Coast River Business Journal

by Benjamin F. Lawrence
Attorney at Law
Campbell & Popkin, LLC

Would it surprise you to know that with an Internet connection and a click of a mouse button, anyone can search the public records and find out where you live, what your property taxes are, when you bought your house, and in some cases even how much you paid for it?

We as Americans are accustomed to strong ties between property and privacy rights—for example, the Fourth Amendment protects us against unreasonable search and seizure by the government, and the Fifth and Fourteenth Amendments grant us privacy rights over our marriages, family structure, and many other personal choices within our homes. So it’s no surprise that the transparent nature of property ownership records comes as a shock. However, they do serve an important purpose.

Let’s consider two scenarios:

In the first, Jenny has just left her abusive boyfriend, Bob. She moves, changes her job, changes her phone numbers, and keeps her name unlisted in the phone book—basically she does everything she can to make sure that Bob can’t find her.

After years of hard work and saving, Jenny puts a down payment on a house. It is the perfect first home and she moves in as soon as she is able. A few months later, though, Bob shows up at her door—he was able to find her by searching the public property records.

In this case, the existence of public records put Jenny in harm’s way, despite her many precautions. However, we have to consider the other side of the coin—what happens when there are no public records?

In this scenario, Doug is renting a place on the beach. Doug loves the coast and decides to ask his neighbor, Pam, if she would sell her house to him. Pam agrees, and they draw up a contract. Doug pays Pam a down payment and Pam hands over the keys.

But just when it seems that everyone is happy, Roy shows up and demands to know what Doug is doing in his house. Roy claims that he owns the house and that Pam was just a renter. Now Doug and Roy have to go to court to settle their dispute. Their case costs both of them money, time and energy, and it drains taxpayers’ limited judicial resources.

In the end, Doug loses his case and all the money he paid to Pam, who by now has surely disappeared to parts unknown.

Even though in the modern era, public access to personal information may appear to create a risk to our financial and personal safety, the practice was intended to serve the opposite purpose. When there is a system in place allowing people to publicly declare and record their ownership of property, there are far fewer disputes and far fewer opportunities for the kind of fraud that befell Doug. The difference is that now, instead of need to travel down to the county recorder’s office and sift through files, all of this information is regularly updated and instantly available through a wide variety of sources.

But what options are open to Jenny to protect her privacy while allowing her to own her home?

Although the only sure way to avoid disclosure is to avoid owning property, there are a handful of ways to work within the system to preserve some privacy. Instead of eschewing ownership altogether, a person can change the way that he or she owns property.

If Jenny were to form a corporation or a limited liability company, for example My-First-Home, LLC, then My-First-Home could be the title holder of the property.

This technique is not flawless since it may not be possible to get financing for this type of transaction, particularly given today’s lending climate. Some information about the members of My-First-Home would be publicly available as corporate records, but there would be an additional layer between Jenny’s name and the property address.

Another option might be the formation of a trust narrowly tailored to hold that specific property. Jenny could create the My-First-Home trust, which would then be listed as the owner of record. Although trusts are typically named after the person forming them, doing so is not a requirement. Jenny would also be wise to select someone she trusts implicitly to serve as the trustee, since the trustee will appear in the ownership records as well. As with LLCs, there may be challenges acquiring financing for the property.

These solutions can be used even if a person already owns the property by transferring the property into the new entity. While the person’s name would still show up in the chain of title as a prior owner, it would not show up during a search through the current owners which provides some measure of protection.

Trusts, corporations, and LLCs provide flexibility for property ownership and the potential for increased privacy, but they are not for everyone. Persons interested in these options should carefully review their finances and estate plans prior to making use of these tools and should consider seeking professional legal and tax advice for their specific situations.