Land Trust Attorney in Florida

LAND TRUSTS IN GENERAL.

A Florida land trust is a private agreement among different people to operate, manage, and hold legal title to Florida real property. A “Land trust” is an express written agreement or arrangement by which a use, confidence, or trust is declared of any land, or of any charge upon land, under which the title to real property, including, but not limited to, a leasehold or mortgagee interest, is vested in a trustee by a recorded instrument that confers on the trustee the power and authority to and under to:

1. The duty to convey, sell, lease, mortgage, or deal with the trust property, or to exercise such other powers concerning the trust, property as may be provided in the recorded instrument, in each case as directed by the beneficiaries or by the holder of the power of direction;
2. The duty to sell or dispose of the trust property at the termination of the trust;
3. The duty to perform ministerial and administrative functions delegated to the trustee in the trust agreement or by the beneficiaries or the holder of the power of direction; or
4. The duties required of a trustee under chapter 721, if the trust is a timeshare estate trust complying with section 721.08(2)(c)4, or a vacation club trust complying with section 721.53( I)( e). However. the duties of the trustee of a land trust created before the effective date of this act may exceed the limited duties listed in this paragraph to the extent authorized in subsection ( 12).

Two Essential Instruments to a Land Trust, the deeds that convey property into the land trust and the land trust agreement.

Terminology.

1 . Beneficial Interest. The Beneficial Interest is any Interest, vested or contingent and regardless of how small such Interest may be, in a land trust which is held by a beneficiary.

2. Beneficiary. The Beneficiary is any person or entity having a beneficial interest in a land trust. A trustee may be a beneficiary of the land trust for which such trustee serves as trustee.
3. The Trustee. The Trustee is the party designated in the trust agreement to hold title to the trust property of a land trust or other trust.
4. Trust Agreement. The Trust Agreement is the agreement entered into between the trustee and the beneficiary which establishes the trust.

Power of Direction. The Power of Direction is the trustee’s disposition of title to the trust power and the execution of trust documents affecting the trust property and authority of a person, as provided in the trust agreement  

Deed in Trust is the instrument which conveys title to the real property into the land trust. 

Trustee’s Deed. An instrument by which a land trustee conveys title to the trust real property to another party is a Trustee’s Deed. 

Trust Property. Trust Property is any interest in real property including a leasehold or mortgage interest, conveyed by a recorded instrument to a trustee of a laud trust or other trust.

The trust agreement deals with management of the property, it can be extended and amplified to deal with a variety of other problems.

 There are of course, many problems that can arise in the operation of property. Well drafted benefciary agreements can deal with problems such as buy-sell arrangements, dispute resolution as well as other government issues. The terms of beneficiary agreements can be incorporated in the trust agreement.

Other uses of land trusts.

1. In situations where multiple owners hold title to real property, the potential exists for judgments, divorce, death, bankruptcy or incompetency of a single beneficiary to cloud the title to all or a part of the real property. The use of the land trust prevents the possibility of clouds on the title in these situations.
2. It is important to note that the ownership of a beneficial interest in the trust can be reached by a judgment creditor if the creditor of a beneficiary of a land trust learns of the beneficiary’s ownership interest in the land trust.
3. Under well-drafted trust agreements, provision can be made to avoid deadlocks among multiple owners. A general partnership, limited partnership or other form of beneficiary ownership can be prepared to spell out the rights and obligations of multiple owners in situations where disagreements may arise.
4. Where real estate projects are syndicated, the use of a land trust can reduce delays where signatures must be obtained from remote locations and can facilitate the many conveyances of lots in subdivisions and units in condominiums.

LAND TRUST BENEFITS

Land trusts have been found to have several advantages:

1. Interests in land trusts cannot be partitioned/ transferring beneficial interests is relatively easy.
2. Interests of beneficiaries cannot be disclosed without order of court.

An important use of the land trust arises in the situation in which a developer seeking to develop an area in which there are many owners of small parcels, uses the land trust to minimize the potential for a few owners to hold out for exorbitant prices by keeping his name off the public records and notifying them of his intentions.

