All Forum Posts by: Keith Barton

It’s challenging to give a satisfactory answer to cover all circumstances you might be considering. There are too many variables. Each state has different laws (whether statutory law or common law). Each deal has different facts. Each person has different goals (and often goals can change between deals.) Therefore, there is no way to give an exact answer. Having said that….

There are at least 7 states with statutes governing land trusts:

1)Illinois:
"Land Trust Beneficial Interest Disclosure Act": §765 ILCS 405/0.01 et seq
"Land Trust Successor Trustee Act": §765 ILCS 410/0.01 et seq
"Land Trustee as Creditor Act": §765 ILCS 415/0.01 et seq
"land Trust Recordation and Transfer Tax Act": §765 ILCS 420/1 et seq
"Building Law Violation Ownership Disclosure Act": §765 ILCS 425/0.01 et seq
"Sale of Residential Property Subject to Land Trust Act": §765 ILCS 430/0.01 et seq
"Land trust Fiduciary Duties Act": §765 ILCS 435/1 et seq

2)Florida:
"Florida land Trust Act": Fla. Stat. §689.071 et seq.

3)Hawaii:
"Land Trust Act": HRS § 558

4)Indiana:
Ind. Code § 13-4-2-13; and,
Ind. Code § 13-4-2-14

5)Montana:
Mont. Code Ann. § 72-36-206

6)South Dakota:
S.D. Codified Laws § 43-10-1 et seq.

7)Virginia:
Va. Code Ann. § 55-17.1

However, one does not necessarily need a statute to specifically govern "land trusts" to create a land trust; after all, a land trust is still a trust. Most, if not all, states allow trusts that can own property and operate in ways at least similar to the ways in which land trusts can be beneficial.

Land trusts may not be all that some claim they are; however, they can provide benefits of sorts in the following areas:

Privacy (they can make it challenging to learn the property owner’s identity;
Assumption of loans (they can minimize the risk of a bank calling a note due under the due on sale clause);
Minimize transfer taxes (they can minimize real estate transfer taxes when transferring property to an LLC if the beneficial interest in the property does not change);
Avoiding probate (they can help avoid probate since the trust determines who the trustee and beneficiary are after the "owner" dies);
Asset protection (they can help protect assets when used properly in combination with an LLC);
Lower property taxes (they can help delay the tax re-evaluation of a property, as re-evaluations are often triggered by the sale of a property, while transfer to a land trust would not trigger re-evaluation.)

Whether any person could benefit from using a land trust should be determined after consulting a qualified expert in the area.

Any positive number is a good start.

Any amount more specific (or even ballpark) really depends on 1) your comfort level,
2) your goals,
3) the accuracy of your expense budgeting; and,
4) the accuracy and consistency of your budgeting for repairs, improvements, emergencies, & vacancies, etc....

If all you ever buy are properties with positive cash flow from day 1, you determine your income by the number of those properties you buy.

Have negative cash flow properties? That's OK, just make up for it in volume.... ;)

Thanks Financexaminer. I'll have to look into the ALTA requirements. Short Sales is a new area for me, but I've done much work on it lately because I have a client working on ramping this up. I am working to develop a system with regards to the legal process because I haven't liked what legal materials I've seen on this matter with respect to Ohio law.

I have a solution for Ohio as far as the law is concerned, but I just need the local area board of realtors to sign off on what I want to do to make sure they have no problems with it. If they have no problems with it, then I hope to be able to convince Brokers that this is the way to go.

My legal process avoids all of the potential pitfalls I've been hearing about. My process also avoids the potentially "less than ideal" work arounds I've seen people mentioning. I just need to work with my client to make sure the rest of the non-legal process goes smoothly....

Time will tell.

Justin: I'm an Ohio attorney and I just had occasion to research this matter twice in 2 different contexts in the last month. In Ohio - you acquire equitable rights to real estate ONLY if there is a purchase agreement in full force and effect. If you have an option contract and you have not yet exercised the option to purchase - there is no purchase agreement in full force and effect. I have no information about marketable interest. Here is the authority for equitable interest not existing if the option has not yet been exercised:

“A written optional contract for a nominal consideration given by the owner to sell his real estate is not a sale thereof, but only a standing offer to sell to the person, and at the price named therein, if accepted within the time stated in the optional contract. The option confers no right to the holder of the option in the real estate, but it is only a sale of a right to him to become the purchaser upon the acceptance thereof within the time stated. Until the acceptance of the offer according to the terms thereof, it does not ripen into a sale of the real estate or become a completed contract between the parties for the sale thereof. It is only after the holder of the option has accepted the option that he becomes the equitable owner of the property, and can compel specific performance of the contract in a court of equity.â€
Sause v. Ward (1917, 11th Appellate District), 7 Ohio App. 446, 450-451.

Sincerely,
Keith