What to do when financing property from LLC to own name

Question

Hi All,

Recently I'm refinancing a property from my LLC to my own name. There's a tenant in the property. What should I do about this?

Basically, I'm using the same property management company for the property before and after refinancing. My property manager told me that I cannot change the lease when the lease is still in effect. But lender requires my home owner insurance to be under my own name instead of LLC. If I don't change the lease(still with llc's name on it), will my home owner insurance still protect me from liability?

In addition, do I need to notify the tenant about the ownership change? Since for them, nothing is changed, they still stay in the property and send the rent to the same place.

Thanks a lot!

Yaping Zhang · Answer

Thanks a lot, @Steve Vaughan.

Yaping Zhang · Answer

Thanks a lot for your input, @Michael Fleet. Will also add llc as additional insured.

Michael Fleet · Answer

(1) You should be able change ownership name with the property management contract. It is no different than you selling the property and the property management company on-boarding the new owner with the tenant in place.

(2) Regarding the insurance, assuming you have a DP-3 policy or some form of non-owner occupied policy on the rental, call you insurance provider and have your LLC added as an "additional insured".  Problem solved!

Steve Vaughan · Answer

The insured for the property and liability is the owner of the physical property. Myself/wife on the houses or the owner LLC on the commercial stuff.  Commercial lines policies are good with and even encourage having an LLC.

The mgt entity owns nothing and is not insured.

Yaping Zhang · Answer

Thanks a lot! @Steve Vaughan

If you put all the lease under your mgt entity, do you have your insurance also cover your mgt entity or just cover the entity holding the property?

Steve Vaughan · Answer

As long as you don't dissolve and remain a member of the LLC, you should be fine.

All of my rental leases are signed under my mgt entity, regardless if owned by me or one of my commercial apt bldg LLCs.

Keeps things clean and simple while also providing a higher authority and some liability protection.   The last thing I'd ever want is rent or deposits made payable to me personally.

Just realized you have a PM. The lease is with the PM anyway. They will pay you your slice however you direct them to.

Yaping Zhang · Answer

@Nick C.

Thanks for the reply, Nick. The property management company collects rent, so I don't need to notify the tenant given nothing will change for them?

Lender and insurance company knows that this is a rental property and the insurance is a rental policy.

Given the lease run with the land, as long as my insurance protect myself, it is OK?

Thanks a lot!

Nick C. · Answer

The lease doesn't need to change. It comes with the property. I'm assuming your property management company collects the rent, so they would just make the checks out to your personal name now instead of the LLC.

Does the lender and homeowners insurance know this property is a rental? If the insurance company thinks your living there, they could try to deny you if a claim is ever made later on. In addition to your home owners policy, you could also get an umbrella liability policy on the property.