Title Insurance Voided After Transfer Into LLC

[Seth Jacowski]

Hi Folks,

New to the scene here. Just recently bought my first rental property (2 unit). I am in the process of transferring it into an LLC that I have created. My biggest concern was the "Due on Sale Clause" but I have had an off the record discussion with my mortgage banker and he put my worries to ease (along with all the other threads that say the clause is never exercised). I heard today though that the title insurance will be voided after it is transferred into my LLC. I spoke with my lawyer and he said that this is true. He did say that this was a minimal risk for me. Can anyone tell me what title insurance actually protects me against (what types of claims, etc...). He mentioned that I could get a new policy but the cost may make it not worthwhile? Any info on this/experience?

Thanks,

Seth

[Ned Carey]

Well the title insurance isn't exactly voided it was simply insuring you not your LLC. When you transfer it to your LLC you could get an updated policy that would be less expensive than the original policy but the real cost is in the title work and transfer.

Title claims are rare but can be a serious problem if they come up. If title company did they job well when you purchased it, you risk is pretty modest. I would guess half of my rental portfolio does not have title insurance but I am confident of the title.