Land Trust Attorney in CA

[Michelle Mapp]

So , I don't know if I have ever heard so many different stories as I have regarding Due on Sale Clauses, changing title to an LLC or Land Trusts.

I can not believe how many people I have spoken to and how many articles I have read that all give me different stories.  What I am looking for seems pretty simple to me.  I would like to find someone in CA (where I live) who can do a Land Trust.  We want to transfer two properties in PA into the name of our LLC but would like to avoid any risk of Due on Sale clauses.  Seems like a simple thing right.  Well, apparently we don't use them much in CA and I have talked to 4 different people/firms and none of them do Land Trusts.  

Some advice I have been given: 

1) just transfer your property from your personal name (my husband an I) to the LLC - no one enforces those clauses

2) if the current title is 50/50 for husband/wife and the LLC is 50/50 for husband/wife then there is no issue - its basically the same

3) We don't do land trusts in CA

I do not want to take the risk of the Due on Sale clause, particularly with one lender who I would expect would actually enforce it.  

So - advice?  Recommendations for a Land Trust attorney?  

[Chris K.]

@Michelle Mapp: sorry for peppering you with questions, but why do you want to get them out of your personal names? Privacy? I also assume you want to continue to use Fannie or Freddie loans? By this I mean, 30 year mortgages instead of 20 years mortgages that allow you to own properties as a LLC?

In PA, the strategy you describe doesn't help with the due-on-sale clause (can't say I know enough about CA law to comment). Most of your protection from due-on-sale clause comes from a federal statute known as the Garn-St. Germain. It does provide an exception for transfer to an inter vivos trust, but it only applies when "borrower is and remains a beneficiary" of the trust and the transfer to the trust "does not relate to a transfer of rights of occupancy in the property." The regulations clarify that this means the trust exception only applies if: (1) it's an inter vivos trust where the borrower is the beneficiary; and (2) the borrower continues to remain as the occupant of the property. 

To specifically comment on the advice that you received:

1. I don't think anyone can tell you what the chances of a bank enforcing a due-on-sale clause. What I can tell you is that as an attorney I represented many national and community banks. We enforced due-on-sales many times. That's especially true for Fannie and Freddie loans since Fannie and Freddie require the banks to enforce it. 

2. I don't know CA Law, but in PA it's absolutely incorrect that you holding the property as husband and wife is the same as the LLC where husband and wife own 50/50 share. If you transfer the property to the LLC, it will trigger realty transfer taxes and also the due-on-sale clause.

3. I again don't know anything about CA law, but I can't imagine this being true. As used on BP, land trusts typically means a revocable trust that people use to hold real estate. There is nothing special about it. Now there are other kinds of land trusts (e.g. conservancy land trusts) but that really has nothing to do with what most people are looking for on BP.  

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it as legal advice. Always consult with your attorney before you rely on the above information.