Landlord Question and Answer Forum

I have been looking into the benefits of incorporating so that my personal assets are not at risk should a legal challenge come I to play. Has anyone dealt with this good or bad? Thank you for your time.

If anything happens with a tenant in court and they win, when the property is under a LLC, it will protect you from losing your assets or even your own home. Good luck!!

Posted by Jorge B, OK on Friday, May 20, 2016

It can provide protection but the LLC must be the owner of the property. If the property is in your name then you will need to have it transferred into the name of the LLC. This is not a difficult process nor is it costly but you will need an Attorney. Be aware though that under the terms of most mortgages (presuming you have a mortgage on the property) it will be a breach of your mortgage agreement to transfer the property and if the mortgage company finds out that you have transferred the property the terms of the mortgage usually allows them to call in the loan. Most people say that they have never witnessed a mortgage company doing this but you need to be aware that it is a possibility. How can you then protect yourself - do what I did - take out Umbrella Insurance and make sure that it is for a large amount - I took out $5 million - it would be unlikely that most people that I rent to would be entitled to $5 million in damages based upon their income if they were never able to work again. Also be aware that an LLC will not protect you if you are personally negligent in performing maintenance that causes injury - you can be sued as the negligent repairer - so how do you protect yourself - don't do the repairs yourself and make sure that you employ a reputable company to do the repairs and have good insurance. Hope this helps.

Posted by Helen G, NC on Saturday, May 21, 2016