Active or Passive Services
THSC serves as title holding trustee for both active real estate transactions in which property is expected to be bought and sold within one year and passive services in which title is expected to be held for more than one year and not to involve any significant transactions on a regular basis. Secured and unsecured notes may also be serviced, which is considered a active service with respect to THSC.
At this time, THSC provides title holding services only when the trust instrument has been prepared by Ballard Law and the property is located in California. Members can nominate other attorneys, particularly for States other than California to be approved for submitting and/or reviewing trust documents for acceptance by THSC. THSC will consider expanding services to other States based upon demand for services. Nevada and Arizona are under consideration. THSC must first qualify as a “foreign corporation” to conduct business in another State. The fees discussed below do not include legal fees applicable to the transaction or additional providers such as escrow and title. Some transactions may be escrowed through a law office rather than an escrow office or title company.
Passive services apply to a typical land trust which is directed by one or more beneficiaries who handle the day-to-day affairs of the property. The annual services include:
- THSC holding title as record title of the land trust in the County Official Records.
- THSC forwarding routine mail such as property tax bills to one designated address within three business days of receipt. Members can choose forwarding via first class mail or to have THSC open the mail, scan the contents and email the contents to the designated member.
- THSC will execute one routine document per year involving a non-member, such as a lease or an extension of a lease. The transaction must be on a standardized form of a routine nature. More complex transactions will incur additional review fees. The trustee will also acknowledge up to one change of beneficial interest per year for no additional charge.
The annual fee for passive services for a single family residence is 0.02% of the estimated Fair Market Value of the property held in trust with a minimum of $195 for the first property in a trust plus a minimum of $135 per property in excess of one per trust. The annual fee commences when the duty of trustee has been accepted by THSC and the trust has been assigned a trust identification number. The fee for commercial properties vary according to the nature of the property (risk to THSC) and the value. (Generally, the fees rates for more than 4 dwelling units and for non-residential commercial properties are 200% of the single family residence rates.) Each annual fee is nonrefundable and not prorated if the property is sold during the year. You can pay your base, minimum fees online below.
Property Transaction Oriented Services: Transaction oriented services for single family residences apply to creative real estate transactions such as property rehabs, REO resales, and short sale resales. Due to the unpredictable nature of many of these transactions, they are handled on a final fee of 0.5% of the gross spread of each property (re-)sale with a minimum base fee of $100 for the first six month (180 day) period and $75 for each 180 day extension thereafter, plus document review and execution fees for each action required by the trustee. A schedule of additional fees will be created for each transaction after the nature of the transaction has been reviewed. Typical average transaction fees are $75-95 per document, such as deed, promissory note or contract. The fee for commercial properties vary according to the nature of the property (risk to THSC) and the value. THSC will also hold personal property assets. Due to considerable variations with respect to personal property services, the fee is determined on a case by case basis.
Ongoing Real Property Services: Ongoing real property services apply when title to real property is held in the course of a transaction which requires some degree of ongoing handling or supervision. This might involve aspects of property management, receipt of lease or note payments with application of the proceeds, and similar duties. This more often applies to commercial properties or rental units, as well as property purchases taken subject-to existing financing. Due to the great variety of potential structuring, each transaction is quoted on a case-by-case basis. As a general expectation, the process involved in the formation and acceptance of a trustee role could range from 0.5% to 1% of the value of the property (with a minimum of $500 and maximum of $10,000 for properties up to $2,500,000; ask for a quote over $2.5 million), depending on complexity. Ongoing services involving monthly receipts and disbursements when a default or voluntary sale is not involved may be based on the number of transactions, the value of the transactions, or the value of the property; these services begin as low as $40/month to receive one payment and to make one disbursement of it.
The initial $100 base fee applies when THSC has accepted the duty of trustee under the trust and the first contract, such as a purchase or sale agreement, needs to be executed, or the first note is received for servicing. The fee is nonrefundable and is not prorated if the property or other asset is sold before expiration of the prepaid term.
Note Services: Active services may also apply to the collection and servicing of notes held on behalf of members of the corporation. THSC bills and receives the payments and remits them as instructed by the beneficiary. THSC also provides the communication interface with respect to all dealings with the debtor and with other vendors and advisers as may be needed. Due to the varying nature of the duties, each servicing assignment is custom structured and billed.
Passive Beneficiary Services
Circumstances arise in which a member has, or creates, a passive role as a beneficiary of a contract yet prefers that beneficial interest be held in a trust. For example, a member might consider having a self-directed IRA hold a multi-year option to purchase a property for which a memorandum of the option or possibly a security agreement/performance deed of trust is recorded against the property. Investors who appreciate the privacy associated with not having highly sensitive SDIRA information disclosed in the public record may use a trust with THSC as trustee to hold the option to maintain their privacy with the SDIRA as the trust beneficiary. In these cases there are usually no duties for THSC until the member chooses to exercise the option. THSC is testing a reduced rate structure for these kinds of circumstances. Passive beneficiary services may also apply when there is a beneficiary receiving distributions from a trust but without having any power of direction or other control over the trust or the trust property. If this might apply to you, please let us know your interests and potential needs via our Contact page and we will quote a passive beneficiary service fee for you.