Condos vs. Co-Ops. vs. HOAs: Pros and Cons

Shared Ownership Housing: What's the Difference?

Condos, HOAs, and Co-Ops

Part II

Last week, we defined the differences between a Cooperative (Co-Op), a Condominium (Condo), and a Homeowner's Association (HOA).  This week, we'll compare and contrast each housing model, as well as discuss the pros and cons.

Condo vs. HOA

Similarities:

• Both are real estate purchases;
• Both can be a part of a Land Trust;
• Both are financed through Traditional Mortgages;
• Owners are responsible for paying property tax;
• Both are run by an elected Board of Directors, comprised of members of the Association;
• Both involve monthly fees to pay for insurance, maintenance, and upkeep of common areas.
• Both generally utilize "special assessments" to charge owners for unanticipated expenses.
• Both often include amenities not commonly found in single unit communities, such as pools, playgrounds, tennis courts, etc.
• Both are administered according to "the documents," which contain covenants, restrictions, rules, and guidelines for unit use.
• Both generally regulate the outer appearance of a unit.
• Both generally allow the Board to levy fines for noncompliance with any aspect of the documents.

Differences:

• With a condo, one generally owns "from the drywall in."  With an HOA, one typically owns the building, utility hook ups, land beneath the building, and the air space above.
• Generally, owner maintenance responsibilities are greater in an HOA than in a condo.
• Generally, monthly fees are lower in an HOA than in a condo;
• In an HOA, the unit owner is responsible for insuring the building itself, as well as the content, structure, etc.  In a condo, owners are generally only responsible for insuring the unit itself and its contents, rather than any structural elements.  Condo policies are usually cheaper than homeowner's policies, but the difference in cost is generally offset by the difference in fees.
• In an HOA, you generally own your parking space(s), regardless of whether they are attached to the actual building.  In a condo, parking spaces are generally defined as "limited common elements," whose use is exclusive to an individual unit.  However, in a condo, the Board generally has the power to reassign or change parking assignments, whereas in an HOA, they generally do not..  
• Both are generally subject to State Statute.  However, most States have more stringent statutes for HOAs than they do for condominiums.  
• With an HOA, any "yard" area generally is part of the owned land.  In a condo, all green space is considered part of the common elements.  (Although most HOAs regulate how the green space may be used, and what type of fixtures or amenities are allowed in a yard.)
• HOAs generally give an owner greater flexibility about what can be done to a particular unit.
• In an HOA, owners have no vested interest in common grounds; in a condo, all owners also have a vested interest in all common grounds and common elements.

Condo vs. Co-Op

Similarities:

• The Association owns the land, buildings, air space, common elements, structural elements, and generally, the utility hook ups;
• Maintenance of anything outside the unit is generally the responsibility of The association, and is managed by the Board of Directors.
• Owners are not responsible for insuring anything outside of their individual unit.
• Both are administered by elected Boards, comprised of members of the Association.

 Differences:

• With a co-op, you are not buying a piece of real estate; you are buying a share in a corporation.  It is considered "intangible personal property" for tax purposes.  With a condo, you are buying a piece of real estate.
• Condos are financed with traditional mortgages; co-ops must be financed through other forms of loan.
• Although both are administered by Boards, Co-op owners have a greater say in how things are done.  Almost everything that is done in a co-op requires a membership vote, while this is not true in a condo.  Because of this, Co-op Association Meetings are more widely attended than Condo Association Meetings, and co-ops generally have a more active membership.
• Statistically, co-ops have the highest percentage of owner-occupied units across all forms of shared ownership housing.
• Condos may me residential, commercial, or even mixed-use; traditionally, co-ops are residential only.
• In a co-op, you are purchasing a right to lease a particular unit, whereas in a condo, you are purchasing an actual unit.
• Co-ops generally consist of one or more apartment buildings, or they consist of land for pre-fabricated homes.  There is a wider variety of home type available in condominium complexes (garden style apartments, townhomes, apartment buildings, pre-fab units, etc.) than there is in co-op complexes.
• Monthly fees are generally highest in a co-op, as they include monthly rent as well as insurance, maintenance, upkeep, and taxes.
• Owners are responsible for paying for their own property taxes in a condo, whereas co-op fees include all property taxes.
• A condo unit may be a part of a land trust; because a co-op is not considered real estate, it cannot be placed into a land trust.  It may be a part of other types of trust arrangements.
• Condos often include more amenities than do co-ops.

