One question most often asked of those who practice real estate law is whether a limited liability company (LLC) or a Land Trust offers better protection for our clients’ Florida real property investments. If you’re wondering whether you need this type of asset protection, or which type of entity structure offers the best benefits for your specific situation, you’ll get invaluable answers and advice by consulting a real estate attorney before you make your decisions.

Do I Even Need To Form A Business Entity To Protect My Real Property Investment?

In a word: Yes. There are many reasons to hold title to your investment property under a separate entity like an LLC or Land Trust, but the simplest way to sum them all up is the concept of liability. Generally, unless you form a separate entity to hold title to your property, you are personally liable for it, which means your personal assets like your home, savings, and wages are fair game in the event of a judgment against you for an incident related to that property. Some property owners choose to purchase liability insurance because it’s relatively affordable and simpler than forming a separate entity, but too often, those owners discover too late that their policy limits were not sufficient, and their personal assets are still on the table.

Florida Limited Liability Company (LLC)

For some real property investors, forming an LLC is the right call. Placing the property title under the ownership of an LLC removes the risk to the owner’s personal assets, because the LLC is the legally liable entity, instead of the owner as an individual. An LLC also offers some tax advantages over a Land Trust. In the case of a single-member LLC (one owner), the IRS treats the income from the LLC the same way it would a sole proprietorship, which means that the owner pays the income and capital gains taxes as an individual. This is called pass-through taxation. Multi-member LLCs file informational tax returns, but the actual payment of the taxes are made by the individual owners, each paying the tax for the portion of the LLC they own at their individual tax rates. There is no additional taxation for the business entity.

Florida Land Trust

A Land Trust, not to be confused with a living trust, works much differently; essentially, it’s a way to hold the title for real property by means of a contract known as a Land Trust Agreement. Because the Land Trust Agreement is not required to be filed with the state as an LLC would, and the public records show the name of the trustee as the property owner, a Land Trust offers more privacy and anonymity than an LLC. In some cases, property held by the trustee of a Land Trust may be eligible for homestead exemption, where land held in an LLC is not. Land Trusts also offer the ability to avoid probate and other debt obligations.

While Land Trusts may appeal to many investors, they are complex and must comply with the Florida Land Trust Act. Failure to comply with the Act may create unintentional title issues.

Consult an Experienced Real Estate Attorney

The attorneys at Overstreet, Miles, Cumbie & Finkenbinder serve the needs of property owners and real estate investors throughout Kissimmee, St. Cloud, and Osceola County. If you’re new to real estate investing or need advice before you select a business entity to best protect you real property investment and personal assets, call or contact us online for a consultation. Our experienced real estate attorneys will explain your options and help you set up the right entity structure for your specific situation and goals.

Commercial leases are far more complex than residential leases, and there are more ways for an inadequate commercial lease agreement to become a costly problem. Having an experienced real estate attorney draft a commercial lease specifically for every tenancy ensures that all of the terms in your lease are enforceable, and that all the bases are covered in terms of protecting your rights, interests, and property while observing the legal rights of your tenants.

Protect Your Rights & Interests

Depending upon the type of property you’re leasing and the intended uses of the tenants, your commercial lease agreement may need to include things like terms for, or prohibition of, subleasing; requirements for indemnification, insurance, and mediation/arbitration; payment of property taxes that arise from improvements made for or by the tenant; and terms for modifying the rent over the life of a long-term lease.

Protect Your Property

If your tenants are permitted to make improvements or modifications to the property, your commercial lease agreement needs to lay out any restrictions, the process for approval of those improvements, a clear statement of who is responsible to maintain and repair those improvements, whether the tenants must remove any improvements at the end of their tenancy, and what happens if their improvements or general use of the property result in damage.

Use A Commercial Lease That Covers Your Specific Situation 

A commercial lease is a legal contract, and it’s only useful if its terms are enforceable and specific enough to cover problems that arise. Some commercial landlords try to save money by using boilerplate commercial leases downloaded from the Internet. Unfortunately, we don’t know what we don’t know until it’s too late, and sometimes, property owners who take a DIY approach to drafting leases can find that those contracts didn’t cover all the bases. That can be an expensive problem.

Working with the experienced real estate attorneys at Overstreet, Miles, Cumbie & Finkenbinder to draft an effective, enforceable commercial lease is a small investment that protects your property and interests against costly issues. Call us or contact us online for a consultation, and we’ll help you create the right commercial lease for your property and tenants.