3. Judgments against the beneficiaries do not affect legal title to the real estate sold in the land trust. Judgments can, however, be enforced against a beneficiary’s beneficial interest in a land trust. title to the real property held in a land trust can be conveyed free and clear of the lien of judgments against a beneficiary.
4. The beneficial interest in the land trust is personal property if so designated in the recorded instrument or trust agreement. if no such designation is made, it is characterized as real property.. Since it is personal property non-residents of the state in which the property is located can avoid ancillary administration.
5. The death of a beneficiary does not terminate the trust, and testamentary dispositions can be made in the trust agreement.

Beneficiaries may make dispositions of the beneficial interest upon death of the named beneficiary. These dispositions can be handled by providing in the trust agreement for the remaindermen to succeed to the beneficial interest of the beneficiary. The provision for remaindermen has been held not to be testamentary.

Since the interest of a beneficiary is personal property, marital rights of dower and curtesy do not apply; therefore, title can be conveyed without the joinder of the spouse. 

Where mortgage financing is used in connection with a land trust, personal liability of the beneficiary can be avoided if the lender does not require personal guarantees

Use of the land trust as a vehicle for holding title to real property permits the preservation of tax benefits under the Internal Revenue Code.

1. All of the tax advantages of individual ownership may be retained when a land trust is properly used to hold title to real property.
2. The deduction for expenses flows directly through the beneficial owners, assuming of course that all of the criteria to prevent the land trust from becoming an entity taxable as a corporation are met.
3. If C-Corporation tax consequences are desired, place the beneficial ownership of the trust in a C-Corporation.

CREATION OF LAND TRUST

The deed in trust generally sets forth the powers and authority of the trustee. It should specifically state that the interest of the beneficiary is personal property and that no beneficiary has any title, legal or equitable, in the real property.  

In Florida for example, Florida Statutes Section 689.071 requires certain language prescribed in 689.073( I) Florida Statutes Section to validly establish a land trust.

1. The trust agreement is the instrument entered into by the trustee and beneficiary.
2. It should provide that the interests of the beneficiaries have the powers to direct the trustee to deal with the title, control and operation of the property.
3. It also should provide that the interest of the beneficiary is personal property (unless so designated in the recorded instrument) and that at the death of the beneficiary the trust will not terminate.
4. The trust agreement sets forth the duties of the trustee and generally provides that it is not the duty of any purchaser to see to the application of the purchase money, nor does any such person have the right to inquire into the necessity of any act of the trustee.
5. The trust agreement should not be recorded.
6. Note that mortgages may also be placed in land trusts. When this is done the Land Trust Agreement should be modified accordingly to provide for hold of fee title to the real estate if foreclosure occurs and to insure that a trustee has the power to institute foreclosure proceedings.
7. There may be other collateral agreements among beneficiaries which are generally called “Beneficiary Agreements” which relate to the relationship among beneficiaries.
8. The kind and variety of collateral agreements and beneficiary agreements is a very wide one. Some take the form of co-ownership agreements. Some others are very sophisticated partnerships.

Limited partnerships, corporations and limited liability corporations may be beneficiaries under a land trust agreement.

1. It is important to make provision for a successor trustee where a human being is the trustee.
2. When such provision is made in the deed, a copy of the death certificate for the deceased trustee may be recorded thereby showing that legal and equitable title is in the successor trustee.
3. If the recorded deed in trust makes no provision for a successor trustee, the provisions of 689.071 (9) should be reviewed as to the appropriate procedure to follow for appointment of a successor.

In connection with the assignment of beneficial interest. a Florida court held that since the interests of the beneficiaries were personal property no witnesses were required to an assignment of beneficial interest under the land trust.

2. With respect to personal liability, a Florida case held that where the trustees were also the beneficiaries of the land trust and were involved in the development of a real estate project,

the court looked to Florida Statutes Section 737.03 relating to personal liability of trustees to third parties and noted that the deed said nothing about the limitations of liability on the trustees.