Pros and Cons of Condos

Pros:

• Condominiums are good for people on fixed incomes, as the monthly fees are generally set; it is rare for a condominium to need to levy a large special assessment to cover costs of operation.
• Condos are fantastic for folks who do not want to be responsible for maintenance and upkeep.
• Application processes are governed by State Statute, and although one needs to apply to purchase a condo, there is little its Board can reject you for, other than financial issues.
• Condos are great vehicles for investors.  Most Boards do not require tenant screening, and are usually easy to operate as rentals.
• Condos generally make great vacation homes, as the Association monitors things while the unit is unoccupied, and handles any maintenance issues that may arise.
• Condos usually include all necessary services, such as trash pick-up, landscaping, etc.

Cons:

• The Board of Directors has the power to make a lot of changes without input from the membership.
• Insurance costs may be higher, as you are paying for both the overall condo plans, as well as a plan for your individual unit.
• Condos tend to fine owners for rules violations more than other forms of shared housing.
• An owner has less input as to outer appearance of his/her home and grounds.
• If a Condominium Association decides to disband, an owner may suffer an extreme financial loss.  Often, it only requires an 80% membership vote to dissolve the condominium.  Developers have been known to buy up units in order to swing a vote.  If the condo dissolves, you will generally receive below market value for your unit and share of common grounds.

Pros and Cons of Homeowner's Associations

Pros:

• Owning a building within an HOA is considered owning a piece of real estate.  The owner owns both the building and the land, as well as the air space and grounds.
• HOAs offer greater flexibility with what can be done to green space.  Although many prescribe guidelines for plantings, the owner has greater choice of what s/he can install.
• HOAs more often include a yard that is yours, as opposed to belonging to everyone in the Association.
• HOAs often provide amenities not found in typical single-family communities.
• HOAs are governed by an elected Board of Directors.  However, this Board has the least power amongst the three types of shared ownership housing.
• HOAs are good investment properties.  The monthly fees can be passed on to the tenants, and the Board will apprise the owner of any irregularities happening within the unit.  Boards usually have few screening requirements for tenants.
• If an HOA decides to disband, the owner will still be left with a valuable piece of land, as well as any improvements s/he has made.

Cons:

• HOAs have the highest maintenance and insurance obligations of the three types of shared ownership housing.
• HOA owners have no vested interest in any common elements or community amenities.
• HOAs often offer more rules and restrictions than they do owner support.
• Legally, HOAs are allowed to do little screening of potential members.  Because of this, their budgets may not be sound as those in condos and co-ops.  Statistically, HOAs employ special assessments to fund things more often than do co-ops or condos.
• HOAs are often described as having all the disadvantages of living in a single family unit, while having all the disadvantages of living in a condo.  Rules as to property use and appearance are very stringent.
• HOAs often utilize fines for minor rules infractions.

Pros and Cons of Cooperatives

Pros:

• Co-ops generally have the lowest buy-in obligations of any of the forms of shared ownership housing.
• Although owners do not build equity in a traditional sense, shares in a co-op may appreciate at greater rates than will a condo or HOA unit.
• Co-ops have the highest amount of owner input of the three shared housing types.  Co-op owners generally know their neighbors and have a sense of community not necessarily found in other forms of housing.
• Co-op Boards are allowed to do more stringent screening of both owners and tenants than are HOAs or Condo Boards.
• Co-ops are great for people on fixed incomes, as the monthly fees include everything, including tax and insurance.  A co-op resident only needs to insure the contents of their unit, similar to buying a renter's policy.  The co-op itself insures everything else.
• Co-ops handle all maintenance, insurance, and tax obligations.

