A crooked developer tried to cheat my mother on a land deal. She sued him. Of course she won as it was an open and shut case. But it took nine long years to fight it through the courts because he and his shyster lawyers used every trick in the book to weasel out of it. One of the tricks, when he knew he was cornered, was to register phony mortgages against all his properties.
Of course they could have been thrown out if we had had the time and money to fight on for another few years. In the end my mother settled out of court. She had a judgement for $3.6 million and wound up settling for $750,000.
Owning a property free and clear of any mortgages is nice, of course, but this can open you up for frivolous lawsuits. If someone does a title search and finds that you owe nothing on the property, they know you’ve got some equity which they might like to take a run at. But, if it appears to be fully encumbered with a big mortgage, they’d be less likely, or more specifically, the lawyer, would be less likely to pursue you.
So, what if you put a lien on your own property. Anyone thought about doing this? Or, maybe you could create a company, or have a friend’s company, etc. put a lien on your property.
What might be a good way to do this and would you be running afowl of any laws? How tough would it be to remove the lien? How about later obtaining financing; would lenders have a problem with the lien?
Any thoughts?
I couldn’t find this talked about in any other post…
Why not get a Home Equity Line of Credit (HELOC). I believe that shows up against your property as a lien for the amount of the credit line. Whether or not you actually use the $$ for anything is up to you, but it does serve your purpose.
This isnt a problem that I have. But if it were, I would create a NV corporation (XYZ Mortgage Co.), then have the corpoartion record a Deed of Trust against the property. This would not be in any way crooked. Of course other lenders would have a problem with it.
I’m not sure that one has to be a crook or shyster to do this. The fellow who told me of this idea had a large deed of trust (CA equivalent to mortgage) recorded against his property naming his mother as the lender. Of course, much as I like the guy, I will not be doing any more deals with him because his ethics are not as high as I like. Anyway, you have the person who seems to have the big loan againgst your property sign a release of mortgage or reconveyance of trust deed, at about the same time that you put the encumberance into the country records. You do not record that document until later, when you sell, refinance, or need to remove the apparent obligation against your property.
In some states, as I understand it, there is a tax to pay when you register a mortgage in the county records.
I don’t think it is illegal, although I am not an attorney and render no legal opinions. You might want to confer with an attorney about the idea. In CA there is a law against putting fraudulent liens against a property. But that is to protect the property owner from some phony lien. A lien which you, as the property owner, authorize should, I would think, be legal.
Apparently the best asset protection if lots of liability insurance. You might want to explore that route.
Discolosures. I am not an attorney, I am not an expert on insurance. It hurts to have to admit there is a lot I don’t know about, but there is. End disclosures.
I like that idea. It is ambiguous what is owed, as the maximum possible loan amount is used. Seeing it, the lawyer might gamble that it was not tapped out I suppose. At least E could borrow against the line of credit to pay for his legal fees.
I find it interesting that while you do not consider the guy a crook or a shyster, you will not be doing any more deals with him as his ethics are not as high as you like.
Let’s face it, he is a crook and a shyster and you are wise not to do business with someone you know is unethical.
Thanks for the feedback but what is so bad about suggesting this? I don’t why people are suggesting a person that does this is a “crook”. What are they stealing? Who are they stealing from? I certainly agree that it is not up-front and I’m not be aware of all of the implications of doing this, but I can’t figure out who, if anyone, would care if you, or you directed someone to, put a lien on your own property. The only reason I was bringing this up was in an effort evade frivolous lawsuits; the people I consider to be “crooks”.