Insurance for Properties in Florida Land Trust

[Chuck Masters]

I have 2 properties in Florida (live in Maryland) one is a long term rental and the other is a short term rental, both are in our personal names. Wanting to move these properties into an LLC but I find out we have to pay taxes (7%) on the transfer equivalent to the mortgage balance. Then I learn we can move them into a land trust bypassing this 7% tax then into and LLC.

I read that folks were having a tough time finding someone to insure a property into a land trust. I asked my agent and he said no go. Asked 2 other independent insurance brokers in Florida and they also said no go. Can’t get insurance for a property in a land trust.

Is anyone in BiggerPockets community owning property in a Florida land trust and found insurance ?

[Ken Naim]

@Chuck Masters what county in Florida? I moved properties into an llc in palm beach county and there wasn't a fee. They said to move it out would incur a fee but it was a fraction of a percent.

7% doesn't make much sense to me. Maybe 0.7% and out of an llc not in

[Chuck Masters]

@Ken Naim My properties are in Lake County. I'm reading that the fees are .07 x the mortgage amount to transfer into an LLC. That amounts to about 10k per property. OUCH.

[Ken Naim]

@Chuck Masters 0.07% so $100 for every $142,857 of mortgage value. So $10,000 would equate to a $14 million property.

[Wayne Brooks]

@Chuck Masters The Documentary Stamp fee is $0.70 per $100 (0.7%, not 7%) and it is on the Sale price, not the mtg since you can’t transfer the mtg to the llc (mtg assignments/recordings are $0.35/$100). Most people do a Quit Claim Deed for $100, or for no value, minimal recording fee. It is the same fee for any transfer, doesn’t matter if llc, land trust or another individual.

[Chuck Masters]

@Wayne Brooks your explanation is what I would expect but I keep reading on various lawyer web sites that the transfer tax is 7% of the current mortgage which for a 150k mortgage is 10,500, which is just nutz!

I’d like to hear from someone that has first hand knowledge that has done this recently in Florida.  

[Wayne Brooks]

Originally posted by @Chuck Masters:

@Wayne Brooks your explanation is what I would expect but I keep reading on various lawyer web sites that the transfer tax is 7% of the current mortgage which for a 150k mortgage is 10,500, which is just nutz!

I’d like to hear from someone that has first hand knowledge that has done this recently in Florida.  

I have done it.....what you’re reading is just wrong,or you’re reading it wrong. And again, transferring your title into an llc has Nothing to do with the mtg. amount, it is not being transferred/assigned. 

To see for yourself, just go online to the clerk’s site, Official Records, look at any random deed transfer recording....the price is shown and the doc stamps $ amount charged is printed on the deed in the upper right hand corner....you do the math......it is $0.70/$100. 

[Chuck Masters]

@Wayne Brooks checking the county clerks records is a good idea had not thought of that!

[Diane Dutt]

A Quit Claim deed would work. The only caveat is that the mortgage lender likely has a clause that says they can call the note due in full upon transfer. 

[Chuck Masters]

@Diane Dutt very few lenders will call a loan that is current and paid on time. Now if interest rates climb to 8 to 9 % then a mortgage lender has a reason to call the loan in order to increase profits.

A warranty deed keeps the integrity of the title insurance while a quit claim deed does not.

[Ben Guttman]

There are a few companies that can write properties in a Trust - but I've never done it in FL (I'm in MD too) Would look up AJ Liebel he's a broker down there 

[Peter Walther]

Three things. First, if I understand correctly, you considered conveying the property to an LLC but because of having to pay doc stamps you're considering conveying to a trust but you are having difficulty finding insurance if you do that. I can't help with that, only a insurance agent can.

Second, as to docs stamps owed on a conveyance, you might want to read F.S. 201.02

Statutes & Constitution :View Statutes : Online Sunshine (state.fl.us)

which explains when the tax is owed.  While using a QCD may encourage the Clerk to accept the deed for recording it won't help if the DOR decides to audit the information provided with the conveyance.  The Clerk only accepts the information on the amt of tax owed presented to it on behalf of the DOR.  It then submits the information to the DOR.  The DOR has a history of checking up on QCDs for compliance with the statute.

Florida Dept. of Revenue - Documentary Stamp Tax (floridarevenue.com)

Third, it's a common misunderstanding that conveying title via WD somehow provides continuing coverage under a title policy while a conveyance by QCD does not.  While a conveyance via WD may provide the possibility of the Grantee suing the Grantor for a breach of the warranties and thereby triggering the insurers obligation to defend the Grantor or pay the covered loss, it is not the same as the Grantee being insured under the existing policy.  For that to occur the Grantee must meet the definition of Insured as shown in the policy.  Based on the OPs description, the Grantee in this case may just do that.

I'm not an attorney and this isn't legal advice, just my opinion.  I hope it helps.

[Jim Windgassen]

GeoVera Insurance Services in St Pete FL will insure properties held in land trusts.

[Chuck Masters]

@Jim Windgassen Thanks for that info.

[Account Closed]

Chuck - transfer tax is .70 per $100 of consideration but if there is consideration no tax is owed. You would have to pay recording fees which are pretty nominal. Please

Let me know if you need any help conveying into the LLC or trust.

Thank you,

Brendan

Real Property Recording Services

https://rprsllc.com

[Isaiah Tademy]

I had the same concern/question. My agent said we can add the trust as an "additional insured" on our existing policy. We decided to go that route and everything has been fine. 

[Cindy Zapp]

Quote from @Isaiah Tademy:

I had the same concern/question. My agent said we can add the trust as an "additional insured" on our existing policy. We decided to go that route and everything has been fine. 

@Isaiah Tademy, what insurance company do you use in FL that allowed you to list the land trust as an additional insured? Thank you!