Real Estate Law Article

What is a Land Trust

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: Should I use a land trust when purchasing property?

A: Land trusts first appeared in the United States in Illinois in the 1890s. Land trusts were codified in Florida law in 1963. During the past few decades, land trusts have grown in popularity among real estate investors purchasing property.

A Land Trust Agreement creates a land trust and vests title to real property in a trustee by a publicly recorded Deed conferring on the trustee certain powers and authority.

The buyer is the beneficiary of the land trust and chooses the trustee. Usually the buyer’s close friend, family member, business associate, or attorney serves as the trustee. Pursuant to the Land Trust Agreement, the beneficiary retains the power of direction to instruct and direct the trustee to act in accordance with the beneficiary’s wishes, and the trustee serves in a ministerial capacity.

A buyer may choose to use a land trust to keep his name out of the public records. The Land Trust Agreement can be kept confidential and prohibit the trustee from disclosing the details of the Land Trust Agreement without the beneficiary’s consent or court order.

In a land trust, the interest of the beneficiary is usually treated as personal property. This allows for easier transfer of the beneficiary’s interest by way of an Assignment of Beneficial Interest without the need for witnesses and public recording of a Deed.

A buyer may choose to use a land trust for liability avoidance reasons as well. According to law, the beneficiary of a land trust, solely by being a beneficiary, is not personally liable for any judgment, decree, or court order for a debt, obligation, or liability of the land trust.

If there are multiple buyers or a group of investors, each buyer or investor may own a percentage of the beneficial interest in the land trust property, and beneficiaries may own their interests as tenants in common, joint tenants with right of survivorship, or tenants by the entireties (i.e., husband and wife). Corporations, limited liability companies, and limited partnerships may also be beneficiaries under a Land Trust Agreement. In the event there are multiple beneficiaries, a Beneficiary Agreement should be implemented to govern the relationship among the beneficiaries in the event there is a disagreement or a beneficiary passes away.

The November 19th edition of “The Law” will review the standards and recent case law regarding whether private entities that work in concert with the government are subject to public records laws.


Latest posts by CCLM Law (see all)