Cons:

• You are buying shares in a corporation, rather than an actual piece of real property.  
• Co-ops have the highest monthly fees of all types of shared ownership housing.
• You cannot finance a co-op with a traditional mortgage, nor may you get an equity loan on the appreciated value of your shares.
• Co-ops require stringent background checks for both members and tenants.  They may deny ownership or tenancy for just about anything not specifically prohibited in the Fair Housing Act.
• Co-op shares do not pass to heirs like other forms of property.  Instead, they are treated similar to shares of stock.  They are subject to securities regulations. It can be more difficult for estate planning purposes.  Joint ownership of shares is also harder to set up than joint ownership of traditional properties.
• Co-ops are not the best vehicles for investments.  Because of the screening processes, they are harder to rent.  The Association pretty much has free reign to reject potential tenants.  
• A land trust and a co-op are not compatible.  Like with other forms of stock, they can be placed in certain types of trusts.  But because they are not considered real property, the Land Trust model cannot apply.

Which Type of Property is Best for Investors?

There is no clear-cut answer as to which type of shared ownership housing is best for investors.  The most important distinction here is that a co-op is not considered an investment in Real Estate.  If you are building an investment portfolio that includes stocks, bonds, and lands, a co-op, condo, or HOA can be a good investment.  All will appreciate at different rates, and according to different variables.  Years ago, co-op shares generally appreciated more quickly than an investment in a condo or HOA, but since the "Real Estate Boom," that is no longer true.  Many infill developments are appreciating very quickly.  And units in an HOA or Condo Association are easier to "flip." Generally, buying a co-op as an investment property is less desirable than purchasing in a condo or HOA for this reason.

Again, when you buy a co-op unit, you are buying a piece of intangible personal property, rather than a piece of real estate.  Thus, the tax ramifications are different, and should be thoroughly discussed with an accountant or attorney.  A co-op may help balance your tax obligations, or it may increase them.

We believe strongly in the Land Trust model for Real Estate Investors.  A co-op is incompatible with this model.  If you are building a portfolio based on the Land Trust model, you may want to stick to condos and HOAs.

Which Type of Housing is Best for Owner-Occupiers?

If you are looking for property to live in, either as your primary home or as a vacation property, any of the three types can be best, depending on your individual needs and desires.  We have provided the pros and cons of each housing model.  You will need to weigh these against your own considerations. This will also depend on where you are looking to purchase.  The New York City area has a higher percentage of co-op units than anywhere else in the US.  Co-ops in New York are generally cheaper than condos or co-ops, and they often appreciate faster.  Often, their rents are more reasonable than rental housing, but the ongoing costs are about the same. That is not necessarily true in other parts of the country.

If you are looking to buy into a shared housing community, but you have little available to put down, a co-op might be the best choice for you.  If you are looking to finance through traditional mortgages, an HOA or condo will be a better choice.  

Summary

In this two-part article, we examined three different types of shared ownership housing: condominiums, Homeowner's Associations, and Cooperatives.  We defined each model, looked at the similarities and differences, and discussed the pros and cons.  We also discussed considerations for property investors.

Here at the Law Offices of Heath D Harte, we believe the most important consideration is how an individual property will meet your individual needs.  And in order to determine that, you need to know the ins and outs of each model.  All three models have benefits and drawbacks.

Our own real estate portfolio tends to rely on condos and HOAs, rather than co-ops.  This is because we are property investors, we use the Land Trust model whenever possible, and we like to renovate and flip.  We tend to focus on real property rather than shares in a corporation when building our own investment portfolio.  We also focus on properties in more suburban areas, where co-ops are not as common.  However, your own investments may differ, and a co-op may be a valuable addition.

The most important consideration here may be what is contained in the community's documents. These documents need to be reviewed with a fine-tooth comb before any purchase is finalized, as they dictate how you may renovate, use, and sell your property.  Having these documents review by your attorney is beneficial.  Your attorney can advise you as to how the purchase will fit into your overall estate plan.

As always, we are here to help.  We have an extensive real estate law practice, and we understand the nuances of both the models and the documents.    Whether you are looking for an investment or a home for yourself, we are here to advise and help.

Shared Ownership Housing: Condos, HOAs, and Co-Ops

Shared Ownership Housing: What's the Difference?

Condos, HOAs, and Co-Ops
Part I

Condominiums, Homeowners Associations, and Cooperatives are all forms of shared real estate ownership.  From a living standpoint, these three entities may appear to be the same.  But from a legal standpoint, there are significant differences between condos, co-ops, and HOAs.  Today, we're continuing our series on Real Estate Law by discussing these differences.  It is important to understand the differences BEFORE investing in any one of these forms of property ownership.

