Land Trusts have traditionally been used as a non-profit entity to own property. In recent years, many companies have developed methodologies that allow for Land Trusts to be used to acquire properties in foreclosure allowing homeowners to save their homes and making it possible for investors to see incredible returns. In a Real Estate Investment model Land Trusts bring ease to the transaction.



While some people believe that using a Land Trust also brings a benefit of not causing Due-on-sale clauses to force the refinancing of the subject property, this is only true when the borrower is and remains a beneficiary of the trust and which does not relate to a transfer of rights of occupancy in the property. While the use of Land Trusts by real estate investors does make it more difficult for a lender to discover a transfer has occurred, the loan can still be accelerated if it is discovered since a transfer has occurred.

By federal law a transfer to a trustee in an inter vivos trust (to which classification a residential property land trust belongs) cannot be considered a due-on-sale (due-on-transfer) violation unless all of one’s beneficiary interest would have been transferred to another. Title 12 of the US Code Para. 1701-j-3 – i.e., the Garn–St. Germain Depository Institutions Act of 1982, specifically makes this point.

What this means is that a partial beneficiary interest, of one to ninety-nine percent, can be given (assigned) to a co-beneficiary without triggering a lender’s alienation recourse (i.e., the due-on-sale penalty requiring immediate satisfaction in-full of the mortgage loan.

In so much as the land trust is beneficiary-directed rather than being directed and managed by its trustee, a remainder agent (i.e., a party appointed to assume responsibility for the trust and its corpus in the event of the death or incapacity of the original director-manager beneficiary) can be a remainder beneficiary (co-beneficiary), rather than needing to be remainder trustee, as would be the case with the standard, and far more common, trustee-directed inter vivos trust (i.e., the fully funded inter vivos family trust)

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