Transferring Title to LLC - Deed

[Jeremy VanBussum]

Hi, I am a newbie seeking legal advice regarding my first investment property. I hope someone can help who knows the ropes. Here is my situation:
I purchased my first investment property with 25% down and the rest of the purchase price was funded with a mortgage in my name. I also took title and possession in my name. As I understand, to protect my equity, it is best to place this property into its own LLC. With that said, I want to transfer title into the name of an LLC (which is okay with my lender as long as it is a single member). I plan to transfer title into the LLC, but I am not sure what the best type of deed is to use. Any thoughts? I've also been advised to update the landlord insurance policy to include the name of the LLC and also to add an addendum to the lease I have in place to make the lease between the LLC and tenant. The only thing that will be left in my name is the mortgage. Does anyone see this as an issue and is there anything else that I am missing? I am racking my brain trying to make sure I have myself as protected as possible. Oh, and yes, I am working on getting an umbrella policy to further protect my personal assets.
Thanks in advance for anyone who offers advice.

[Bill Gulley]

A savvy attorney who is not up on real estate agency law but simply business can get you in trouble. Your LLC is a separate entity as a different person. That entity, in order to do property management for RE that it does not own in title may well require a license with your RE Commission, so you need to check on that issue.

Next, your LLC should be formed more for business purposes, like taxes and related expenses that may be taken than protection from liability issues. Consider too that in some instances a manager or executive of a business can be held personally liable aside from the entity. Single member LLCs are very difficult to insulate yourself from saying your alter ego is responsible and not you. If you fail to manage and maintain the LLC properly a good attorney lay down a float bridge over your mote and shoot your archers with a 50 cal. charging in like Grant went through Richmond. :) The tactic is to disqualify the LLC due to lack of attention, unauthorized actions or poor management and then hit you personally and since there is more to good management than most realize, it's easy to do. A multiple member LLC is easier to insulate yourself as it is a partnership, but you still have management issues and the opposing forces will go after that as well and seek the guy with deep pockets.

Insurance is the best solution if you failed in your duties.

The very best solution is to act legally and prudently, taking care of your properties to eliminate risks, and for those you can't eliminate cover yourself with insurance.

Form an LLC for its business advantages more than as a shield from liability.

As to the deed, use a Special Warranty Deed if there is something about the warranty you are excepting out, like an underlying mortgage, otherwise use a Warranty Deed for the chain of title. A Quit Claim Deed should only be used with deeds in lieu of foreclosure or between family members, it's is not a good way to convey title in investing matters between unrelated parties or from a business entity, there are too many title issues that can arise.

Best thing to do before anyone uses any deed is to call your title company and give them the situation and ask if they will insure over the deed and if that is the proper use. They may not say you're doing it right (providing legal advice) but they can say if they would insure over the transaction. :)