What is Shared Ownership Housing?

There are many types of real property available today.  There are apartments, single family detached houses, townhouses, duplexes, condominiums, cooperatives, cabins, mobile homes, and prefabricated units.  With the exception of the single family detached house, many forms of housing today involve some form of shared ownership. And today, you'll find many detached houses are also a part of an association, especially in newer developments. As you enter many subdivisions, you will see signs that say "a deed restricted community,"  indicating some form of shared ownership housing is in effect.  

In a typical subdivision, there are streets and sidewalks.  There may also be parks or other types of green space, playgrounds, pools, trails, or tennis courts.  These may be open to the general public, or their use may be restricted to those that live in that community.  If the use is restricted at all, chances are, the subdivision employs some sort of shared ownership.  Those elements are owned, paid for, and maintained by those who share in their use.

Conversely, if amenities are for public use, chances are they are owned and maintained by the local government, funded through local taxes.  Even though they might require a "resident pass," they are publicly owned.  If the City oversees the amenities, chances are they are NOT a part of a shared ownership community.

Shared ownership housing is typically controlled by a Board of Directors.  There are documents that define who owns what, and there are bylaws and regulations by which all owners must abide.  There are generally monthly or quarterly fees that all owners must pay.  These fees pay for maintenance and insurance of the shared areas.

Currently, in the United States there are three common types of shared ownership housing: Cooperatives (commonly called co-ops), Condominiums (commonly called condos), and Homeowner Associations (referred to as HOAs).  All three can be made up of a wide variety of property types. They may be residential or commercial in nature.  But there are some significant legal differences amongst the three types of property.  It is important to know the differences BEFORE you buy in.

What is a Homeowners Association (HOA)?

A Homeowners Association (HOA) is an entity made up of homeowners within a defined area.  This area is defined within the Homeowners Association Documents.  These documents also contain the bylaws, covenants, restrictions, and rules by which all members must abide.  The Association itself is generally a Non-Profit Corporation.  

Each owner buys a lot (or lots) within the defined area.  That lot may or may not include building(s). If the lot is unimproved, all improvements must follow the guidelines and restrictions set in the Association documents. The individual owns, maintains, and insures everything on that lot.  And when the person buys into the Association, he pledges to uphold all guidelines and restrictions contained within the HOA documents.

The Association itself is governed by a Board of Directors, elected by the members of the Association.  This Board is responsible for upholding all of the covenants, restrictions, and regulations contained in the documents.  

Most HOAs also contain some common elements.  Those elements are owned in their entirety by the HOA.  Lot owners own no shared interest in those common elements.  They just have a right to enjoy their use, as dictated by the HOA itself, and as defined in the HOA documents.  Depending on the development, common elements may be restricted to things like roadways, sidewalks, and mailbox stations, or they may include things like swimming pools, playgrounds, and barbecues.  

All owners are responsible for paying monthly fees to the Association.  Those fees cover maintaining, improving, and insuring the common elements.  Individuals are responsible for paying to maintain, insure, and improve their own lots in addition to paying the HOA Fees.  Some HOAs include general landscaping maintenance on the individual lots; in others, lot owners are responsible for maintaining their own yards, including cutting any grass.

Although many HOAs consist only of single-family detached homes, others consist of a variety of structures.  Some townhouse communities are a part of a Homeowner's Association.  In addition, many office parks have adapted an HOA model, where an individual owns both the office building and the land on which it sits.  

Owners in an HOA own individual parcels of real property, each with its own individual parcel number.  They are responsible for individually paying all property taxes on their lots, as well as paying their share of taxes for common elements.  (Taxes on common elements are figured into the monthly HOA fees, rather than being individually assessed.)  And although they are governed according to the documents, those documents do not get recorded.

With an HOA, the Association owns all common elements in their entirety; lot owners do NOT own a share of common grounds.  And the HOA Board may restrict the usage of these common elements. If a member is derelict in paying any fees or fines, his rights to common elements may be suspended. 

HOAs are generally governed by State Statute, and the statute supersedes what is written in the HOA Documents.  An HOA is subject to all provisions of the Fair Housing Act.  Your purchase application may need to be approved by the Board of Directors, but generally can only be rejected for financial reasons, (i.e. you do not appear to have the financial resources to pay the Association fees.)

