BiggerPockets

I have used the Gatten system several times. It is comprehensive-but before you learn all the ins/outs, I suggest you find a very experienced, local escrow officer and discuss your plan with him/her. Find out just exactly how the title company will treat your transaction (or if they will even handle it!). My personal experience is that due to abuse of Land trusts by those who try to short cut everything, the title companies are simply declining to insure land trust transactions. Not that it's illegal or anything, it's simply a business decision that many title companies have made- that they will simply not provide title insurance.

Hmmm. That kind of takes the wind out of it. I have asked - several time- for referral to ANY title company in Oregon who will insure a land trust transaction - I haven't received anything but a terse.. "just go out and ask around". Hm. Did that. All I have received is "we don't do those anymore".

Again- it's not illegal to do land trusts. It's just that title companies are not insuring title for them anymore (around here anyway.

Bill

Gatten's "system" is incredibly complex and there have been court cases in NY state proving it not quite as bullet proof as advertised. But, let's assume for a moment it is absolutely and completely bulletproof.

It is far more than is needed by 99.99999999% of all investors.

If you are buying sub2, a normal living trust is probably even more than you need considering the current market conditions.

The biggest problem in today's market from trusts is with title companies. Many are refusing to insure title at standard rates and many are refusing to insure title at all if a trust is recently in the title chain. There are ways around the problems but most of them come down to putting a real live person on the hook for the quality of the title through a Warranty Deed.

Title companies are telling me that many owners who are in default, get involved with an investor who "knows land trusts".. and then proceeds to muck it up . There are MANY ways to do that. Owners are told they can avoid tax judgments, etc- basically, many times they don't understand exactly what a trust is- in particular, they don't know what a LAND trust is, and how it is different from the common living trust that is used for holding personal property etc.

Anyway, the title officers simply are of the opinion that there is lack of "full disclosure" to lenders, primarily- though it's a perfectly legal way to convey and hold real property, the recent meltdown and potential for lawsuits is causing these title companies to avoid the risk altogether. I have walked them through a transaction.. step by step.. and they simply won't budge.

But if you know of a title company in Oregon that WILL insure title for a conveyance of property recently title to a Trustee in a land trust, please let me know! As yet, no one has been able to do so.

Bill

Heh heh... I've talked directly with the legal beagle at Transnation Title. If I had any luck, I wouldn't be posting here!

Phrasing a deal as a "living trust" doesn't hold water, as they will ask for the trust agreement- obviously it is a living trust, only it is a more specific "Land Trust" variety. If the property was only recently transferred into the trust means that the title company will be even less likely to insure title.

Like I said earlier, it's not a matter of being legal- it's the refusal of the company to insure title that is the problem. They simply won't take the risk.

Full disclosure means.. they are concerned about subsequent conveyances of beneficial interest (all or a portion) by the settlor, after the trust was recorded. That's a private transaction, of course.. and they have experienced "issues" that took them to court and cost them money to get settled. They don't like to pay out much in the way of claims, etc.

The attorney said issues involving tax liens, judgments, etc against the former owner/ current beneficiary(ies) caused title issues that required inordinate resources - and they just refuse to handle these anymore.

And of course you can just deed the property xyz corporation, as trustee for 123 trust. On your Em agreement, refer to seller at xyz corporation (legal owner). But any title examine worth his salt will see through that and again request the trust agreement when the deed is reviewed and may go further to request beneficiaries (not that they have the right/power to do so..but if you don't produce- they won't insure.. )

I'm still hoping someone will jump in here and direct me to an Oregon title company that will insure sales of property conveyed from trustee to a 3rd party arm's length buyer. The Land Trust is a terrific instrument- if only title insurers would participate.

As far as this problem being "bunk".. tell it to the title company. they don't care :-)

Bill

Thanks, Taz...

I have discussed it at length with title officers who make the call. They are concerned that a house bill (HB 3630) passed recently in Oregon may kick in.. and draw them into fire. It's essentially an "anti predator" law that is so poorly crafted that it puts any transaction under scrutiny. It is basically a political response that sounds good, but in reality it is an attempt to presume that all buyers who are involved transactions where there is a borrower in default are somehow fraudsters. Hey, it's Oregon- we embrace Communism... and government power has become concentrated in this ideology.

Title companies, due to this bill, and to a pervasive anti-business political attitude and power structure, are very cautious.

Bill

Thanks, Bill.

I continue to try to get a sensible explanation from title companies, regarding their reluctance to insure title where real property is owned by a legally formed and operating corporation that is also Trustee for a Land trust. So far, none of the "reasons" given hold water upon close examination.

Seems to me the title company is making up a "legal fiction" as they go along. For example:
1- where is it written that legal title can't be transferred from an individual to another entity who holds the property as trustee for a land trust? Garn st Germaine expressly allows an individual to deed his property to a Trust, and if done properly, it does NOT violate any due on sale provision that may be in a loan document.
2- What law is broken when a beneficiary to a trust transfers .. say.. 50% of his beneficial interest to .. whomever?
3- If there are 2 or more unrelated beneficiaries in a Land Trust, and one of those beneficiaries (after the property is conveyed to the trustee) is tagged with a judgment, does the affect TITLE to the property? Can the creditor cause the real property to be liened or sold to satisfy the judgment? IF so, please point me to the case or statute.
4- Assuming the documents were properly drafted by an attorney who REALLY knows how a land trust differs from an ordinary "living trust", just exactly where does the title company have a problem with "insuring title"?

I don't get it. Assuming an owner of property deeded properly to a Trustee, and the deed clearly sets forth the transfer to the Trustee of ALL rights and title to the property.. where's the problem? The title had been legally and completely deeded to the Trustee. The Trustee is given full power to deed the property to any other legal entity- it's right on the Trustee document, given to the Title company.

In my mind, it seems to me the title companies don't deal with land trusts often enough (around here) to understand the difference between a "home made" land trust and a land trust prepared by an attorney with honest to goodness expertise. Because this is such a minor part of a title company's business I think they just want to brush it aside and be done with it. Period.

It would be good to have an attorney who specializes in LAND TRUSTS provide some leadership in this area. As in so many areas today, informed leadership is REALLY scarce.

As Taz stated, this type of land trust (the pact trust) is way more than needed in most cases. It is a very complicated land trust and in my opinion, often not needed. A simple land trust is all that is needed. Combine that with a good insurance policy and a corporate entity and you have several layers of protection and privacy.

Note that with enough effort and legal costs, anyone can eventually find out who owns the property.

I found a document on First American Title Insurance on Land Trusts. It has some good information. It also talks about some reasons that title companies may not want to insure them.

http://www.firstam.com/listshortcut.cfm?id=3318

This is an old thread, however, I do believe that the correct info should be given here.

I agree 100% with Bryan in that a land trust or any trust for that matter, including Bill Gatten's trust does trigger the ability for the lender to excercise the DOS clause. That said, there are several ways to avoid such a trigger, one of which is a simple disclosure. With a letter going to the lender showing the new buyers qualifications and the fact that the original borrwer remains on the hook, most of the time, the right person never sees the letter anyways as bank's right hand has no idea what the left hand is doing. The other way is to make timely payments for a few months including a payment coupon with the new payors name and contact info also can serve as notice to the lender.
In today's market, lenders are happy to receive timely payments. Theo nly way I can see lenders starting to utilize the DOS is if mortgage rates were to get at least into the 6's again and that is a long way off right now.