Consent from Lender to Transfer Property to LLC
I have several rental properties that I currently own in my own name. Realizing that is not a good idea from a liability perspective, I would like to transfer each to a separate LLC. I also realize that this may trigger the "due on sale" clauses on the mortgages I have on the properties, unless I get consent from the lender first. Does anyone have any experience in this area? How difficult is it to get consent. Is it worth doing without consent and taking the chance that the lender will not exercise the clause? Any specifice experience getting consent from Countrywide?
Thanks,
I have a Countrywide loan in which I closed in my own name. I also have an LLC. I called Countrywide in the hopes of moving my property from my name to the LLC. The first gentleman I talked to said "Sure, go ahead, it happens all the time. We won't foreclose or call the loan".
Just to be sure I called again, and requested a supervisor, which informed me that they would not under any circumstances permit me to do that, even if I signed a document with a promise to be held personally liable for the LLC.
The mortgage even states #18. that you need "written" permission to do a transfer. I am still looking into it, possibly pursuing a land trust. There has got to be another way. Just my experience so far. greg
I was afraid someone would tell me that. Regarding the land trust only angle, the problem is (as I understand it) that all the land trust will do is hide your name from being in the title records. I don't think it will shield you from liability, but I am not for sure. Hopefully, someone with more knowledge on this subject will respond for the benefit us both.
I have never had a clear answer on this forum to the same question. Experts seem to know about LLC or Land Trust but not both. But I think you first put in land trust for the DOS clause. Then you make your LLC the beneficiary of the trust with you or someone eles the trustee. The LLC take care of the libility problem. The main reason people talk about land trust is for privacy. But most of us have loans on property so would only use the trust for DOS clause. I am only about 90% sure this is correct I wish someone else would confirm.
I am by no means a legal advisor.
That being said, it is my understanding that when you place a property in a land trust, you are deeding the property to that trust which could cause DOS to be invoked.
Anytime a property is redeeded DOS could come into play. What I hve heard is that it usually does not. The reason here is simple, if the loan is being paid, then why call it due.
The bank does not want to own properties. They are not in the business of real estate. Forclosed properties are a liability on their books.
I guess it all comes down to taking the chance.
Comments ?
I have not done it personally, but I have read articles by William Bronchick (a real estate attorney) concerning how to get around the due on sale clause by using a land trust. The article is called There's No "Due on Sale Jail" by William Bronchick, Esq.. He actually covers the legal aspects of the DOS clause and using a land trust. If you read it carefully, then you will read that a lease/option can also trigger a DOS clause. So why do realtors and lenders allow lease/options, but not subject to investing?
Tanya
That was an excellent article. Thanks for finding it and pointing it out.
from my recent seminar w/ Pat Tarr who specializes in Land Trusts and LLC and other asset protection
You transfer your properties to a L/T with a designated trustee and you hold the beneficial interest.You record this document
Banks look upon this as owner setting up some sort of asset protection and are not allowed to call the DOS because you have tx the property to L/T
then you assign your "beneficial interest" which is personal property and not real property] to a LLC which holds the beneficial interest of that property of which YOU are the manager and make all the decisions regarding that property [set LLC up to be more than one person for other reasons] You DO NOT RECORD this document so the bank never knows you have an LLC or does anyone else
The Trust is your camophlage and the LLC is your protection
If interested I can give contact for Pat Tarr She is an attorney licenced in Ohio and Florida. I'm setting up 3 L/T and LLC from her CDs and material. She has a toll free line for questions
I would be interested in getting her information. Did she happen to discuss with you how (if there is a way) you remove your name from the chain of title once you have quit claim deeded the property to the land trust trustee? Of course I am assuming you had the property in your name to begin with.
Also, you must be careful about your homeowners/liability insurance. Before, when the property was in your name, you were covered for your personal liabilities. Now that you transferred it to a LT/LLC, I don't think you would be covered.
Jamfish,
Sorry I can't seem to get back to my private massages to respond
I have the # ,but you'll have to send me a message so I know where to reply to
#1. Put the property into a landtrust that looks like you. (eg. bob smith land trust). This document is recorded (and it is the ONLY document that is recorded that I will mention).
Grantor: You
Trustee: Anyone you trust or an LLC you own.
Beneficiary: You
Assign the beneficial interest from you to the LLC that you want to hold the property.
The ONLY way for the lender to find out who the beneficiary (owner) of the property is is to sopeona the trustee to court and "force" them to disclose the beneficiary.
They keep getting their checks, you have the liability protection. The loan is still in your name unless you transfer the liability with it. That's up to you. I won't go into that here. Find a RE attorney who understands what you're trying to do. He could do it all in an hour. (have him charge you his hourly rate rather than by the entity that he sets up if you can).
What they don't know won't hurt em!
Why would a bank be reluctant to have the property transferred to the LLC? I had three rentals in my name before I formed an LLC. The bank had no problem with my transfer. I have bought many, using 4 different lenders (all in Wisconsin) in the name of my LLC, though I am personally responsible for my debts. I just bought a multifamily in Michigan and the bank would not allow me to buy in the name of my Michigan LLC. It seems unreasonable to me.[ Edited by ronjung on Date 06/28/2003 ]
You are right. It is unreasonable. The bank assumes no more risk at all when you personally guarantee the loan. However, a lot of lenders, including Countrywide, will not let you do it. I would like to know the names of the lender(s) you have used that allow you to transfer you property to an LLC. Thanks,
Hi, I am trying to buy my neighbor's house, but I don't want to have the new purchase price as the tax base for property taxes...I was told there was a way to create a LLC and have my neighbor put the property in it and have me as one of the directors, then have them removed, thus avoiding an official sale...does this sound right? Doesn't a change of title cause a new tax assessment? THANKS IN ADVANCE FOR YOUR HELP!!!
Bad idea for the tax idea.
Can you say TAX FRAUD?
Hibby was right on with his comments, I would like to expand a little. If you are truly worried about assett protection assigh=n your interests to a Nevada Corporation wiht nominee shareholders and agent officers. Then all correspondence would be directed through a fax machine and your personal attorney and even then if they subpoena your officers into court they won't be able to tell them anything. Not who you are not who owns controlling interest,nothing. AN added benefit is you are invisible to the IRS and have a .27% chance of an audit. Under a state LLC you chances of audit are 9 times higher and increase with the dollar amount in your inventory. If you have 1 million in assetts it is 30-40 times greater.
Bronchik writes a lot about the nevada corp.
Here is a site that if you click on the flash in the top (bluie) it will walk you through the basic benefits etc.
http://www.assetprofile.com/twocorporationstrategy.html
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