Using a Property Management LLC on the Lease Instead of Our Personal Names?

Question

My partner and I own a small rental property in our personal names, but we also have an LLC that we use to manage it. We run the LLC ourselves.

We’re thinking about putting only the LLC on the lease as the landlord/property manager instead of our personal names. The main reason is privacy—we’d rather not have tenants know our home address or personal information.

The LLC would handle all communication and rent collection, and we’re planning to add the LLC as an additional insured on our landlord insurance policy.

Has anyone here done something similar?

I’m mainly wondering:

• Are there any legal or liability issues with having only the LLC listed on the lease when we personally own the property?
• Could that cause problems if we ever had to enforce the lease or go to court?
• Is it better to list both ourselves and the LLC, or is using just the LLC fairly common?

Stuart Udis · Answer

I've posted countless time on this subject and other flimsy asset protection strategies often discussed and implemented. Check out my many posts on this subject.

What you describe is a textbook example of something known as the alter ego doctrine. Specific to your case as a real estate owner, with any meaningful claim expect the deed holder to be sued which is public record. No lease or management agreement precludes a plaintiff's attorney from naming the property owner. Fail to pay your GC or if the GC fails to pay sub-contractor? Mechanics Lien gets filed against the property. Also, with a separate management company you should carry GL coverage for that LLC as well as for the deed holder. What happens if the two carriers are at dispute over who should pick up coverage?

It ultimately would have made more sense to purchase the property in an LLC. More so to keep your name out of the docket should a claim be filed and for business planning purposes. The better strategy than what you propose which is where most investors fail is operating your business on a daily basis in a manner that's proactive in nature and prevents liability exposure from occurring. I've also posted countless times on the risk mitigation and risk shifting strategies that investors should implement. Highly recommend you take the time to review and truly understand the concepts before spending unnecessarily on asset protection strategies that don't help.

Drew Sygit · Answer

As usual, @Stuart Udis makes some great points.

No one has seemed to ask the most important question though - who legally owns the property currently?

Most states require a lease to identify the owner of a leased property, whether a person, trust, LLC, IRA, etc.

Landlord = Lord of the Land = Owner per deed

Agent = someone legally representing the owner

Property Manager = Agent

If the deed is still in your name, then your state may require you to identify yourself on the lease.

Also, despite what many members state here on BP, in my 30+ years of investing I've learned the hard way that NOTHING GOOD comes from a tenant knowing you are the owner.
- Many prattle on about "being open" and "establishing rapport" with their tenants, but none have EVER responded to my warnings about how a Class C tenant found my personal residence and threaten my wife after an eviction.

So, I'm all for hiding your ownership and representing to tenants that you are just a PM.

James Mc Ree · Answer

If done properly, it won't hurt you. It probably also won't help you. I don't think you will get any material benefit for privacy since your names are on public record for owning the property.

Think about all the times Tenant will interact with Landlord. Are you Landlord? "Hi, I'm Tenant. What's your name?" How do you answer that question and do you do it consistently? If you always tell Tenant, neighbors and everyone else "I'm with the LLC...", maybe you get some benefit, but anyone who checks county records will easily sniff you out.

Some folks think it gives them a legal shield. An attorney will find you very easily as they will sue you personally and the LLC.

You will need a document in which you personally authorize the LLC to manage the property and make sure the LLC operating agreement contains the right text. This is where your attorney comes in. Listing yourselves and the LLC on the lease totally destroys any value you are trying to get from the LLC.

You need to talk with your attorney and insurance company about adding the LLC to insurance. I don't see any obvious problems with it, but the insurance company may have a different product for you because the LLC is operating the property, not you personally. That might increase your insurance costs and will probably give you no value.

I think you are way over-thinking this. Lease with a real property management company if you want privacy and some legal protection as they will have insurance. Otherwise, lease personally or use the LLC to have just a single entity for the lease so you don't have to keep repeating 2 names for owners and landlords. Next time, buy in the LLC name and you can do what you are describing.

Jimmy Lieu · Answer

Welcome to BP! From what I've seen, it's pretty common to have the LLC listed on the lease as the landlord or property manager even if the property is still titled in your personal names. The key is making sure the LLC actually has the authority to act on your behalf, whether that's through a management agreement or another document, so there's no question if you ever need to enforce the lease or file an eviction. I'd also make sure the lease clearly identifies who owns the property if your state requires it and that your insurance carrier is aware of the setup. If your goal is privacy, using the LLC's business address and contact information on the lease is a common approach. Since landlord-tenant laws vary by state, it's worth having a local real estate attorney review your lease language once so you know it's set up correctly from the start. Happy to connect and answer any questions you have!

Stuart Udis · Answer

I believe you're taking the concern a bit too far. If someone is truly so unstable that they're willing to harm someone over a housing issue, I don't think they're going to stop and distinguish between the property manager and the owner.

Even using your own example, wouldn't it have been just as awkward if the tenant showed up believing you were the property manager when you were actually the owner? The underlying issue is that you felt personal and professional boundaries were crossed, not the title you held.

Taken to its logical conclusion, your position suggests that landlords should either own property only in distant markets or avoid owning real estate that attracts tenants from the same socioeconomic background as themselves to avoid the possibility of interaction. I don't think that's a practical or necessary conclusion.

Stuart Udis · Answer

@Drew Sygit I believe in many instances having a PM is good. If the real estate is in such horrible locations where safety is an issue, then absolutely conceal your identity. I would go a step further and say that you likely don't want to own real estate where you fear for your life. Fundamentals are likely pretty lousy :) However, it's naive to believe tenants in major metro true class A and Class B (probably even C) will not see through the misrepresented role of PM when in fact they are the owner. You would need basically zero internet footprint which is incredibly rare, particularly for someone with the financial means to own this type of real estate. I believe people take the anonymity or concealed identity too far in real estate. Owning investment in an LLC I absolutely side with, but the anonymity piece as long as it's not war zone real estate is where you lose me.

If you believe the person who is evicted from a class A property is going to try to harm you or your family that's going a little too far when it comes to rationale behind concealing your identity as the property owner. At that point where do you draw the line? The restaurant owner should conceal his identity because someone may have a bad experience at his restaurant? The person who owns the hair salon because the customer got a haircut they do not like? Should everyone providing a service be a ghost in their professional life because of the extremely low chance there's an extreme reaction from a customer?

Drew Sygit · Answer

It only takes one crazy person, whether Class A, B, C or D to end a life - examples are in the news all the time:(

Other issue is boundaries. Once had a Class A tenant show up at one my personal pool parties. They knew someone that knew me. Was very awkward because he had been laid off and was behind on the rent. Not sure why he thought it appropriate to come.

Let's agree to disagree:)

Jim Johnson · Answer

Using an LLC as the property manager on the lease is fairly common, but I'd make sure the ownership and management roles are both clearly documented. The last thing you want is confusion over who owns the property versus who is authorized to manage it.

Since ownership is still in your personal names, I'd have a local real estate attorney review the lease language to make sure it aligns with your state's requirements and won't create issues if you ever need to enforce the lease.

From a practical standpoint, using the management company's contact information for day-to-day communication is a good way to maintain privacy while keeping everything professional and consistent.

Jake Handler · Answer

The lease is an agreement between tenant and landlord, regardless of who is managing it. Not an attorney but the management property LLC likely should be unmentioned on the lease, as it's irrelevant to the agreement between tenant and landlord.

Using a Property Management LLC on the Lease Instead of Our Personal Names?

Using a Property Management LLC on the Lease Instead of Our Personal Names?

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