What is a Condominium (Condo)?

With a condominium, an individual owns a particular unit within a larger complex.  That unit may be a townhouse, a half duplex, an apartment, or even a mobile home.  However, one does not own the land underneath the building, or even the building itself.  (There are some exceptions to this, which will be discussed later.)  Typically in a condo, one owns "from the drywall in."  The land itself and all improvements typically are owned by the Condo Association.  The unit owner is responsible for insuring and maintaining everything within the walls of the unit; the Condo Association is responsible for insuring and maintaining everything it owns.

The specifics of what a unit owner owns and maintains, versus what the Association owns and maintains, is outlined in the Condominium Documents.  Like with an HOA, these documents also contain the Covenants, Restrictions, and Bylaws for using your property, as well as the common elements.

In some states, a condo may be platted as a "Land Condo."  In those instances, the Association only owns the land; the parcel owner owns the actual building and all improvements.  In these cases, the parcel owner has a higher maintenance and insurance obligation.  In other cases, the Condo documents push maintenance responsibility on to the owner.  It is important to read the Condo documents BEFORE finalizing a purchase, so that you understand how much of a maintenance obligation your condo requires.  

In a Condo Association, each owner actually owns a share of the common elements, including the actual building, the grounds, any shared utility connections, and any amenities, such as a pool, a playground, or green space.  All of these are actually administered by the Board of Directors.  The Association also handles maintenance of the grounds, including landscaping and mowing grass.  

With a condo, although you may not own an actual building, you DO own a piece of Real Property.  You are able to build equity, just as you are with non-shared ownership housing. Each parcel in the condominium has an individual parcel number, recorded in the property database.  Every individual owner is responsible for paying property taxes on their parcel(s).  Each also pays his/her share of the taxes on the common grounds.  The Condo Documents define each owner's share.  Some condos define shares according to unit size, with larger units having a larger share and a larger financial burden.  Others split the common grounds into equal shares, regardless of the individual unit size.  In this case, all owners have an equivalent share of all common grounds and amenities, and all pay equally.

Like with an HOA, Condos are governed by a Board of Directors, elected by the members of the Association.  Most states also have statutes specific to condos, and those statutes supersede anything contained in the Condo Documents.  

Condo Associations usually maintain all roadways, sidewalks, etc. within the community.  Many also cover things like trash collection and recycling.  And of course, Association Members are responsible for paying monthly fees to cover all of these costs.  Should unexpected issues arise, the Board may impose a "special assessment" to pay for these issues.  These are in addition to the regular fees, also called "assessments: in condo lingo.  Each parcel owner is responsible for paying his share, as outlined in the Condo documents.

Condominiums often have two types of common elements: General Common Elements (GCEs) and Limited Common Elements (LCEs.)  Limited common elements are only available to a selected group of owners, while General common elements are equally available for use by any of the members of the Association.  Things such as parking spaces, balconies, patios, and car ports are generally Limited Common Elements.  Often, the financial burden for limited common elements falls to an individual owner, rather than to the Association as a whole.  The Board may demand you maintain a limited common element, and if you fail to do so, they can perform the work themselves and bill it to the parcel owner.  If the parcel owner fails to pay, the Association may put a lien on the unit.

Condos are governed by what is in their documents.  And unlike with an HOA, these documents are recorded in the property database.  They become public record.Statutes are generally more stringent as to what these documents may restrict.  These documents also outline dispute resolution procedures for when an owner disagrees with the Board's interpretation of the documents.

Condos generally have some sort of screening process for prospective owners.  This process is usually more rigorous than with an HOA, and prospective owners may be rejected for a broader number of reasons.  Many Associations perform background and credit checks on prospective owners.  State statute and the Fair Housing Act define what a condo may or may not consider.  

What is a Cooperative (Co-Op)?

A Cooperative differs significantly from an HOA or a Condominium. Rather than owning a piece of "real property," an individual owns a share in a corporation or LLC.  This share gives the owner the right to lease a certain space in the building.  Legally, this is considered a piece of "intangible personal property," rather than an actual piece of real estate.  With a co-op, all buildings, improvements, and amenities are owned by the corporation, and you are buying shares in a corporation.  Usually larger shares mean the right to lease a larger unit, while smaller shares give you the right to lease a smaller unit.

