[WSBARP] [WSBAPT] Due on Sales Clause and transfers to trust

Tue Feb 3 15:08:07 PST 2015

Hi Rob,

Never seen it myself. Advised clients for many years of the possibility. I remember a posting and email thread about this a few months back and don’t recall anyone having actually seen it happen just because of the transfer itself. Love to hear about 1 or more just to know it will really happen.

Sincerely,

Tom

Thomas J. Westbrook

Attorney at Law

Rodgers, Kee & Card

324 West Bay Drive NW, Suite 201

Olympia, Washington  98502

Phone: 360-352-8311

Facsimile: 360-352-8501

Email: tjw at buddbaylaw.com

Skype: thomas.westbrook

www.buddbaylaw.com

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From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Rob Rowley
Sent: Tuesday, February 03, 2015 8:49 AM
To: WSBA RPPT
Subject: Re: [WSBARP] [WSBAPT] Due on Sales Clause and transfers to trust

This is more of a survey question for the wise minds that inhabit this listserv.

How many practitioners have actually seen a large bank (Wells Fargo/Bank of America, etc…) call a note on a breach of the ‘due on sale’ provision on a sale ‘subject to’? A wrapped note transaction.  I have never seen one.

Obviously, a whole different answer when dealing with a small local bank/credit union or commercial loans.  I have seen that situation as the bank officers are far more aggressive.  Likewise, these small lenders are far more likely to file a judicial foreclosure and seek a deficiency versus the large banks.

When I am counseling my clients I'm always very mindful to remind them of the due on sale provision and where necessary obtain a written document advising the clients of the risks on buying a property ‘subject to’ which I tuck away in my file.

When I argued my sole case to the Supreme Court (Bank One vs Alby (2005)), which had lots of issues one of the very tangential issues dealt with restraints on alienation and due on sale provisions.  Not at issue in that case, but I've always been interested in the topic.

Thank you.

 Robert R. Rowley | Attorney at Law

505 W. Riverside Ave, Suite 500

Spokane, WA  99201

Telephone: (509) 252-5074

Mobile: (509) 994-1143

Facsimile: (509) 928-3084

Email: rob at rowleylegal.com <mailto:rob at rowleylegal.com> 

Web Site: www.rowleylegal.com <http://www.rowleylegal.com/> 

From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Jennifer Y. Sohn
Sent: Monday, February 02, 2015 4:32 PM
To: 'WSBA Probate & Trust Listserv'
Subject: Re: [WSBAPT] Due on Sales Clause and transfers to trust

Sure, and based on my experience, most commercial banks will work with you to make this work. With fannie mae loans, I found that the approval/review fee can be quite hefty. In any case, for non-residential, I would advise the client (in writing) to get a prior waiver and the risks of not getting one.  

From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Lovie Bernardi
Sent: Monday, February 2, 2015 3:04 PM
To: WSBA Probate & Trust Listserv
Subject: Re: [WSBAPT] Due on Sales Clause and transfers to trust

Thanks, Jennifer. That was my thought as well on the lack of occupancy. I found an unreported federal case that ruled against the bank on that issue, but it seems like a risk. I like your suggestion on the transfer on death deed, Kate, especially if the banks are unwilling to approve the transfer.

From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Jennifer Y. Sohn
Sent: Monday, February 02, 2015 2:31 PM
To: 'WSBA Probate & Trust Listserv'
Subject: Re: [WSBAPT] Due on Sales Clause and transfers to trust

I would review the deed of trust and any other loan documents. My experience has been that most commercial banks (including Chase) doesn’t care too much, or will approve the transfer upon request, but I recently had a lender (a fannie mae loan) call a loan for transferring assets to an RLT.  If there are more than 1 properties I would presume the non-residence property will not fall under the (d)(8) exception.

From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Lovie Bernardi
Sent: Monday, February 2, 2015 1:54 PM
To: wsbapt at lists.wsbarppt.com
Subject: [WSBAPT] Due on Sales Clause and transfers to trust

Dear listmates:

I have a client whose wife passed away. The couple owned multiple properties in Idaho and Washington, most with substantial mortgages. The wife had been living in Washington for medical treatment for many years when she passed away while the husband lived in Idaho most of the time. We filed a probate here in King County and an ancillary probate is being handled by an attorney in Idaho. The will instructed the PR (husband) to place the wife’s portion of the community property in a living trust that was established before her death. She died before any of the property was transferred to the trust, hence the two probates. Interestingly, the trust did not become irrevocable upon the death of the wife.

The husband wants to transfer both his wife’s interest and his interest in the properties to the trust, in order to avoid a double probate at the time of his own death. (He will probably still be an Idaho resident.) My concern is whether the transfer will trigger the due on sale clauses in the mortgages. Most of the mortgages are with Chase. I have reviewed the exemptions from the due on sale clause under 12 USCS Section 1701j-3(d). The transfer of the wife’s interest falls under exemption (d)(3) (“a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by entirely”). But does the husband’s transfer of his interest fit under (d)(8) (“a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to the transfer of rights of occupancy”)?

Am I safe to transfer both the wife’s interest and the husband’s interest in the properties without triggering the due on sale clause? I attended a trust CLE last August which suggested the transfer of real estate to a trust during lifetime might trigger the due on sale clause. Does anyone have experience with this issue and/or suggestions for me? Thank you in advance for your input.

Lovie Bernardi

Attorney at Law

Seligmann & Flaherty, PLLC

216 First AVE S, #450

Seattle, WA  98104

(206) 682-2616

lovie at sbfirm.com <mailto:joni at sbfirm.com> 

http://sbfirm.com <http://sbfirm.com/> 

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