In this episode of Coffee with Carl, attorney Carl Zoellner explains how land trusts can help minimize or avoid the churning of title.
Updated August 13, 2020
Land trusts can be a useful tool in your real estate investing toolbox. Alone, these types of trusts do not offer asset protection. However, one of the benefits they provide is the prevention or minimization of title churning. One way to think about the “churning of title” is seeing a long or convoluted chain of title.
Every once in a while, you may encounter issues with a lender or title insurance company related to the churning of title if a property has changed hands or transferred title multiple times. This “churning” can make it harder to close on the loan for the buyer. This is especially relevant for wholesaling real estate.
When it comes to land trusts and chain of title, these types of trusts prevent the issue of title churning. Once title is held in a land trust, you can assign the beneficial interest at will. Ultimately, title is always held in the name of the land trust. What may change are who the trustee is and who holds the beneficial interest. With a land trust, ownership can change while title stays the same, preventing churning.
When dealing with lenders, if there are title or transfer issues, a land trust is a viable option. One of these possible issues is the churning of title. In this case, you could use a land trust to keep the chain of title clean, potentially staving off some buyer issues or if you’re in a state that requires title insurance.
Watch as Carl goes over how land trusts can prevent the churning of title.
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