Because you are not buying real estate in the eyes of the law, you do not build equity like you do in an HOA or Condo.  Co-op purchases generally cannot be financed with traditional mortgages either, but must be financed through other types of loans.  And because you own shares, rather than physical property, they pass to heirs a little differently as well.  Heirs inherit shares, just as if you left them 100 shares of Microsoft Corporation.  Legal structures such as "joint tenants with right of survivorship" are more difficult to set up.  And because you do not own actual property, you may not put your co-op shares into a Land Trust.  However, you can make them a part of a different type of trust arrangement.

Like with an HOA or Condo, the Co-Op is administered by an elected Board of Directors.  However, most co-ops have active membership meetings, and the individual shareholders have a far greater say in how the co-op is run.  More actions require a group vote, and generally more members are active in a Co-Op than in any other form of shared ownership housing.

Co-Ops are also governed according to the documents.  Ownership requires a pledge to abide by all of the covenants, rules, restrictions, and bylaws.  But unlike with Condos and HOAs, most states do NOT have statutes specific to Co-Ops.  Co-Op members are freer to apply rules and restrictions to any area the majority of owners agrees.  They have more flexibility as to what they can allow and prohibit.

Co-ops generally have a smaller buy-in commitment than do Condos or HOAs.  This is because you are only buying a share in the building, rather than buying an actual piece of the building.  However, they also have higher monthly obligations.  In a co-op, your monthly payment must include rent for your unit, in addition to monthly costs associated with maintenance and improvement.  .  Your monthly fee also covers your share of mortgage payments and taxes.  (Many co-ops do not own the building they are sharing outright; instead, each share also includes a share of the mortgage on the actual building.)

And although Co-op ownership is subject to the Fair Housing Act, co-ops have the most rigorous screening process of the three types of shared ownership housing.  Purchasing a co-op share almost always involves a background and credit check, as well as an interview in front of the Board and/or a Member Committee.  Because the co-ops have the most leeway, they reject far more applications than do HOAs or Condos.  Again, this is because you are buying into a partnership, rather than just buying a place to live.

Because of this, co-ops have fewer investors and more owner-occupied units than a typical HOA or Condo.  Many Co-Ops have leasing restrictions, and may require a tenant pass the same rigorous screening as an owner.  This can be highly beneficial when you are looking for a place to call home. However, this can be a huge drawback to an investor looking to diversify or expand his housing portfolio.

Co-ops are more often found in urban type areas, and can be great alternatives to renting an apartment.  However, owning a Co-Op unit greatly differs from owning a piece of real property.  But a co-op is great for a person looking for a small community in a large area,  Co-Op dwellers generally know their neighbors.  Many co-ops have amenities and social aspects not found in other communities.  And they probably involve the most "sharing" of any of the three types of shared-ownership housing.

Pros and Cons of Condos vs. Co-Ops vs. HOAs

This week, we looked at three types of shared-ownership housing: Condominiums, Homeowner's Associations, and Cooperatives.  We discussed the basics of each type of housing, as well as their legal definitions.  Part II of this article will discuss the pros and cons of each type.  We'll also discuss how co-ops, condos, and HOA units may fit into a Real Estate Investment strategy.

Here at the Law Offices of Heath D Harte, we believe that a property should fit its owner.  There are some wonderful elements of shared ownership housing, as well as some limitations.  We want all of our clients to be informed, and to find the best match for their needs.  As well as handling purchases and closings, we have helped individuals with issues that arise AFTER they are settled into their property.  We've seen people buy into shared ownership housing that was a poor fit from the start. This is why we want everyone to be informed BEFORE they buy.

We'd love to hear our readers' experiences with co-ops, condos, and HOA.  We'd love to hear the good stories and the bad.  We invite you to share via Facebook, Twitter, Google+, or by the comment section of this post.  You can also contact us with your stories through our website.  And of course, we hope you'll be back for the second part of this article.  (Subscribe to this blog using the link in the sidebar, or join us on Facebook, Google+, or Twitter to receive notifications for Part II of this post.)

