'subject to' and mechanic's leins. - Posted by Taylor

Real Estate Investing
#1

Posted by Jim Locker on December 15, 2000 at 10:07:25:

>>Does placing a property prior to acquiring it into a Trust relieves it of any leins that have been placed on it?

No. Why would you expect it to?

>>>My second question is…Can the leins of a trustee or a beneficiary encumber the subject property???

WRT the trustt, no, since the trustee is not the owner. Leins on the beneficiary certainly can encumber the property, or at least the Trust. I think. Depending on how it is structured, and the nature of the lien.

#2

‘subject to’ and mechanic’s leins. - Posted by Taylor

Posted by Taylor on December 15, 2000 at 01:50:31:

Hi,
I pretty much exhaust the archives before I post, so I would appreciate answers that reflect understanding either from the school of experience or from those who have courses that are offered on this site.

The question is this: Does placing a property prior to acquiring it into a Trust relieves it of any leins that have been placed on it? (keep in mind that the purpose for doing so would be to buy it subject to the existing financing.)

My second question is…Can the leins of a trustee or a beneficiary encumber the subject property???

I appreciate the time and effort it takes for anyone to read and post valid and constructive answers. Thanks in advance.
Taylor.

#3

Re: ‘subject to’ and mechanic’s leins. - Posted by JPiper

Posted by JPiper on December 15, 2000 at 10:58:12:

Just to clarify, the title of your post references “mechanic’s leins”. The body of your post talks about “liens”. There’s a difference. A mechanic lien is a specific lien. A “lien” could be either a specific lien or a general lien. I’m going to assume that what you’re talking about is a mechanic’s lien.

The mechanic lien law is going to vary by state. But in my state a mechanic’s lien is going to attach to the property. When you deed the property to a trust it’s going to follow the property. Understand though that to be an effect mechanic’s lien in my state requires a court action within 6 months (the contractor has to win his claim).

Once the property is in a trust, a mechanics lien could probably only be incurred by the “owner”. In my state the trustee is the “owner”…so therefore if the trustee had work performed, the contractor could obtain a mechanic’s lien in my state.

Further, if the beneficiary engaged a contractor to perform work, I would say that the contractor could obtain a mechanic’s lien in my state. The problem here is that the beneficiary does not “own” the property. He owns the trust. But when the contractor perfected the mechanic’s lien with a court action, it’s might hard to imagine that a judge wouldn’t grant this mechanic’s lien when the work was engaged by the person who owned the trust, and benefited from the work. This latter question though would be complicated, and should probably be directed to a qualified attorney.

One of the benefits of a trust would be that a “general lien” incurred by a beneficiary would not automatically attach to the property owned in trust. My belief is that the lienholder would have to know of the existence of the trust, and pursue the appropriate legal steps to cause a general lien to attach to the beneficial interest.

Finally I would note that I’m not an attorney. The second question you asked is a good one, and deserves to be answered by an attorney.

JPiper