Legal Question in Real Estate Law in California

Re: Straw Deal

Straw deals aren't inherently illegal. It would be the particular purpose of a particular straw deal that would determine whether it was 100% OK and lawsuit-proof, or whether it might be found to be any of the following: (1) illegal in the criminal sense, subjecting the parties to fines and jail time; (2) void as a contract, this having no enforceable effect; (3) voidable as a contract, meaning that one of the parties could elect to un-do the contract; (4) fraudulent as to one of the parties, inviting a lawsuit (such a contract might also be void or voidable); (5) fraudulent as to a third party, who could sue one or more of the parties for damages; or (6) could simply create a legal mess due to future uncertainties as to what was intended and who ends up with what rights and duties.

It was once common is some jurisdictions to use sales to strawmen to break up joint tenancies, but that is no longer necessary in California. It may be common in real estate deals for a developed to use strawmen to accumulate parcels of land for a big project. None of this is inherently fraudulent or illegal.

However, placing property in the hands of a strawman in order to hide or protect it from creditors would be fraudulent and all participants are likely to be in legal trouble.