Re: L/O vs Pac trust

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Posted by Bill Gatten on October 20, 2001 at 15:25:12:

In Reply to: Re: L/O vs Pac trust posted by JPiper on October 19, 2001 at 16:32:58:

Jim, your post is well phrased and quite accurate. I would also presume that a PACTrust “could” and maybe would be construed as a conveyance of equitable interest before a simple lease option might…assuming the Lease and the Option were separate documents. Like BB says, there has only been one case (I don't know that his statement is true, but I'll accept it for now).

But think about this...Let’s say you try to kick ME out of one of your L/O properties. I know that you're right in doing so, and I know that the law is definitely on your side. However, I’m broke and unemployed and no way to feed my family and no place to go. So I go to an attorney whose billboard I see on Highway 14 out toward Palmdale (“Being Evicted? Call Snagem, Whackem and Scrumgood. Your Home is Your Castle!).

Now bear in mind that I know this guy is more interested in money than justice (…if such an attorney ever existed), and I tell him my tale of woe. and he knows that you’re loaded. He then takes the lease AND the Option documents and waits until the last minute (after your ignored grace period, ignored 30-day eviction notice and your Unlawful Detainer claim, and goes to court to boldly protest my eviction on the grounds that the option may alone conveys an Equitable Interest to me. He contends that I must be foreclosed upon as an owner, rather than being evicted as a tenant (he’s clipping the two documents together as one, by the way).

The judge sets a distant date for a hearing (during which time I’m living rent-free, and you’re paying through the nose). After months of your paying the mortgage for me, and my getting free rent, the court date comes and judge finally tells the attorney that he’s full of baloney and he loses “my” case. NOW how much has all of this cost you? How much free rent did I get (the attorney is on contingency because he knows you cave…they all do)? How likely is it that you might have settled out of court earlier for half of what you know the case is going to cost you to win it (all of which goes to the attorney)?

Jim, our position is simply that since we can in fact make a good (if not solid) argument that a tenant in a co-owned third party trustee land trust clearly has no equitable title interest in the property (because the function of the land trust is specifically to vest both legal AND equitable title solely and completely with the trustee. And as far as your tax write-off issue is concerned, the judge would have no interest in how the tenant was treating his lease payments for tax purposes...that would be an IRS issue and wholly unrelated to the case or the eviction. The fact that, in keeping with the analogy, I’ve been writing off interest would (should) not be a consideration in an Unlawful Detainer Action, or any action to prove Equitable Interest in order to thwart eviction efforts. After all, you never ‘authorized’ me to take a tax deduction...I just did it because I thought I could, because of the way the tax law on the subject is written.

Understand tht our goal is to stop the Equity claim before it starts…in the Unlawful Detainer phase…if the eviction would go that far. As you say, so far we’ve been right. and so far his problem has not presented itself to you (good for both of us)

No fights, no arguments, no insults please...this is just a major potential protection that we see the PACTrust having.

Bill Gatten

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