Selling a trust held home via a Land Contract? - Posted by Jim IL

Posted by Bud Branstetter on February 23, 2001 at 15:51:51:

The scenario that the code address is when the property is in a trust and a contract for deed is written. The code indicates that under the described conditions that the contract can be abrogated. They surely would ask for their down payment back. I became trustee on one last summer in which the beneficiary had signed the contract for deed. The contract for deed was cancelled and a bankruptcy was used to try and stall the eviction. They did not attack the fact that the original trustee did not contract with them. There was no agreement for the beneficiary to have authority to contract or manage.

It would work fine if every thing ended properly but they seldom do with high risk tenants.

Selling a trust held home via a Land Contract? - Posted by Jim IL

Posted by Jim IL on February 22, 2001 at 23:33:22:

Hello all,
WOW!
I’ve been doing some reading tonight in my state law books online.
Holy cow.
Look at this!
If you own a home that you hold title to in a trust, look at this before you sell it with a land contract.
This sure doesn’t sound too nice, darn it!
*I’ll paste it below
(765 ILCS 430/)

(765 ILCS 430/0.01)
Sec. 0.01. Short title. This Act may be cited as the Sale of
Residential Property Subject to Land Trust Act.
(Source: P.A. 86-1324.)

(765 ILCS 430/1)
Sec. 1.
As used in this Act:
“Land Trust” means any arrangement under which the title, both legal
and equitable, to real property, is held by a trustee and the interest
of the beneficiary is personal property and under which the beneficiary
or any person designated in writing by the beneficiary, has the
exclusive power to direct or control the trustee in dealing with the
title and the exclusive control of the management, operation, renting
and selling of the trust property together with the exclusive right to
the earnings, avails and proceeds of said property is in the beneficiary
of the trust.
“Residential property” means any single family residence or multiple
dwelling structure containing 6 or less single dwelling units for 6 or
less family units, living independently of each other.
“Real estate installment contract” means any agreement or contract
for a trustee’s or warranty deed, or otherwise, under which the purchase
price of residential property is to be paid in installments over a
period in excess of 5 years with title to the property to be conveyed to
the buyer upon his payment of the purchase price or a specified portion
thereof.
(Source: P. A. 76-1869.)

(765 ILCS 430/2)
Sec. 2.
Residential property which is the subject of a land trust may not be
sold under a real estate installment contract unless at the time of
execution of such a contract a full disclosure of the name of the
trustee and the designation of the trust and all of the beneficiaries of
the trust is made by the seller to the contract purchaser and the
contract is signed by the beneficiaries having the power of direction.
Each such “real estate installment contract” shall be deemed to include
a provision, whether actually incorporated in the “real estate
installment contract” or not, that the beneficiaries undertake to convey
or cause to be conveyed the real property which is the subject of the
"real estate installment contract" in accordance with the terms of the
"real estate installment contract". Any violation of this Act renders
such a real estate installment contract voidable at the option of the
purchaser.
(Source: P. A. 76-1869.)


That is it folks, just for reading and pondering,
Jim IL

Re: Selling a trust held home via a Land Contract? - Posted by Bud Branstetter

Posted by Bud Branstetter on February 23, 2001 at 10:52:01:

Jim,

Illinois is home of the land trust. I’ve sold on contract for the benficial interest in the trust, not deed. Does that make a difference? Since I’m in Texas it’s mute to me.

I’m also using the PACtrust now and there is no problem with the terms of this provision either. The RB owns a piece of the trust. Their occupancy is that of a leasee. The property is going to be sold at a specified point and while they have in effect first right of refusal they still own the interest in the trust.

I could see a problem for someone that promised a deed and did a wrap for the long term when the title to the property was already in the trust.

Re: Selling a trust held home via a Land Contract? - Posted by Houserookie

Posted by Houserookie on February 23, 2001 at 06:54:31:

“Any violation of this Act renders such a real estate installment contract voidable at the option of the
purchaser.”

If the contract is voided by purchaser is that bad?
Where does it say you have to return the money paid
to you?

If the contract is voided, the purchaser gets nothing.

a couple questions - Posted by AWWMi.

Posted by AWWMi. on February 23, 2001 at 01:02:13:

I’ve read before that land trusts should be set up separately, for every property its used on. You do Not want to record the trust agreement. However, since the trust will be dissolved after sale of the property what problems would this disclosure of information cause? If I understand correctly, the disclosure is to be given to the purchaser Only. The disclosure would Not have to be made publicly, which is one of the benefits of a land trust. What negative consequences would beneficiary have from disclosure to purchaser?

Re: I don’t see a problem. - Posted by Stacy (AZ)

Posted by Stacy (AZ) on February 22, 2001 at 23:55:55:

Was it that you have to disclose to the buyer who the trustee and beneficiaries are that concerns you? Or that the beneficiaries have to agree to convey title to the buyer in accordance with the land contract? I don’t see a problem in doing so. It’s the lender who shouldn’t be informed. So, don’t record the contract.

Am I missing something, Jim?

What did interest me, though, is that a land contract is defined as “to be paid in installments over a
period in excess of 5 years”. Well, my land contracts are due and payable in full after 2 years. I wonder if I was in IL, what they would call that?

Stacy

Re: What problem? - Posted by Stacy (AZ)

Posted by Stacy (AZ) on February 23, 2001 at 11:01:14:

Bud, can you clarify your last statement?

“I could see a problem for someone that promised a deed and did a wrap for the long term when the title to the property was already in the trust.”

When the Land Contract is paid in full, simply deed it from the trust to the new owner, as promised. There’s no promise to the contract buyer what vehicle will hold title during the contract period. That’s none of his concern. Where’s the problem?

Stacy

Re: Selling a trust held home via a Land Contract? - Posted by JPiper

Posted by JPiper on February 23, 2001 at 09:09:40:

Bzzzzt. Wrong guess.

JPiper

Good Question… - Posted by JPiper

Posted by JPiper on February 23, 2001 at 24:38:06:

Good question…but it doesn’t appear that it would be subject to this act…whatever it was called.

JPiper