by Bill Gatten
What would you think if you asked your auto mechanic if you should buy a Mercedes Benz, and he told you to buy a Geo Metro instead? “After all, you don’t need a Mercedes, Geos are just fine. What could anyone want in a car other than getting from here to there, stopping, going, speeding up and slowing down? Oh, yeah, and…they are far easier (for me) to work on because I never went to Mercedes school and don’t wish to take the time to do so now. Sure, the manufacturer says they are better, safer, built stronger, last longer, have better re-salability; that they are less likely to kill you in a crash, blow off the road in a high wind, or skid off a mountain road in a snowstorm. But…I ask you, how can I stay in business by suggesting that my clients seek out more knowledgeable sources?”
For the record, I do not advocate proceeding in any real estate related transaction without the advice of a "good' and "knowledgeable" legal professional. However, the quandary in which I find myself is that there are very few attorneys who know much about the use of trusts in general, and even fewer know beans from a box of matches about what a "land trust" is...much less what it does, or how it differs from other inter vivos trusts. Most attorneys have never even heard of such a thing; and there are even fewer yet who are competent to offer sound advice…Yay or Nay relative to the use or safety of an "Illinois-type, revocable, inter vivos, title-holding, beneficiary-directed, third-party trustee, co-beneficiary land trust transfer (i.e., the NEHTrust System™)." In other words, “Go buy that Geo.”
Ordinarily, when one engages the services of an uninitiated attorney for the purposes of reviewing a land trust transfer (much less a NEHTrust Transfer™ with all of its appendices, directions, Escrow documentation, creditor letters, assignment, lease, etc.) he or she is faced with a true pointy-horned dilemma. The only two options being:
1) Get out to the law library and spend billable hours getting educated on land trusts, or…
2) Render advice (pro or con) on something about which virtually nothing is known. I can assure you, the advice will always be con because ‘con’ is surer, quicker, easier and more profitable than ‘pro’).
I'd presume no less than 8 or 10 hours would be needed to research the pertinent codes and cites and the myriad features, benefits and uses of the land trust (i.e., $3,000 to $ $5,000 billable?); Think about it...if you were a busy attorney whose itinerary was over-burdened with money-making time constraints, what would you prefer to do? Would you opt to:
1) Spend your "billable" hours doing hard research for free for a transaction you'll probably never see the likes of again;
2) Risk your client's walking away when he hears what the bill is going to be, and receiving nothing for your time, or
3) Convert the entire transaction to something that you better understand, and are more competent to advocate...and something on which you could make some money, despite any disadvantages there may be?
Similarly, if you were the client hoping to pay only for a simple review of documents, would you be willing to finance your attorney's continuing legal education at the rate of $375 per-hour? Me neither.
My hope is that no one would accept that the entire transaction should be converted to something less effective but more "manageable (for the attorney)." Perhaps a nice "Contract for Deed" or maybe a little (innocuous, volatile, due-on-sale violating) lease option. After all, let's face it, there just isn't much billing potential in telling a client, "I'm not competent to advise you in this matter."
Being told to "convert to something else," to bebefit an attorney is a reversion to the very short falls and serious risks that the NARS NEHTrust Transfer™ is designed to circumvent. Shortfalls such as due-on-sale violation; a resident's claim of "equity" forestalling eviction and forcing foreclosure (to buy time and free rent); the constant threat of creditor and/or tax liens attaching to the property due to untoward actions by the other party; the insidious susceptibility to partition actions and/or charging orders by judgment creditors; involvement in the other party's Probate or forced ancillary administration issues; public recordation and notification of the transaction; absence of a third-party holding entity to ameliorate potential for disputes.
If you or I were to consult with a medical practitioner about treatment for a brain tumor, a good doctor would refer us to a neurologist. However, the mindset of the legal practitioner is too often analogous to as physician's advice that we simply contract a more manageable disease. "I missed the class on brains, so how 'bout I treat you for hemorrhoids instead?
But…what are you trying to say? Should I seek the advice of an attorney or not?"
