Ohio Land Trusts and ORC Sec. 5301.255 - Posted by David
Posted by David on March 19, 2006 at 21:10:13:
I have a question that affects the Ohio real estate investing community.
Land trusts sound like the perfect way to keep property owners’ names out the the public record.
However, in Ohio there is ORC Sec. 5301.255. Recording of memorandum of trust.
The statute requires that the memorandum of trust have the following information become a matter of public record (which is very easily searchable via the internet in several of the larger Ohio counties on both auditor and recorder websites):
(A) A memorandum of trust that satisfies both of the following may be presented for recordation in the office of the county recorder of any county in which real property that is subject to the trust is located:
(1) The memorandum shall be executed by the settlor and trustee of the trust and acknowledged by the settlor and trustee of the trust in accordance with section 5301.01 of the Revised Code.
(2) The memorandum shall state all of the following:
(a) The names and addresses of the SETTLOR and trustee of the trust;
(b) The date of execution of the trust;
© The powers specified in the trust relative to the acquisition, sale, or encumbering of real property by the trustee or the conveyance of real property by the trustee, and any restrictions upon those powers.
(B) A memorandum of trust that satisfies divisions (A)(1) and (2) of this section also may set forth the substance or actual text of provisions of the trust that are not described in those divisions.
No problem with the name and address of the trustee (this is public record anyways and for the address you can just use a PO Box). The part in A(2)a that requires the name and address of the SETTLOR (the creator of the trust and often the beneficiary) could really be a problem. The law here requires that an individual sign the memorandum before a notary public. So even if you used an LLC or C-Corp as the Settlor, you would still need an individual to sign for the Settlor. If you are named as the Settlor what is the point of having a land trust to begin with. This is a problem if you want someone else to be the Settlor (or officer of the Settlor if an LLC or C-Corp) since in the event of a lawsuit they could be personally named as a defendant (remember, in law school they teach you to sue EVERYBODY and let the court sort it out). Even with a indemnity clause in the operating agreement or bylaws no-one wants to be named in a lawsuit.
The statute does not actually “require” that the memorandum be recorded but its been my experience that if you want sell or refinance real property a title company will want this statute to be followed and no bank is going to give a loan to the buyer/refinancer unless the tittle company is happy. Banks and title companies are skiddish about trusts to begin with and with a land trust they look at them like a person with 2 heads. I’m sure that there are banks (even private financing) that are willing to work with this. But buyers don’t always just fall out of trees when you need them and if they want to deal with their bank that could be a deal killer if the bank won’t play ball.
Sure you could show the bank and title company ALL of the documents including the trust, LLC operating agreement, C-Corp bylaws, etc. And sure a bank and title company would keep these confidential. But most of the time they would still require that all of the i’s be dotted and t’s crossed (follow the statutes including this one to the letter and by the numbers).
So… any suggestions would be greatly appreciated!