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Holding Title To A Property In The Name Of An LLC Or Land Trust

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 Law, P.A. 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.

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What Does A Real Estate Attorney Do?

When you are involved in a residential or commercial real estate transaction in Florida, it’s important to understand what a real estate attorney can to do to actively protect your interests, prevent mistakes, and solve issues that could delay your closing. Working with a real estate attorney helps you stay on top of all the details of your life-changing investment and makes your transaction as painless as possible.

Find & Resolve “Hidden” Issues

When you purchase real estate, a title agent will search the property title for things like liens, and verify that the seller is the rightful owner, entitled to sell you the property. The results of this search are provided to the parties in a title commitment, which is one of the most important documents in the closing process. The vast majority of buyers do not know what a title commitment is and therefore don’t bother to review it. Hiring a real estate attorney to review the title commitment can alert you to issues before you purchase the property. In many cases they can help resolve these issues before the closing. Otherwise, you may not be aware of title issues that could cost you money later on: Issues like liens, easements, or deed restrictions. A real estate attorney can serve as the title agent too. 

Gain A Clear, Accurate Understanding

 Real estate contracts are incredibly complicated, and it’s critical that you understand everything you’re committing to, both rights and obligations, before you sign. When you hire a real estate attorney to review the documentation and contract for your potential purchase, you add a layer of protection and peace of mind. Your real estate attorney will review all the terms and contingencies, explain anything you don’t understand, and advise you if they find issues that work against your best interest. Another benefit to having an attorney review the title and contract is that they can let you know if there are any land use controls or zoning issues that could affect your future plans for the property.

Added Protection For Short Sales & Foreclosures 

Short sales and foreclosures can offer buyers excellent value, but that value is not without risk. When you’re dealing with bank-owned property or property that the lender has agreed to allow to be sold for less than the seller owes, there are some potential pitfalls. Hiring a real estate attorney helps ensure that you’re not stuck in a situation where the seller doesn’t actually have the lender’s permission for a short sale, or the lender is able to come after you for the shortfall later, or you’re dealing with liens or other encumbrances that transfer with the property title.

Experienced Real Estate Attorneys In Florida 

The real estate attorneys at Overstreet Law, P.A. are highly experienced in helping Florida real estate buyers and sellers protect their interests and investments. Call us or contact us online for a confidential consultation, and we’ll let you know what to expect and how we can help!

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How To Remove Someone From A Deed

Sometimes it becomes necessary to remove a person’s name from a property deed. This often happens in cases of divorce or death. Although it might seem like removing someone from a deed would be a simple process, it’s actually a complicated matter that is best left to a real estate law attorney.

Deeds of Conveyance

A deed establishes the legal owners of a property. Whoever is named on the deed is considered the owner of the property. In order to change legal ownership of a property, it must be transferred, or conveyed, by the owner to another person through a deed of conveyance.

There are two types of deeds of conveyance: quitclaim deeds and warranty deeds, but which one is better suited for the transaction depends on how the property is held and the purpose of the change in ownership.

Both quitclaim deeds and warranty deeds indicate that the seller/grantor has ownership of the property and a right to transfer their ownership to the buyer/grantee, but they do not provide similar levels of assurance. Quitclaim deeds provide no assurance that there isn’t another person who may also have claim to the property. This makes them a riskier choice in most situations.

Warranty deeds, on the other hand, do provide explicit assurance to the buyer/grantee that there aren’t any other people with claim to the property. That’s why warranty deeds are the most commonly used deed in typical real estate transactions.

Ownership Type Affects Deed Choice

Property can be owned by multiple parties or title may be held in different ways that affect the ownership rights. The type of property ownership determines how the property may be transferred via deed. Types of property ownership include:

  • Sole Ownership. One person owns the property.
  • Joint Tenancy. More than one person owns the property.
  • Rights of Survivorship. More than one person owns the property and each is entitled to inherit an equal share upon another owner’s death.
  • Tenants in Common. More than one person owns the property but none of them inherit any shares upon the death of another owner.
  • Tenancy by entirety. A Married Couple own the property. They inherit each other’s shares upon the other person’s death.

Best Deed Choice Per Property Type

In general, warranty deeds are better in situations with multiple owners, in transactions between strangers, when money changes hands, and in any situation where the buyer wants assurance that the property is free from the ownership interests of other parties.

Quitclaim deeds are a better choice when property is being transferred between family members and no money changes hands. A good is example is siblings inheriting their parent’s property. A quitclaim deed can be used to establish the children as the new owners of the property by removing the deceased parents’ names from the deed. See our blog on additional consideration when using quitclaim deeds

Removing Names From Deeds Is Best Accomplished With Legal Assistance

There are several requirements that must be followed in order to legally remove someone’s name from a deed. Deeds are only valid if they are properly executed and delivered. In Florida, they should also be recorded with the local county clerk’s office.

Both types of deeds must name the grantor and grantee, include the date of transfer, the reason for the transfer, a legal description of the property, and the form of ownership, to name just a few of the requirements. They must also be signed in front of a notary public.

As you can see, transferring property is a complicated process in Florida and a misstep at any point in the transaction can invalidate the deed and impact the legal ownership of the property. In some cases, do-it-yourselfers have found themselves in trouble later on because there was a simple error on the deed.

A real estate attorney can ensure all processes are followed correctly and the new deed is valid, establishing proper legal ownership. Contact a real estate attorney at Kissimmee’s Overstreet Law, P.A. for advice on removing someone’s name from a deed or any of your other real estate law questions.

Call 407-847-5151 to arrange a consultation.

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