The LLC to Trustee Real Estate Scam? How long can this be allowed to go on.

[Redemptionman]

Jurisdiction

Arkansas

I have learned of a scenario, I am not sure I would call it a SCAM since I am not 100 percent sure how it works. I have an idea, but this is only a theory. So, you all can tell me if I am right or wrong.

Lets say a shady LLC of the month guy builds a house on a property that he acquired the land to. Let's say that he originally had the LLC (which is now bankrupt on the title) but switched it to an individual named trustee. This trustee has changed and continues to be updated every 6-12 months. I am sure what ever payment is due on the house hasn't been paid and that it is an accelerated foreclosure. However, the foreclosure can never happen for the creditor because the trustee changes like I said every 6-12 months. Sometimes they will even change them out of state and whether right or wrong the foreclosure can not happen because the mortgage holder never can get proper process since the Trustee changes so often. They would have to prove process in court and by the time that happens the trustee has changed again.

It is a fascinating way to acquire properties you can not afford but a terrible way to do business, I would assume. So, basically by having ownership of the property and being in it, they are avoiding foreclosure by putting a different trustee name on the property before it can be foreclosed on. I have seen some dandy things in my time but this is either a genius or if they eventually do catch up to it. The dumbest thing ever invited, using the system against the system for some free America living.

Nothing better.

 

[army judge]

have learned of a scenario, I am not sure I would call it a SCAM since I am not 100 percent sure how it works. I have an idea, but this is only a theory. So, you all can tell me if I am right or wrong.

Have you given any consideration to the municipal, county, and state taxing authorities?

Unpaid tax assessments will soon become a very big problem for all of these dummies!!!!

 

[Redemptionman]

Have you given any consideration to the municipal, county, and state taxing authorities?

Unpaid tax assessments will soon become a very big problem for all of these dummies!!!!

I am not sure if that is the purpose of it, I think it is more of a mortgage scheme. Whereby you move to another trustee again and again and again. The mortgage company is always one step behind. I would bet that he pays the taxes on the property. The goal is to ultimately avoid foreclosure so they are always filing against some other entity that is not not the proper process.

I believe it is a well known teachable scheme and they hold classes on how to do this. Like sovereign citizen stuff.

 

[Tax Counsel]

How did it go from being a property held in LLC to a property owned by a trust? LLCs don't have trustees, but trusts do.

Whether a change of trustees would matter in a foreclosure action on a mortgage is an issue of state law. In my state a switch of trustees wouldn't require the foreclosing party to start the foreclosure again from scratch. In most cases it wouldn't even slow it down all that much.

It does sound like a scheme that would be sold to the sovereign citizen types. When the buyer of such a scheme learns it doesn't work like the promoter claimed it's too late to get the money back because the promoter that scammed them is long gone.

 

[Redemptionman]

How did it go from being a property held in LLC to a property owned by a trust? LLCs don't have trustees, but trusts do.

Whether a change of trustees would matter in a foreclosure action on a mortgage is an issue of state law. In my state a switch of trustees wouldn't require the foreclosing party to start the foreclosure again from scratch. In most cases it wouldn't even slow it down all that much.

It does sound like a scheme that would be sold to the sovereign citizen types. When the buyer of such a scheme learns it doesn't work like the promoter claimed it's too late to get the money back because the promoter that scammed them is long gone.

they set up trusts, and name a trustee. The house is neither in the owner's name nor the LLC as it is in the trust. They file a new trustee document every so often, usually 18 months or so. A new trustee is named and the trust I assume holds the title. I am not 100 percent sure how it works in that trusts could make it easier to foreclose on but in effect this is the opposite of what is happening. It has bounced around to 3-4 different trusts since the property was built 4 years ago or so.

I would think by locking this property in a trust it clouds the actual ownership of the property and basically sticks it in a paper trial cue of guessing the proper trust to try and foreclose on and then it changes again before they can initiate it. The original LLC that the property was built under has been sued and bankrupted around 18 months ago, and a new LLC opened in its place.

I read from a Real Estate attorney that in theory this could work but was never intended to be used for this manner. Since the mortgage company attorneys are endlessly trying to prove the property ownership to foreclose. They can't because it is in a named trust and takes a court appearance to identify the proper owner. By the time they do this the trust has been reassigned to someone else. It is a loophole and those who know how to work the system can get away with it.

 

[Tax Counsel]

That's a very state specific thing. It's possible that some state has trust laws have the unintended consequence of allowing this to happen because it lacks rules to allow the plantiff to prevent it.

In my state a change of ownership would not require the foreclosure to start all over again. The foreclosing party would file a lis pendens at the time the complaint in foreclosure is filed. The lis pendens puts the world at large that there is litigation taking place that may affect the title to the property. That cloud on the title will stop any buyer represented by a lawyer or title company from pursuing purchase of that property. The complaint will name both the trust itself and the trustee as parties to the action. Immediately after filing the complaint and serving it on the trustee I'd file a lis pendens with the clerk of the court office that handles the real estate records. A lis pendens is a public notice that the property is the subject of litigation. I'd also file a motion with the court asking for an order prohibiting any transfer of the property until the litigation is resolved. Once that motion is granted the property is frozen in place and the trustee won't be able to play the kind of game you describe.

In short, a litigator in my state who is familiar with foreclosure proceedings can keep the foreclosure on track. It may require some work to file a motion or two to attack what the owners of the property are attempting to do, but the change in trust and trustee won't result in having to start all over. My state isn't alone in having these kinds of tools for the plaintiff to use to keep the defendant from dissipating property or continually transferring out of the reach of creditors.

Some states are more on the ball than others, though, so I don't rule out the possibility that one or two states have more rudimentary property and trust laws that are so deficient that it leaves a plaintiff no remedy to stop this kind kind of abuse.

 

[Redemptionman]

think maybe I was looking at it wrong, it is to basically protect the property from all the people this individual rips off through business transactions and who sue them and the company in civil court. It protects this asset from being able to have attachments put on it through the civil court process.