@Olivier Chaine
In all trust deed or mortgage documents written by instructional lenders that I've come across, a change in ownership/manager structure of an LLC holding title to a property is a violation of the "due on sale" clause, so from a purely covenant violation sense purchasing the LLC doesn't help you.
However, if the LLC is purchased, that purchase is NOT a recorded document, and hence more difficult for a lender to ascertain, as long as the warranty deed itself is not transferred and recorded.
There’s an entire “industry” consisting of gurus, attorneys and title companies that provide services and advice for transacting real estate without paying off the existing lien(s). However, all strategies, tactics, etc TRIGGER the “due on sale” clause, despite whatever people selling “how to” ideas want you to believe. Not land trusts, not LLCs, not living trusts, not “divided” interests, and not quoting repealed section of the St Germain Act will work. This has been court tested by over 40 years of case law.
Investors transacting real property without paying off existing mortgage notes fall into three categories. 1 - the note IS assumable. This is rare but may occur with notes originated with private parties. 2 - the lender gives his blessing to the assumption of the note. This usually occurs if the buyer “qualifies” for the loan and an incentive - higher interest rates, transfer fees, etc. to the lender is provided. 3 - the parties entering into a transaction, take steps to conduct business in a way that doesn’t “alert” the lender to the fact that the property ownership has transferred. This includes the seller maintaining property insurance in their name with the buyer added as additional interest and mortgage payments being made from an account in which the seller appears as bank account holder.
If the lender does find out that a property transfer has taken place, and chooses to enforce the due on sale clause, the lender must provide the seller (debtor) and, if applicable to state law, buyer with notification of default under the mortgage or deed of trust, and specific time as specified by state law to cure the default. Once the “cure” period is expected, the lender has to send a notification of intent to foreclose to same parties. The rest follows state law. The length of time before actual foreclosure would range from a little as 21 days in Texas to “years” in New Jersey and New York, and many other “judicial” foreclosure states. The parties can pay off the note for principal balance, late fees, penalties, back interest and legal fees any time before the actual foreclosure. Foreclosure itself can be delayed by either a Temporary Restaining Order or a bankruptcy filing.