Yup you sure should! Indubitably, as a matter-of-fact (so say I)! However, be certain to choose a truly competent one who has experience with land trust transfers in creative real estate transactions. And if they start talking about Lease Options, Lease Purchases, Land Contracts (Contracts for Deed), Wrap-Around Mortgages, Equity Shares, Subject-To's or ‘Silent Seconds’ ...run for your life!
Bill Gatten, CEO
North American Realty Services
6520 Platt Ave. #548
Westhills, CA 91307
home@landtrut.net
www.landtrust.net
The remainder of the original article (never published)
However, there are a few nice people with whom I've become familiar over the years who do practice law and who do understand the concept (albeit a limited few, to be sure…though this list is by no means complete). I cannot vouch for any of them (learned the hard why one should never “vouch”), but I can list their names (addresses and phone numbers are up to you):
AZ, Gareth Hyndman, Phoenix/Scottsdale
AZ, Harvey Dye, Phoenix Scottsdale
CA Steven Zipperman, Santa Ana
CA, David Robinson, Los Angeles
CA, Gary Gitlen, Agoura Hills
CA, Jay Swob, San Diego
CA, John Brady, San Diego
CA, Judy Wrentschler, Foster City
CA, Mark Blankenship, Riverside
CA, Martin Slater, Los Angeles
CA, Michael Kilmartin, Simi Valley
CA, Paul De Witt, Los Angeles
CA, Peter Gibbons, Riverside
CO, Bill Bronchik, Denver
FL, Mark Warda, Ft. Lauderdale
ILL, Henry W. Keno, Chicago (but alas…he died)
ILL, Doug Lansky, Downers Grove
MA, Birnbaum and Monahan, L.Q.
MA, Michael Moskos, Worcestor, Mass
MD, Bryon S. Bereano, Upper Marlboro
ME, Jennifer H. Pincus, Portland
MI, Jean Marie Hansen, Detroit
MI, Russell Messina, West Bloomfield
MO, Richard L. Zinn, Kansas City
NC, Clinton S. Forbis Jr., Kannapolis
NC, Susan Hunt, Greensboro
NJ, John H. Crammond, Bloomingdale
NY, James De Brosse, Queens Village
NY, John Freeman, Manhattan
NY, Nabisubi (“Nobi”) Musoke, New York City
NY, Steve Butcher, Rochester
OK, David Eldridge, Oklahoma City,
TX, Blue Ransfeld, Fortworth
TX, Bryan Dunklin, Dallas
TX, Jerry Corbin, Midland
TX, Theresa Smith, San Antonio
TX, John C. Blazier, Austin, Texas
The following are some attorney quotes, in answer to: "Why aren't there more attorneys to call on who know something about land trusts?
"Because very few know how to use them and even fewer recognize the benefits."
Mark Warda, Attorney, Florida
"If you can't find the expertise [when seeking a competent attorney], you have no choices but to keep on looking, or take upon yourself the task of trying to educate your advisors and counselors."
Jay Douglas Swob, Attorney, Cincinatti
"Another problem with using attorneys is that most have a negative attitude. They will probably advise against using a land trust because they [themselves] don't understand it."
Bill Bronchik, Attorney, Denver
"In that the 'land trust' is less frequently used outside of Illinois where it was first created [1920 its precursor in 1891], it is unlikely that many will be immediately familiar with its benefits or structure."
Henry W. Kenoe, Attorney, Chicago (Deceased) (Keno on Land Trusts, IICLE, 1989)
"No! Don't do it! Oh m'god! These can only be done in Illinois. They violate the Doctrine of Stepped Transactions. Lease tenants can't take tax write-offs. You crazy? No court in the country would see such a thing as a conversion of real estate to personal property! Run Gertrude, run! Run like the wind!”
