Protection from liens - Posted by paul

Posted by Smith on August 30, 2002 at 24:42:35:

When a property is placed into a land trust, the trust owns the property. The beneficiary owns the trust as personalty, not as real property. A lien cannot attach to a trust.

A mortgage is used to secure an agreement (such as a promissory note). That agreement could also be a land contract or option. A mortgage that secures an agreement or contract of this type is called a performance mortgage. It looks very similar to a normal (promissory note) mortgage, except that it refers to the “agreement” instead of the “note”. It still places a lien on the property superior to any liens that attach afterward (except tax liens).

I recommend that you learn about performance mortgages and land trusts.

Protection from liens - Posted by paul

Posted by paul on August 29, 2002 at 14:03:36:

I have negotiated a deal where I can take over the payments on 4 houses, all with as much as $250/month cash flow each. For my protection I’m trying to find a lawyer that will escrow the necessary documents to ensure delivery of title after all obligations have been met. My question is how can I protect myself and ensure I’m able to get the deeds if the current owners ever have a lien placed against the property?

Re: Protection from liens - Posted by Bud Branstetter

Posted by Bud Branstetter on August 29, 2002 at 15:02:58:

Probably a better method would be to have title transferred now. Designate a trustee for a land trust.Have him move title to the trust. Assign a portion of the trust to you. Create a beneficiary agreement that says what you have agreed on.

By doing it this way you are better protected than performance mortgages. The property insurance policy can be owned by the trust.

Re: Protection from liens - Posted by Smith

Posted by Smith on August 29, 2002 at 14:21:51:

How are you “buying” the properties? Is it using land contracts or lease options?

Placing the properties into land trusts can help shield them from liens attaching. Also recording a performance mortgage can ensure any liens occuring after will be in a junior position to yours.

Re: Protection from liens - Posted by Paul

Posted by Paul on August 29, 2002 at 15:22:59:

I was planning on buying two using Lease Options and the other two using land contracts. Putting the properties into lands trusts surely helps “shield”, but doesn’t necessarily “prevent” liens from attaching to the property does it? How does the performance mortgage work?