Transferring DEED to LLC for liability benefits.

[HoneyHany]

What is the name of your state (only U.S. law)? New Jersey

I am interested in transferring ownership of deed to an LLC (of which I am a partner) to limit potential damage brought upon by liability lawsuits on one property and so it doesn't spread to my other properties.

In my mortgage contract, there contains this clause below. Do you know what New Jersey law stipulates concerning what's underlined below? Is there resistance getting this done from lenders? a basic question: Is putting a property in LLC equating to transfer of the deed from individual to an LLC entity? (am i thinking about this the right way?). Has anyone done this for themselves?

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18. Transfer of the Property or a Beneficial Interest in Borrower. As used in this Section 18, "Interest in the Property" means any legal or beneficial interest in the Property, including, but not limited to, those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract or escrow agreement, the intent of which is the transfer of title by Borrower at a future date to a purchaser.

If all or any part of the Property or any Interest in the Property is sold or transferred (or if Borrower is not a natural person and a beneficial interest in Borrower is sold or transferred) without Lender’s prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument. However, this option shall not be exercised by Lender if such exercise is prohibited by Applicable Law.

If Lender exercises this option, Lender shall give Borrower notice of acceleration. The notice shall provide a period of not less than 30 days from the date the notice is given in accordance with Section 15 within which Borrower must pay all sums secured by this Security Instrument. If Borrower fails to pay these sums prior to the expiration of this period, Lender may invoke any remedies permitted by this Security Instrument without further notice or demand on Borrower.

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Thanks,
HanyWhat is the name of your state (only U.S. law)?What is the name of your state (only U.S. law)?

 

[FlyingRon]

I assume you meant a deed to some property you own and you are a member of the LLC. Frankly even if it is owned by an LLC, if you are personally responsible for whatever negligence you are sued over, it won't help you. The LLC won't help there.

But to answer your question. You can't "put a deed in something." A deed is the transfer of the real estate from one entity (in this case YOU) to another (the LLC). You are darn tooting that it could give the bank justification to invoke the due on sale clause if you make such transfer without their permission.

In addition there is tax issues involved. In addition to federal tax, NJ will exact both a transfer fee plus they will come after you for the tax on the gain at the time of the sale. Since this sounds like it was a rental property the basis will have to be computed in light of the depreciation you have taken or should have taken.



Whenever doing deeds it would behoove you to have a lawyer understand the transfer intended and write the deed appropriately, have it properly executed and recorded.