liability question when i transfer the property to an llc

9 Replies

if I take a mortgage in my name and transfer the property to an LLC which I am not a member of , I am liable for the the tenants or would the person who owns the LLC be responsible if the llc is pierced?

Do I need an umbrella insurance on the LLC to name me as an additional insured ?

@Chasing Vega If the mortgage is in your name, but you transfer the ownership of the property to an entity out of your control. You would still be personally responsible for the mortgage, but the LLC would then own the property. So basically a standard "subject to" situation.

@Chasing Vega

I don't believe that you would have any liability if you are not and we're not involved with the lease nor the LLC.

However if the tenant sued the LLC and win, he may get a judgement against the LLC and get the property and or the LLC. During that a time, you will still be responsible for the mortgage payment but will not receive any money from the LLC. If the property is foreclosed and the bank does not get its money back, you will still be financially responsible to the bank for any shortfall, and your credit score will also get to the drain.

So maybe not liable but definitely impacted.

Anyone involved with the property can be sued. If you still hold the mortgage in your name, you are still vulnerable.

The bank typically wants the mortgage to be held by the same person/entity that controls the property. If you move ownership of the property to an LLC, you should notify the bank first and make sure it won't cause problems. If they see you transfer ownership but maintain the mortgage in a different name, that may be a violation of your mortgage contract.

Originally posted by @Chasing Vega :

@Nathan G.  @Mike S. The bank is okay with the LLC in someone elses name. I am thinking if there is any way a lawyer could say the personal paying the mortgage on the property is liabile for landlord tenants rules .

Yes, the mortgage holder can still be held liable, even if the property is in the name of an LLC and managed by a property manager.

I worked with an investor that had two large apartment complexes in California, owned by him and three partners in an LLC. The apartments were managed by a property management company and the four partners were rarely involved except to track financials. Someone sued for a Fair Housing violation and all four partners had to fly to California and defend themselves even though they had no involvement in running the operation.

 

Anyone can sue anyone else for pretty much anything in the U.S.  If your question is whether a threshold motion to dismiss would be granted at the outset of the case, the answer is usually no, maybe or probably.  A "sure thing" has about an 80% chance of occurring in our legal system.  As a real estate investor, you either get used to it (and buy a lot of insurance) or you find something else to do.