefits yourself.
Dave, by doing it this way you have accomplished 100% of all your objectives, effectively without a breach of the lender’s alienation provisions; without increasing property taxes; without creating a capital gains event for your brother; without risk to the property or the title relative to either party’s (yours or your brother’s) liens, suits or judgements (including BK, martial claims, tax liens, etc.).
Now on the other issue…if the loan you’re talking about has a One-Year Residency Requirement (or if that is what you’re referring to), then all the advice (including mine) that you gotten so far is of no value. The Residency Clause has nothing to do with the Due-on-Sale Clause, and is much more strictly investigsted and enforced. And if the servicer for the lender learns that your brother has moved (within the residency requirement period), then they can (and often do) foreclose. There are machinations you can go through to get around this (fake addresses for insurance, tax filings, etc.) but they are all illegal and usually too “iffy” to mess with.
Hope this helps.
Bill
Re: Correction to earlier post. - Posted by Charles-DFW
Posted by Charles-DFW on August 06, 1999 at 06:09:22:
In earlier post I said:
“My brother owns the property or has beneficial interest, so any law suit against him should not affect the property or trust.”
It should say:
"My brother no longer owns the property or has beneficial interest, so any law suit against him should not affect the property or trust. "
Charles,
Re: Property transfer question - Posted by Charles-DFW
Posted by Charles-DFW on August 06, 1999 at 06:02:23:
If I were in your situation:
I would have my brother put the property into a land trust, with an attorney or friend as the trustee, and him, my brother as the beneficiary. My brother then would sign over to me his beneficial interest. It is the trust that owns the property, the trustee controls the trust as dictated by the beneficiary. My brother owns the property or has beneficial interest, so any law suit against him should not affect the property or trust. Then if someone sues me - that’s another story.
I am not an attorney, and am not giving legal or real estate advice. I have only expressed what I would do in such a situation.
As Jim said, check out Bill Bronchick @ legalwiz.com
Good luck,
Charles
Re: Property transfer question - Posted by Bud Branstetter
Posted by Bud Branstetter on August 05, 1999 at 23:20:44:
While the land trust may hide the true ownership it doesn’t provide a lot of liability protection if he is sued. Have him and you consider a $1M liability rider on your homeowner’s policy. The next step would be to create a LLC type entity for the property.
Land Trust …goto www.legalwiz.com(nt) - Posted by Jim IL
Posted by Jim IL on August 05, 1999 at 17:10:09:
nt