On your lease - Do you put yoursef as Landlord or your LLC?
managment · Pittsburgh, PA · Member since 2015 · 14 posts · 1 vote
On your lease - Do you put yoursef as Landlord or your LLC?
Most Popular Reply
Investor · Flower Mound, TX · Member since 2017 · 182 posts · 198 votes
8ySignificant liability attaches to ownership as well as management. Your LLC isn't really buying you any protection unless it owns title to the property. I manage a couple properties this way, but am under no illusion that it provides any liability benefits. It's more like a trade name and DBA for me, and a way to manage my financials.
And to answer your question, the landlord is the OWNER of the property. If you specify the LLC as the owner when it is not, then you may not have a valid lease. I list the LLC as my "property manager" and payment address.
17 Replies
- Investor · Flower Mound, TX · Member since 2017 · 182 posts · 198 votes8y
Significant liability attaches to ownership as well as management. Your LLC isn't really buying you any protection unless it owns title to the property. I manage a couple properties this way, but am under no illusion that it provides any liability benefits. It's more like a trade name and DBA for me, and a way to manage my financials.
And to answer your question, the landlord is the OWNER of the property. If you specify the LLC as the owner when it is not, then you may not have a valid lease. I list the LLC as my "property manager" and payment address.
- Investor · Hoboken, NJ · Member since 2016 · 464 posts · 179 votes8y
Here is my view, the landlord is the owner of the property that is being rented out.
So if you own those properties under your name, even though the LLC is the property manager, you are the landlord.
Your current setup doesn't really keep your business and personal assets/dealings separate.
To do so, you'd need to transfer those properties to an LLC you own or create a new one for that purpose.If there is a lawsuit, I'd imagine that your name, as the owner, would appear in the documents filled.
Just my 2 cents, I am not an attorney, nor a CPA - South Jersey · Member since 2016 · 78 posts · 35 votes8yI own my properties under an LLC but sign my name as the landlord since I’m under the LLC. From my understanding, all my personal properties are not tied in this investment since it is owned by an LLC, not my personal name. Anybody correct me if I am wrong please!
- 8yColleen F.Pro MemberInvestor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votesWhere I have an LLC I sign the lease on behalf of the LLC. The contract is between the LLC and the tenant. They make checks out to the LLC. The LLC business account pays the bills. If you evict in some states an LLC must have a lawyer. So it depends on the structure of the LLC etc. , what it was formed to do,who owns the property, check with your lawyer if you are concerned.
- managment · Pittsburgh, PA · Member since 2015 · 14 posts · 1 vote8yThank you everyone - great insights as always.
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes8y
My mgt s-corp is on record as the 'landlord' and signs the leases whether a personally-owned house or a commercial apt bld owned by one of my LLCs.
If someone has a PM it's the same way, right? If you have a regular PM, are you personally listed as the landlord or owner on the lease? No way.
My mgt s-corp is also who HUD Section 8 or CAC or other entities pay and 1099. I sign as agent of the property or Regional Manager of the mgt co and all rents have always been paid to and gone through my mgt corp.
I have no idea how or why folks would receive rents and stuff in their own name. Ugh.
- Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes8y
The OWNER of the property!
If your property is owned by an LLC and you put yourself as the landlord you are taking on the liability that you are attempting to protect your self from in the first place
- 7yRob CucuglielloPro MemberPhiladelphia, PA · Member since 2017 · 27 posts · 9 votes
Hey All!
Doesn't seem to be a consensus on here on how to write the lease up. I have some properties in my personal name and some properties under my LLC (going forward all will be under my LLC. So I'm trying to ensure my Leases are properly written. I need finances to go thru my LLC, so checks need to be made out to the LLC name. But how do I properly write the lease up? Any definitive answers here?
- Property Manager · Washington Twp, NJ · Member since 2017 · 152 posts · 169 votes7y
@Rob Cucugliello - This is a very state specific question as its dependent on state specific landlord-tenant laws. My properties are all in New Jersey (South Jersey to be specific) so I can speak to that state. First off, I do want to state that I'm not a lawyer and that you should consult your specific situation with your lawyer for the definitive answer. The answer is two folded in NJ. To my understanding the law states here that you either have to have an ownership interest in the property or you have to have a RE brokers license to collect and enforce a lease.
Collecting rent and enforcing a least for Properties in an LLC:
1. The collecting entity must either have ownership interest in the property (Example - Any member of the LLC or someone who works for the LLC who either owns your LLC or has partial ownership of the house)or
2. Have a real estate brokers license (Example - if you have a PM company they must have a team member who is a real estate broker)
Collecting rent and enforcing a least for Properties you personally own:
1. You may collect rent
or
2. Have an LLC who has either an ownership interest or has a a member who has a real estate brokers license
As you can imagine this gets tricky when you personally own your property but try to send everything through your LLC. Unless your LLC has ownership interest in your property or has a member with a brokers license its legally vulnerable. If you try to claim that you own the property as the owner of the LLC who also personally owns the property the court can pierce the veil.All of this being said, the only time I've heard people running into this issue is with professional tenants who intentionally try to work the system. Otherwise I haven' heard of blowback.
