Tenant wants to change name on lease to his LLC

Tampa, Florida
Tax, SDIRAs & Cost Segregation
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Tenant wants to change name on lease to his LLC

Alejandro Alvarez
Member since 2022 · 3 posts · 0 votes

My tenant (who paid the entire year in full and up front) asked if he could change the "tenant name" on the lease from his name to his LLC's name. He is a business owner and I know exactly where the business is located as I drive by all the time on my daily routes. He does not plan to use it to run his business, he just wants to do it for tax purposes. I totally get it, and I'm fine with it as long as it doesn't negatively impact my pockets. I couldn't find anything online about higher / different taxes for commercial entities signing residential lease agreements. Anybody have any insights?

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
4y

You are renting to him, not to his business.  If he's not running his business out of the rental (which would be another problem), then don't.

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  • Brittney Santizo
    Member since 2020 · 1 post · 0 votes
    4y

    There was alot of feed back about this subject on Facebook in the Brrrr group you should go check it out

    0Reply
  • Alejandro Alvarez
    OP
    Member since 2022 · 3 posts · 0 votes
    4y

    Thanks Brittney! I've found multiple BRRRR groups on FB, would you mind posting a link to it here?

    0Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    4y

    You are renting to him, not to his business.  If he's not running his business out of the rental (which would be another problem), then don't.

    3Reply
  • Joe Martella
    Rental Property Investor · Cherry Hill, NJ · Member since 2015 · 626 posts · 495 votes
    4y

    I thought I would see other LLs post how the year up front is usually a red flag.  I wouldn't change it.  What if he goes out of business?  What is your recourse?  You are going to have to incorporate a personal guarantee into the lease.  If you don't allow business in your unit, how can you rent to a business?  What if you rent to his company and he starts doing business out of your unit?  How can you say no business in your lease and then rent to a business? 

    0Reply
  • Jeremy Kloter
    Real Estate Broker · Tampa, FL · Member since 2015 · 329 posts · 102 votes
    4y

    We run a property management company, we never allow entities on the lease.

    1Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    4y

    Evicting a business is very different than evicting a person!

    Check with a local attorney, so you better understand.

    [email protected]248-209-6824
    Logical Property Management4.9458 Reviews
    WebsiteView Page
    2Reply
  • Pamela GordonPro Member
    Rental Property Investor · Charlotte, NC · Member since 2021 · 36 posts · 36 votes
    4y

    @Alejandro Alvarez I actually just had a very similar scenario, earlier today.  An inquiry came in where a business owner wanted to put the business in his name for tax purposes, but he wanted to house his employees and that he doesn't have a problem with the actual occupants being on the lease but he needed his business name on it as well.  Since I wasn't sure how to address the issue, I reached out to the Property Manager that manages one of my properties in Indiana and here was the feedback in a nutshell...which is in line with @Drew Sygit

    "We do not lease to businesses. The lease has to be in the occupants names. There are a couple reasons we won't rent to businesses. The biggest is what happens if we need to evict? Taking a company to court for possession is a different ballgame than individuals. Plus you don't know what kind of legal team the company has and how expensive they are going to make the process on you by dragging things out. More likely than not you wouldn't be in small claims court you would be in superior court. That's always more expensive."

    And yes, getting a local attorney would definitely help as well.  Good luck!
     

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  • Megan Templeton
    Attorney · Birmingham, AL · Member since 2022 · 220 posts · 83 votes
    4y

    I would not recommend doing this. It limits your options to actions you can take as the landlord if the true resident (the individual) is not listed on the lease.

    0Reply
  • Alejandro Alvarez
    OP
    Member since 2022 · 3 posts · 0 votes
    4y

    Thank you all for the insight! My worry was not so much getting paid, but more so about tax implications. I didn't even consider how this would change an eviction process, should things get to that point. I am going to leave the lease as is. Thanks again.

    0Reply
  • Lori Williams
    Developer · Youngstown, OH · Member since 2019 · 129 posts · 121 votes
    4y

    You really don't want to help him commit tax fraud and that's what he's asking you to do. Why would you risk any issues with the IRS for any renter?

    Also you can't attach his llc's debt to his personal finances and assets, at least not without a very long and drawn out legal battle. You don't want that

    just explain to him that because his business is not actually renting the property, you cannot put the business on the lease. 

    and you can tell him that your real estate attorney told you that since you are renting out residential you cannot rent to businesses.

    0Reply
  • Gina Mann
    Investor · Carrollton, TX · Member since 2020 · 12 posts · 5 votes
    4y

    Please don't. This is a fraud. He is not using your property as a place of his business or a part of his business, but wants to write off as a business expense. 

    0Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    4y
    Quote from @Alejandro Alvarez:

    My tenant (who paid the entire year in full and up front) asked if he could change the "tenant name" on the lease from his name to his LLC's name. He is a business owner and I know exactly where the business is located as I drive by all the time on my daily routes. He does not plan to use it to run his business, he just wants to do it for tax purposes. I totally get it, and I'm fine with it as long as it doesn't negatively impact my pockets. I couldn't find anything online about higher / different taxes for commercial entities signing residential lease agreements. Anybody have any insights?

    (laughing)
    No, do not do that or you will regret it.
    0Reply
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