Land Trusts: Final Thoughts

Land Trusts:
Final Thoughts

We hope you have enjoyed this series on Land Trusts.  But alas; all good things must come to an end. We are wrapping up this series.  Then, we are going to take a couple of weeks off to compile this information into an ebook.  (Subscribe to this blog and/or follow us on Facebook or Twitter to be advised as to when this book is available.)  When we return, we'll be highlighting other  important Real Estate Law and Real Estate Investing subjects.  

Land Trusts: Summary of Advantages

Throughout this series, we have focused on all the advantages of putting properties into a Land Trust. To sum up, these advantages include:

1. Privacy: Using a Land Trust keeps property ownership private, and it keeps your name out of the public records.
2. Liability Protection: Using a Land Trust can help shield you from many frivolous lawsuits.
3. Protection from Judgements: A Land Trust helps protect your personal assets from being subject to a judgement.
4. Protection from Liens: IRS and other government judgements do NOT attach to property held in a Land Trust.
5. Avoiding Probate: Land Trusts help your assets pass DIRECTLY upon your death, rather than having to pass through probate.
6. Eases Transferability and Control: Property held in a Land Trust is much easier to sell, transfer, and manage.  This is especially true of "distressed properties," "under-water properties," and those in danger of foreclosure.
7. Minimizes Fees: Minimizes fees related to deed recording, transferring properties, title insurance, etc.
8. Eases Multiple Ownership: A Trust can have many beneficiaries.
9. Asset Protection: A Land Trust can help shield assets in case of ownership issues, such as bankruptcy or divorce.
10. Keeps Pricing Information Private:  A Land Trust helps protect your privacy regarding what individual parcels of land are worth.

Land Trusts: Summary of Concerns

1. You will need a Skilled Attorney: Few lawyers are experts when it comes to Land Trusts. You will need to find an attorney with skills and training in this area to receive the maximum benefits.
2. There are ongoing fees: A Land Trust will always have nominal ongoing fees associated with it.  After all, few Trustees are willing to do the job for free.
3. Privacy May Be Revealed with a Court Order: Although a Land Trust makes it more difficult to determine ownership, a Court can order ownership information be disclosed.
4. May Only Hold Real Property as Assets: Other forms of trusts allow multiple types of assets to be held by the trust.  A Land Trust, however, may ONLY hold real estate as assets.
5. Statutes Vary by State: Only a few States have their own, specific statutes regarding Land Trusts.  Their validity in other States relies on Case Law.  However, in those states that HAVE specific laws, you must ensure you follow them to the tee, or the Land Trust may not be valid.  Again, this is where engaging a skilled attorney is of supreme importance.

Land Trusts: Should I use One?

The choice to use a Land Trust is very individual.  No one can say definitively whether a Land Trust is the investment vehicle for you.  In writing this series, we hope we have equipped you with the tools and information you need to make this decision for yourself.  If you are leaning towards "yes," we suggest you gather your own information and documentation, and you meet with a skilled Land Trust Attorney in your area.  (If you live in the New York-Connecticut area, we'd be happy to meet with you to discuss your individual circumstances.  We offer free consultations for these purposes.)  

Again, we believe in Land Trusts.  We use them ourselves.  And as we branch out into property investments to enhance our own personal portfolio, we have begun using Land Trusts even more.  We want to invest in our own community, and we know that using Land Trusts are our most effective way of doing so.  And we live in a State that is using Land Trusts to revitalize neighborhoods and to provide affordable housing to our local workforce.  We have seen how effective Land Trusts can be, both on an individual and an organizational level.

Whether you already own real property, or there is property you have your eye on, we suggest you identify an attorney to help you now.  Having an attorney you know and trust will ease the process as you begin to accumulate property.  And you will need to interview this attorney to ensure s/he has the skills and knowledge you need.  Pick a few items from this series and use them as the basis for your interview questions.  If your prospective attorney cannot answer them to your satisfaction, move on to a lawyer who can.  

Final Thoughts

Again, we welcome your comments and feedback, whether you have been with us from the start or you are just finding this series now.  You can always find us through our website, hartelawoffice.com. We are also active on Facebook and Twitter.  We are also interested in what you would like to see in upcoming blog posts.  Do you have a burning question in the area of Real Estate Law?  Is there any topic you'd just like to learn a little more about?

Stay tuned for details on our Land Trusts e-book!