-MB
- Seattle, WA · Member since 2018 · 20 posts · 9 votes7y
Okay, I keep thinking about this, why can't you form an LLC that then leases the property from the owner, to use to rent to the tenant? If there is a liability issue wouldn't they have to sue the LLC and if the LLC doesn't own the property what is there for them to gain? It would be like if I rented a car from Uber and crashed it with passengers, Uber wouldn't be liable right? I am sure there is something I am missing here. lol
- 7yScott SmithPro MemberAttorney · Austin, TX · Member since 2014 · 1k+ posts · 932 votes
Originally posted by @Devin Cutler:
Okay, I keep thinking about this, why can't you form an LLC that then leases the property from the owner, to use to rent to the tenant? If there is a liability issue wouldn't they have to sue the LLC and if the LLC doesn't own the property what is there for them to gain? It would be like if I rented a car from Uber and crashed it with passengers, Uber wouldn't be liable right? I am sure there is something I am missing here. lol
The reason people don't like to do this is that it adds a layer of complexity and expense, but it does offer many rewards. I often see investors pair a traditional LLC with a Series LLC to function in this capacity.
A traditional LLC is the traditional form of limited liability company that acts as a shield to limit the personal liability of an investor. A traditional LLC is typically set up in conjunction with a parent Series LLC to act as the Operating Company, or shell company, for the parent Series LLC. The reason for this is to keep the name of the parent Series LLC away from day to day operations, which limits the risk of liability. When used as an Operating Company, the traditional LLC can enter into contracts, handle repairs/contractors, enter into property management agreements, collect rents, and advertise. Any profits or assets received by the Operating Company will be transferred over to the parent Series LLC, thus creating separation between the management and the assets. You could just think of the parent Series LLC as the ASSET HOLDING COMPANY and the traditional LLC as the OPERATING COMPANY.It would require extra costs, since you are involving the formation and operation of an additional entity. But you can get pretty creative with these entities to implement additional layers of protection by utilizing additional tools - and in my opinion real estate investors under-utilize trusts. While the scenario above will limit liability, your name is still all over the LLCs, so anyone looking to find you can do so easily. That's where adding privacy through anonymity can come into the picture.
A layer of anonymity can be added to the traditional LLC by utilizing an Agent Trust as Member/Manager of the traditional LLC. Instead of listing the investor's name as Member/Manager on the publicly filed Certificate of Formation, the Agent Trust is used. Thus, the trust acts as an "agent" for the investor. The document used to create the Agent Trust is a Declaration of Trust Agreement and is a private document that is not recorded or filed in the public records. This trust agreement lays out the management and ownership structure of the Agent Trust. And since the Agent Trust is the Member/Manager of the traditional LLC, the trust agreement thus lays out the management and ownership of the traditional LLC.Once and investor has the structural anonymity formed at the LLC level they can also remove their name from ownership of the property on public record. This is accomplished by transferring the property into a land trust and having your attorney sign as a "nominee trustee" before having the role of trustee granted to you after the signing. This means anyone looking at the property will see it is held by a land trust signed by "attorney X." If they wanted to dig into it and see the actual documents it would be costly, since the document is private and protected by attorney-client privilege.
Asset protection is a bottomless rabbit hole. In the end you just want to ensure you are taking the proper steps to minimize your exposure and keep your assets protected. For someone who is just operating a property or two through a single LLC it would be hard to justify spending a massive amount of money creating an elaborate asset protection strategy. But for someone with several properties and growing - it is invaluable. Ideally you would just find an experienced attorney who could guide you through the process - there are some very expensive strategies out there that really don't protect investors...
Apologies for the long message. Kind of got rolling on it. I did lay out a general approach to asset protection in one of my more recent articles, so feel free to refer to that. Feel free to reply with questions. I have not proof read this, so I may have skipped stuff in the explanations.
- Seattle, WA · Member since 2018 · 20 posts · 9 votes7y
Wow, Scott thank you very much! I will need to read this a few more times and listen to your podcast, you are right, I am currently house hacking my way to my second property. I did form an LLC because I thought I needed to do it for tax and liability purposes.
The location is excellent for longterm rental income. Over the last two years, I have seen a 36.8% appreciation. But, looking at it now, I realize forming for just one house may have been a bit premature?
My wife and I are working on scaling as quickly as possible. We are both in property management and aspire to 1031, exchange our way to owning small apartment complexes and eventually small hotels, like a Courtyard by Marriott or something on that level. Does it make sense to hold onto the LLC, I created or start fresh once I have a stronger portfolio?
- Member since 2023 · 6 posts · 1 vote2y
Quote from @Dawn Curry:
I own my properties under an LLC but sign my name as the landlord since I’m under the LLC. From my understanding, all my personal properties are not tied in this investment since it is owned by an LLC, not my personal name. Anybody correct me if I am wrong please!So then in this situation, if the landlord were to also be the property manager and wanted to be known by the tenant only as such, would it then make sense to sign the LLC as the landlord? I was under the impression that it is best for tenants to not know that their property manager is the landlord so they appear to represent both parties.
- 2yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
The owner is the landlord - thus LLC
Logical Property Management4.9454 Reviews
Join the conversationCreate a free account to reply, vote on answers and follow this thread.