Owner Title Insurance and Quit Claim to LLC

6 Replies

First post here. Have been learning a lot from your questions and answers. I am purchasing a property meant to be short term rental. On the loan estimate it mentions Owner's title policy as optional. Should I purchase this? What happens when I quit claim the property to my LLC? Thank you.

Originally posted by @Gelerie S. :

First post here. Have been learning a lot from your questions and answers. I am purchasing a property meant to be short term rental. On the loan estimate it mentions Owner's title policy as optional. Should I purchase this? What happens when I quit claim the property to my LLC? Thank you.

Using a Quit Claim Deed invalidates Title Insurance. Talk to your Title Company before you do anything. Definitely have Title Insurance. If you Quit Claim to an LLC, you could be in violation of your loan's Due on Sale clause. That may or may not be a big deal depending on how you feel about things.

Originally posted by @Mike M. :
Originally posted by @Gelerie S.:

First post here. Have been learning a lot from your questions and answers. I am purchasing a property meant to be short term rental. On the loan estimate it mentions Owner's title policy as optional. Should I purchase this? What happens when I quit claim the property to my LLC? Thank you.

Using a Quit Claim Deed invalidates Title Insurance. Talk to your Title Company before you do anything. Definitely have Title Insurance. If you Quit Claim to an LLC, you could be in violation of your loan's Due on Sale clause. That may or may not be a big deal depending on how you feel about things.

Regarding  title insurance, this is simply not accurate.

I've posted the defintion of "the Insured" under the standard ALTA owners policy several times on BP. Many LLC transfers do not invalidate TI. It has nothing to do with the type of deed used.

Thank you. I'm glad it does not invalidate it. Could I add an endorsement to policy adding LLC? I will try to find your definition for insured. The LLC is a vehicle to assist with estate planning. My husband and I are the only members of LLC.

Originally posted by @Tom Gimer :
Originally posted by @Mike M.:
Originally posted by @Gelerie S.:

First post here. Have been learning a lot from your questions and answers. I am purchasing a property meant to be short term rental. On the loan estimate it mentions Owner's title policy as optional. Should I purchase this? What happens when I quit claim the property to my LLC? Thank you.

Using a Quit Claim Deed invalidates Title Insurance. Talk to your Title Company before you do anything. Definitely have Title Insurance. If you Quit Claim to an LLC, you could be in violation of your loan's Due on Sale clause. That may or may not be a big deal depending on how you feel about things.

Regarding  title insurance, this is simply not accurate.

I've posted the defintion of "the Insured" under the standard ALTA owners policy several times on BP. Many LLC transfers do not invalidate TI. It has nothing to do with the type of deed used.

 Perhaps that is a decision made by each Title Company. Mine says they will not insure a Title of a property that I take using a Quit Claim Deed. However, once I sell it to a new party on a Warranty Deed, they will do a Title search and if it is clean, they will insure from then on. But, while it is being held under a Quit Claim Deed they will not insure. They will provide a Title Report, but not the Insurance.

Originally posted by @Gelerie S. :

Thank you. I'm glad it does not invalidate it. Could I add an endorsement to policy adding LLC? I will try to find your definition for insured. The LLC is a vehicle to assist with estate planning. My husband and I are the only members of LLC.

No endorsement needed (IMO) although you could request one after the transfer. Here is the relevant language:

(d) “Insured": The Insured named in Schedule A.

(i) the term "Insured" also includes

(A) successors to the Title of the Insured by operation of law as distinguished from purchase, including heirs, devisees, survivors, personal representatives, or next of kin;

(B) successors to an Insured by dissolution, merger, consolidation, distribution, or reorganization;

(C) successors to an Insured by its conversion to another kind of Entity;

(D) a grantee of an Insured under a deed delivered without payment of actual valuable consideration conveying the Title

(1) if the stock, shares, memberships, or other equity interests of the grantee are wholly-owned by the named Insured,

(2) if the grantee wholly owns the named Insured,

(3) if the grantee is wholly-owned by an affiliated Entity of the named Insured, provided the affiliated Entity and the named Insured are both wholly-owned by the same person or Entity, or

(4) if the grantee is a trustee or beneficiary of a trust created by a written instrument established by the Insured named in Schedule A for estate planning purposes.

(ii) with regard to (A), (B), (C), and (D) reserving, however, all rights and defenses as to any successor that the Company would have had against any predecessor Insured. 

Originally posted by @Mike M. :
Originally posted by @Tom Gimer:
Originally posted by @Mike M.:
Originally posted by @Gelerie S.:

First post here. Have been learning a lot from your questions and answers. I am purchasing a property meant to be short term rental. On the loan estimate it mentions Owner's title policy as optional. Should I purchase this? What happens when I quit claim the property to my LLC? Thank you.

Using a Quit Claim Deed invalidates Title Insurance. Talk to your Title Company before you do anything. Definitely have Title Insurance. If you Quit Claim to an LLC, you could be in violation of your loan's Due on Sale clause. That may or may not be a big deal depending on how you feel about things.

Regarding  title insurance, this is simply not accurate.

I've posted the defintion of "the Insured" under the standard ALTA owners policy several times on BP. Many LLC transfers do not invalidate TI. It has nothing to do with the type of deed used.

 Perhaps that is a decision made by each Title Company. Mine says they will not insure a Title of a property that I take using a Quit Claim Deed. However, once I sell it to a new party on a Warranty Deed, they will do a Title search and if it is clean, they will insure from then on. But, while it is being held under a Quit Claim Deed they will not insure. They will provide a Title Report, but not the Insurance.

That is a totally separate issue from the subject of this post. 

If you are buying and there is a title company involved why aren't you insisting on a special warranty deed from the seller?

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