The Irvine Company “TIC” at Orange County CA continues to own title to parcels of land where some homes are located, and it has offered to sell most of these parcels to people who own homes situated there.
The subject real property is a “leasehold”, and the “lessor” is owner of the land, and homeowner leases the land from the lessor, is the “lessee” of the land and owns only the improvements or the home itself.
A Lease to Fee Conversion Escrow occurs when the Lessor (The Irvine Company or TIC) sells and transfers its fee simple interest to the Lessee. This escrow process involves more than just obtaining a demand letter from the Lessor (TIC) and is a much more detailed process – this would be a “Land Purchase Escrow”.
The Lessee (Buyer) must submit to escrow a completed application to purchase the land and a $300.00 initial deposit made payable to the Escrow Company. Escrow then forwards a copy of the application to TIC. The Irvine Company then prepares a Purchase Agreement, Escrow Instructions, Termination of Lease and Grant Deed. The Irvine Company also provides items involved in a normal purchase escrow, such as, Hazard Disclosure Report, 593 and 1099 reporting. Escrow also obtains a preliminary title report.
Most conversion escrows are typically all cash transactions. The Buyer may obtain financing, but it must be handled as a separate “refinance Escrow” as TIC does not allow financing to be done through the land purchase escrow. If the buyer is obtaining financing please note that this transaction will take approximately 45 days to close. The loan proceeds from the refinance escrow must be transferred to the lease to fee (or purchase) escrow in order to have the funds necessary for closing. Both of these escrows would utilize the same preliminary title report and must be recorded concurrently. The title company records the Termination of Lease and Grant Deed prior to recording the Deed of Trust in favor of the new Lender, thus providing the Buyer with a fee simple title to the real property. The refinance escrow obtains a Lender’s Title Policy while the lease to fee conversion escrow, or Buyer receives a CLTA Owners Policy.
Mariners Escrow has handled this type of escrow for The Irvine Company for 25 years. If you are a “lessor” of such land where your home is located at Orange County and have questions, you should contact an experienced real estate attorney and/or Mariners Escrow – att: Jim Lynch, 949-640-6040 – or 949-719-2111.
Source is Mariners Escrow at Newport Beach, CA – and this is for information only and is not the providing of professional legal or other services.
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