Therefore, every deed should contain language indicating that the liability of the trustee is limited to property which is contained in the trust. This limitation of liability should be placed on other documents executed by the trustee.

HOW A LAND TRUST WORKS

In Florida. land trusts are a creature of statute  

1. Florida Statutes Section 689.071 recognizes and confirms the creation and establishment of land trusts described in the act. Courts have held that the statutory land trust is not an ordinary inter vivos trust which is administered under the trust administration chapter,
2. Case law in Florida confirms that a grantee from a land trustee need not look beyond the trustee’s deed in trust to determine his powers.
3. The beneficiary retains full power of management of the property under Section 689.071(3), Florida Statutes, provides that the trustee of a trust in which the recorded instrument confers the power and authority prescribed under 689.073(1) receives legal and equitable title to the real property.
4. Florida Statutes Section 689.073(2) states that any grantee from a trustee holding title to real property in trust under a recorded trust deed which meets the requirements of 689.073, does not have to inquire into the identification or status of any named or unnamed beneficiary, their heirs or assigns or to the authority of the trustee to act within the powers granted in the recorded deed, nor is there any requirement that the grantee inquire into the provisions of an unrecorded trust document whether such document is referenced in the deed or not.
5. Florida Statutes Section 689.073(2) is applicable to recorded deeds in trust whether or not the beneficiary is named or unnamed.
6. The deed prepared pursuant to Section 689.073(1) creates a valid trust and as provided in Section 689.073(2) there is no need to inquire into any unrecorded trust instruments or other matters which may or may not be referenced in the deed.

Care should be taken to insure that beneficiaries are not inadvertently named, either in the deed or subsequently recorded documents. By naming beneficiaries on the public record, notice may be given to a title examiner requiring further investigation as to the ownership of the property.

Florida Statutes Section 689.073(3) provides that all persons dealing with the trustee under any recorded instrument which has been prepared in accordance with the section takes free and clear of the claims of all named or unnamed beneficiaries of the trust and of any unrecorded declarations or agreements collateral to the trust, whether they are referred to in the agreement or not.

1. It should be noted, however, that the beneficiary can enforce the terms of the unrecorded trust instrument against the trustee.
2. If the grantee is dealing directly with the beneficiary, this subsection may not apply.
3. It is important to note that Florida Statutes Section 660.41 was modified so as to permit corporations to act as trustees under a land trust agreement.

Florida Statutes Section 689.071(6) states that in all cases where the recorded instrument prepared in accordance with the section contains a provision declaring the interest of the beneficiary to be personal property only, that provision shall be controlling for all purposes where such determination shall become an issue under the laws or in the courts of the State of Florida. It is important to note that this provision makes it possible for a beneficiary to convey his interest in the real property by assignment of beneficial interest rather than by the execution and recording of a deed.  Notwithstanding the characterization of the beneficial interest in a land trust as personal property, the assignment of that beneficial interest is still subject to Florida

With the use of an appropriate exculpatory clause, no personal liability is imposed on the beneficiaries or trustee and exposure to deficiency judgments in the event of foreclosure can be avoided.

LAND TRUST COSTS

Our firm’s customary fees for a Land Trust begin at $950.00. The fee includes:

1. Up to 2 hours of discussion with an attorney to gather the necessary information to draft the Land Trust; and
2. Standard Land Trust Agreement

In addition, we can serve as trustee of the land trust. When we are the trustee, our trustee entity will be the public face of the property ownership instead of you as beneficiary.

If requested, attorney time for additional work as trustee, trust agreement customization, or other legal services is charged at our customary hourly rates.

From our offices in Miami, Ft. Lauderdale, Boca Raton and Orlando, our legal team offers a full range of personalized legal services and business counseling to assist clients in achieving their personal and business goals. We also have a team of experienced and professional closers throughout the State of Florida

We welcome any feedback that will allow us to serve you better.