Re: Brilliant Dan Lubell not hating beautiful Bill Gatten - Posted by Bill Gatten
Posted by Bill Gatten on May 23, 1999 at 16:19:13:
Burnish the following indelibly into your subconscious if you will:
“When the finger is pointed toward a star, it is the slow of wit who looks at the finger” [Chinese Proverb]
(This is no manner an allusion to your brilliance, which I indeed acknowledge and respect: but rather it is a pointed reference to my own extraordinary beauty).
Now (speaking of pasting and poking):
YOU SAID: “The due on sale clause is NEVER triggered when Harry homeseller rents out his property.”
I SAY: First fallacy… the DOS is always subject to being triggered if that rental or lease agreement is for more than three years or contains an option to purchase (GSG USCA 1701-j-3, item 8).
YOU SAID: “A transfer into an inter vivos trust in which the borrower IS AND REMAINS the beneficiary and OCCUPANT of the property…[is excluded]”
I SAY: Correctomundo! Except that I think the verbiage refers to “resident” rather than “occupant” and remember…it is the “interpretation,” not the “law.”). The U.S. Code Annotated (1701-j-3) does NOT refer to such occupancy provision. Though I do agree that a lender could jump on this interpretation, and would no doubt to so, in an attempt to prove me wrong…if they chose to: that does no however, make them right.
I’ve cited other cases wherein transfer of a partial or co-beneficial interest in a trust did not entitle the lender to a DOS call despite their clinging to the FHLMB interpretation, however, here are a couple “reasonably related” others:
Gasparre v. 88-36 Elmhurst Ave. Realty Corp., 119 Misc.2d 628, 464 NYSE2d 106 (1983) (See also U.S. Med O. Farm, Inc., 701 F2d 88 (9th Cir. 1983). In this case the property was vested with a corporation, and transfer of the borrower’s stock did not trigger the DOS. Note, however, that, in residential property, stock ownership to a resident would not convey tax deductibility as it does when beneficiary interest in a land trust is similarly conveyed.
Also see Hodge v. DMNS, Co. 652 SW2d 761 (Tenn.App Ct., 1982). In this case it was a partnership, wherein two of three partners withdrew in order to convey full interest to the third partner who didn’t qualify for the loan (no DOS viol).
YOU SAID: “…let me be clear. I DON’T THINK THIS WILL EVER COME UP! I was simply making the point…”
I SAY: Hey, Man, throw a subordinating conjunction in there between “clear” and “I don’t” (e.g., but, albeit, however, none-the-less, etc.). It will make the difference (i.e., thereby acknowledging an adjustment in the subjective element of your compound sentence… and your original thought process).
YOU SAID: “Unfortunately, the CFRs are very clear on this…”
I SAY: Read (for example) Real Estate Law…10th Ed. Werner and Kratovil (1992) - 21:01 “The MOST CONTROVERSIAL clause in mortgage law today is the so-called Due-on-Sale Clause…” I agree. The regulations are NOT AT ALL CLEAR.
YOU SAID: “…let me be clear. I DON’T THINK THIS WILL EVER COME UP!”
I SAY: With all deference and adulation (not to exclude fawning), I don’t think it’s at all clear that you mean that. It appears to me and probably to your other readers that the possibility frightens the dickens out of you. Albeit, I don’t understand (for the life of me…as they say) how lease option proponents can declare to the world that the Due on Sale Clause is NEVER triggered, and is nothing to worry about: then turn right around and show such concern over the interpretation of GSG by the FHLMB and/or the “Code of Federal Regulations.”
Regarding your comments about a potential for a Gatten versus Bronchick squabble… it won’t happen. Bill and I don’t seem to disagree on one single point, until it comes to something wholly outside the land trust issue, and that is whether the inherent disadvantages of lease options can be overcome by a 3rd party co-beneficiary land trust conveyance without losing a single element, benefit or advantage of the former.
Now… where do YOU AND I agree? It is in that no system can be said to be absolutely perfect… I only say that the PACTrust™ is closer to it than anything seller-assisted financing arrangement that has been promulgated heretofore.
And let me close by amending your scenario before the Unlawful Detainer judge… I don’t refer to the “buy-out” provision to assert my position: I refer to the fact the co-beneficiary’s interest in the trust and the lease of the property are completely separate issues…and that as a tenant, he as no equitable interest claim in the property: and that he is not only the defaulting party, he is also the very drafter of the document which issues and delineates the direction for, and the conditions of, the tenant’s (his own) eviction. Please understand Dan, that I’ve been there (down that road) a few times, and do indeed know of which I speak on that particular issue.
Another point on which we fully agree:
YOU SAY: “I think your ideas do have some merit, and are rather well reasoned.”
I SAY: You are truly a master at understatement.
Mirror, mirror on the wall…,