Self managed property, LLC scenario

I know that the inside liabilty protections of a self-managed LLC are questionable.

I was wondering about this scenario though.

Suppose you have four properties and four LLCs (all self managed).

A tenant in one of the properties gets injured and sues the landlord individually, since the LL was self-managing the property.

Even though the creditor could go after the LL’s bank accounts and the one property in question, wouldn’t the other three properties still be completely protected through outside liability? (this is assuming that the LLCs are not single member).

Technically, yes. The other properties and their assets cannot be seized, but the creditor will get a charging order against the LLC with the following properties:
No one can take money out of the LLC.
The LLC cannot make loans to anyone.
The LLC cannot buy major assets (e. g. property).
The LLC cannot sell major assets (e. g. property).
A receiver will be appointed at a cost as high as $600/hr payable by the LLC.

In effect, the LLC cannot conduct business and you can rest assured the receiver will support the creditor’s interest over yours. Given those conditions, how long will it take for you to decide to give the creditor whatever he wants? This is not theory. These exact types of charging orders are being presented in conventions and seminars for collection professionals as a means to squeeze the debtor.

Thanks. That’s the kind of scenario I was wondering about. Do creditors usually take it to that level or are they really trying to just extract a smaller settlement?

What I am really concerned about is tenant’s pets causing an injury to someone. It’s still unclear to me whether it’s considered owner negligence if the tenant brings in an animal and it attacks someone.

It’s not that hard to get a charging order, but they really want quick money (i. e. insurance). Let the insurance pay and go about your business.

You have to know the animal is dangerous before you are responsible. It is a completely different scenario when you allow a dog that is a known bitter to stay on a property versus having no idea the tenant snuck in a pet.

Juries rule on who they like. If they think you did what you should have done, they will be kind. If they think you are a bozo, you will pay. Maintain your properties in top condition. Respond quickly to maintenance requests. Treat every one the same and with respect. That will keep you from getting sued in the first place, which is the best asset protection plan.

That’s good to know BLL. It’s basically what I suspected. It is the tenant’s pet after all, not mine.

I was thrown for a loop by the fact that all the insurance carriers dropped animal liabilty at once. It made me uneasy about relying blindly on the insurance because the carriers keep changing the rules of the game.