apartment buildings in land trusts

I was wondering if anyone holds apartment buildings in a land trust with someone else acting as trustee? Do you need a mgmt company to manage the property?

What are you trying to accomplish? A business trust might be a better alternative. The owners of the trust certificates have limited liability, while the land trust does not provide any liability protection. Depending on your state’s law and the size of the property, you may need an onsite manager, which can be a 3rd party PM or your employee.

gpre,

Yes, I hold apartment buildings in land trusts. That provides additional privacy. The beneficial interest is owned by a LLC. I manage all my properties myself.

Mike

Thanks guys.

PropertyManager,

Since you manage the buildings yourself, are you listed as the “trustee” for purposes of paying bills, signing leases, paying contractors, etc. ?

Absolutely NOT! Being the trustee yourself would completely negate the intent of putting the property in the trust (privacy)!

Mike

Please correct me if I’m wrong, but isn’t the only reason to put a property into a land trust to provide some level of anonymity as to who really owns the property? …to make it more difficult for a lawyer to sue you.

I understand that trustee status would negate the benefit of being in a trust. What I’m not understanding is how the beneficiary, who is not trustee/owner, can also act as the property manager. Were there some instructions given to the trustee, at the time the trust was formed, delegating management responsibility to the beneficiary?

If the trustee is a person, just make it someone you trust, like your brother or mother. They’re just a name figure. They don’t really do anything, they’re just there for “show”.

What I'm not understanding is how the beneficiary, who is not trustee/owner, can also act as the property manager. Were there some instructions given to the trustee,

The beneficial interest IS the real “owner” as opposed to the legal owner (the trustee). It’s really your property. The trustee must do what you want them to do or you (the beneficial interest) can replace them.

However, that has nothing to do with the property manager. If you want to be the property manager, tell the trustee to contract with you (or your company) to be the manager. It’s that simple.

If the trustee is a person, just make it someone you trust, like your brother or mother.

Never make the trustee a person who has the same last name as you. That makes it really easy for a scumbag contingency lawyer to figure out that you really own it. A married daughter or a trusted lawyer can make a good trustee.

Mike

We’re splitting hairs here. If you get sued the layers sues everyone he or she can find. Trusttee, manager, owner…ect. and you personally. Its misleading to belive that the way the title is filed can prevent a lawsuit. There really is nothing to prevent a lawsuit just try to practice good business. By the way insurance dosen’t help either because they will sue for punitive damages which can’t be paid by insurance. Don’t be sued!

Onedeal,

That’s not quite right. A land trust only provides privacy. As I said, it does not provide liability protection. However, that does not mean that it won’t prevent a lawsuit. If a tenant gets killed on your property and the scumbag contingency lawyer sees big dollar signs - yes, you will probably be sued regardless of the entity. However, most lawsuits are not like that. Most lawsuits are nothing more than extortion. These scumbag lawyers make a living suing people. Whether there is a legitimate claim doesn’t matter. Most of the lawsuits are simply frivilous and the scumbags count on the defendent caving in and paying a settlement (which a lot of people do). They look for people with a lot of assets to sue. If your properties are divided into different entities, that is very helpful when the lawyer does a search. For example, when the lawyer searches the ABC Land Trust, it won’t say who the beneficial interest is and he won’t be able to discover any other properties the beneficial interest owns. If he can’t find enough assets, he very easily could decide to go after easier pickins.

We had a tenant try to stage an accident and sue us. Their scumbag lawyer couldn’t even find out who owned the property (other than the trustee) and the trustee wasn’t talking. In addition to that, we had evidence that a fraud was being committed. These two factors stopped this lawsuit before it even happened.

I agree with you that you should always operate using good business practices. However, I can tell you from personal experience that this won’t stop you from being sued. There are a LOT of predators and their scumbag lawyers out there hoping to win the landlord lottery. Proper entity structuring, insurance, and aggressive defenses are all key ingredients to protecting yourself.

Mike