Home › Forums › General › EHTrust/EHT Topics and Creative Real Estate Financing › Title insurance at trust termination in Oregon?
February 25, 2008 at 6:53 am #4506
I will submit upfront that I am new to the NARS EHT strategy… Please forgive me if this question had been covered previously. I have not found exactly what I’m looking for in the forum search and I also haven’t discovered a clear answer in my success pack manual.
I don’t know if this is unique to the Oregon RE investor community that I happen to belong to, but I can count numerous instances in which the use of land trusts was vigorously discouraged whenever such topics were brought up for discussion. The primary criticism I hear is that title companies in Oregon are extremely reluctant to insure title on a property sold out of a land trust. One representative from a local title company that I spoke to briefly about this topic said the only way they might even consider being involved in this type of transaction is if we file some kind of notice with state identifying all beneficiaries involved in the trust. (This sounds like a UCC-1 filing with the Secretary of State.) Obviously this would defeat the anonymity and privacy features of the land trust. I understand the concept that people who don’t really know about a tool will be the first to say that it can’t work. But in the interest of protecting everyone’s interest in future EHT deals that I hope to make, can someone give me some confidence that one can indeed make this work in Oregon?
Some possible answers that I’ve anticipated:
1. The trust technically terminates before the RB refinances or settles a traditional sale of the property… Thus it would appear to the title co. that the property is transferred from an individual person instead of a land trust. (Although, I read in the back of the success pack manual that Oregon requires the trustee to be the seller of the property.)
2. In Oregon you just have to file the UCC-1 and forget about the anonymity and privacy.
3. There’s a title company in Oregon that knows how to deal this and I simply need a kind referral from someone on this forum.
4. I have an essential misunderstanding that the more experienced on this board can clear up.
-LukeFebruary 25, 2008 at 3:54 pm #24726
You are talking about the end or termination of a transaction when the property is sold “out of a land trust”. The property is not sold out of a land trust. The Trust DOES NOT TERMINATE before the sale. The Trustee sells it as the owner. The land trust does not hold title to the property. It appears that you do have an essential misunderstanding.February 27, 2008 at 3:00 am #24727
As always, I hate to admit it, but the good Doc is right on the money! A trust shouldn’t even be in question: the property is simply owned by a corporation in Midpines, California. Period. EHC is the legal and equitable and rightful owner of the property with all the right in the world to sell it to anyone who wants to buy it. Keep the word trust out of it any time you can.
BillMarch 5, 2008 at 9:07 pm #24728
Thanks Gary & Bill… I appreciate your feedback. I delayed my reply to your posts because I was waiting for a response from the legal department of the local title company that I use to hear their position on land trusts.
Now, I realize what you both essentially said is that what really matters is that the property is held legally by a corporation in California. This trustee owns the property and will be the one selling the property at the termination of the trust. If I understand this correctly, are you saying that the title company will have no idea that the owner is also the trustee for a land trust when the time comes to get title insurance for the RB’s refi or for a new buyer. Is this right?
If I set that idea aside for one second, let me briefly convey what my title company told me. They actually sent me an internal memorandum outlining their stance on land trusts. Without repeating every detail, it looks to me like one of their chief reservations with land trusts is that the beneficial interests can be transfered. (Presumably without any public record of the transfer.) They appear to be worried that an Oregon court might allow a holder of beneficial interest to attack a transfer or encumbrance of the trust property that occurred without the beneficiary’s approval. For this reason they will not insure title of a transfer or encumbrance by the trustee of a land trust. Exceptions to this policy are if all parties to the trust file with the Oregon Secretary of State, or if in the transaction, title passes out of the land trust into a natural person or legal entity AND all persons connected with the land trust join in the transfer. (If the beneficial interest is not recorded in the first place, I don’t exactly understand how this helps.)
Perhaps this is all a moot point if the title company doesn’t know that they are dealing with a trust in the first place. Is this realistic to expect?
Please be kind… I’m simply trying to learn how avoid complications down the road.
LukeMarch 7, 2008 at 2:01 am #24729
When the property is sold by the trustee, title does pass to an individual at the direction of all beneficiaries. And there is not a single case ever wherein a beneficiary was able to impinge upon the integrity of a land trust following a transer of the corpus. Period! They do not own, and have never, owned any real estate interest in the that would or coukld allow for such actions against the property.
And as far as a sale of beneficiary’s interest without anyone knowing about it, it can’t happen until the trustee permits it…and the beneficiary’s can never act unilaterally on any matter. And, again, they are not ever the owners of the property. So irrespective of how many such transfers would take place, the owner is still the same corporation, and no beneficiary can act in any manner than would be detrimental to title. The trustee is instructed from the inception to sell the property at a prescribed time to anyone who is willing to pay for it.
However, be all that as it may…you still can’t always win in a fight with idiots in city hall. Usually, the best thing to do is just follow their lead…or change title companies.
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