“But wait. Before you rush off, Gertrude, let me create an all-inclusive wrap-around mortgage for you instead. It'll do the all the same things and I'll only charge you $2,000." The Due-on-Sale Clause? Oh, don't worry about that...lenders never pay any attention to those things. I'll build in a nice exculpatory paragraph anyway (so you can't sue me) and it'll be in bold print. Could the buyer get the property embroiled in a lawsuit or tax lien while you're still on the mortgage loan and unable to make the payments or sell the property? Well, I suppose so, but that hardly ever happens either...don't worry about it. Could you evict the buyer if he doesn't make his payment? Well, no. But, hey, there's always judicial foreclosure, Unlawful Detainer, Ejectment and quiet-tile action: which I will be more than happy to handle for you (at $225 per hour plus court costs...no guarantees of course).
“Huh?
"Would the property be tied up in the other party's Probate proceedings, if they die?" Well, um, yes, but most people don't ever die of anything serious: but even if they did, that would just be a matter of another paycheck for me, now wouldn't it? I don't see any problems here."
Unnamed, famous, anonymous former attorney, Riverside, Ca.
"There is no person on the planet that is more apparently knowledgeable about the law relative to anything new, than a lawyer who doesn't know what the hell he's talking about.”
Bill Gatten, Author, Entrepreneur,
Seminar Leader, West Hills, Ca.
If your, or your client’s, attorney tries to put one over on you by suggesting tht the client do something else via another type of transfer vehicle, he/she would only do that if they were too busy, too lazy or too misinformed to tke the time to justify their opinions. Should this happen, just ask him/her (the attorney) if he/she will sign an agreement declaring that the suggested alternative will do everything the NEHTrust can do.
In other words, will the suggested alternative serve to avoid –
…a due-on-sale (DOSC) violation
…the need for option fees and/or rent-credits (that create “equity” violating the DOSC)
…the ability of any party to it to act unilaterally (alone, without the other party/ies)
…any untoward, illegal or deceitful actions of another party to the transaction
…the potential for any party creating clouds on title
…the ability of any party to over-encumber the property
…the need for foreclosure and ejectment action re. eviction
…the tenant’s worries about the actions of the landlord/optionor
…the misdirection or embezzlement of funds (pmts, taxes, ins., etc.) by any party
…partition or charging orders by outside creditors (even the IRS)
…the need for deceit and subterfuge (re. an underlying lender’s admonitions)
Or can the suggested alternative provide –
…avoidance of the “due-on-sale” clause (options, wraps, land contracts & equity shares certainly do not)
…free, centralized 3rd-party professional collections and disbursement of paymnts
…automatic notice of default to all parties
…legitimate recordation in the name of another (without due-on-sale threat or loss of control)
…full income tax benefit to the acquiring party throughout term of the agreement
…quick and easy eviction without risking claims of “Equity” to force foreclosure and stall ejectment
…higher rental income for the landlord (re. transfer of tax benefits)
…lower after-tax housing cost for the tenant (re. access to tax benefits)
…the safest and most silent contingency sale vehicle ever
…easiest purchase and disposition of property at termination
…transfer of full ownership benefits without equity transfer
…privacy of ownership without compromise or public notice
…24-hour monitoring of all aspects of the transaction
…freedom from all management, maintenance and collections
…avoidance of credit damage and debt-relief taxation (re. foreclosure or short-sale)
…a history of never having been challenged in court or by the IRS
NOTE: In order to accomplish all of the above, one need but (with the proper documentation) vest the property in a land trust and make the tenant a co-beneficiary. [See Title 12 USC 1701-j-3; Title 12 US CFR(a) 591(vi); Rev. Rul. 92-105; IRS Sec. 163(h)4(D)]
ANOTHER NOTE: Bill Gatten, the author of this article, is not engaged in the practice of law, or in rendering dependable professional advice of any kind what so ever. For legal or other expert assistance and direction, the services of a competent professional should be obtained. Do not expect Bill Gatten to know anything about anything...ever.
STILL ANOTHER NOTE: Want to get your attorney to do the right thing? Give them a copy of this article. If they review the above list and tell you they don’t agree that these benefits are attainable, it’s because they simply don’t know anything about land trusts, much less what can be done with them, and choose not to learn.
The attorney’s creed: I’ve been to Know it All School, so If I don’t know it by now, it is either unknowable or wholly without merit.
Bill J. Gatten
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
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