LANDLORDS AND LAND TRUSTS RANDY HUGHES
Most rental real estate is owned by mom and pop
operations that have no separation between the
“owner” and the “tenant.” The relationship that
develops is one of an adversarial nature. The
tenant knows that he/she is dealing directly with
the owner of the property and therefore has an
advantage
when
negotiating
lease
and
maintenance issues.
For example, when it comes time to renew a
lease it is difficult for the owner of a property to
drive up in his/her Mercedes to demand a rent
increase. Not that the owner doesn’t deserve an
increase, but the perception from the tenant’s
point of view is that the owner does not “need” an
increase.
Most savvy real estate investors will hold title to their
property in a Land Trust with perhaps the beneficiary
being
a
Limited
Liability
Company
(LLC)
or
Corporation. This structure gives the investor the
anonymity of ownership from a Land Trust and the
asset protection benefits of the LLC.
Unfortunately, most tenants in America today
think that the owner of their property is rich and
has no cares in the world! It is a common
misconception that people who own rental real
estate are wealthy. So, when it comes time to
renegotiate a lease the owner is at a distinct
disadvantage.
When a Land Trust owns title to real estate held
inside the trust, the Beneficiary is NOT the owner.
The Trustee is the full legal and equitable title holder.
This means that as the Beneficiary you can honestly
state (to everyone including tenants) that you are not
the owner. This puts the Beneficiary in a much better
negotiating position with tenants.
As the property manager you only have certain
powers bestowed upon you by the owner. Beyond
those powers your hands are tied and it becomes a
take it or leave it proposition. For example, when a
property manager presents a rent increase to a
tenant it is from instruction from the owner of the
property. It is not up to the property manager to
negotiate, just deliver the message. Negotiations
become much more matter of fact when handled in
this manner. The property manager is just “doing her
job.”