I want to put a rental property into an LLC. It is now titled in my name as is the Title insurance Policy. Does the policy transfer if I go ahead and make the change, or do I need to take out a new one?
when you deed the property to the LLC (not a quitclaim, a warranty deed) the title policy will not cover the transfer to the LLC.
However, there’s no reason why you need a new policy unless you have done something to the property to cloud the title. If something is discovered that occurred prior to your transfer, you can fall back on your title policy, since it guarantees that you had clear title, in your name, at the time you transferred it to the LLC.
When you sell it, the new title policy will clear the title for your transfer to the LLC, so your buyer will be protected.
Great. I appreciate it. Thanks.
I have done this exact same scenario back in May of this year. My title insurance policy was through Chicago Title and so I contacted them about the transfer. The only question they asked was if the transfer was via Warranty Deed or Quit Claim Deed. Since mine was done via refi into LLC and thus a Warranty Deed transfer, they said no new polic was needed. He said it would have been necessary if tha transfer was via Quit Claim Deed.
So your still covered by the policy in the LLC?
Correct. Im no expert, but it was explained to me that the title insurance policy issued when we first purchased the property had clear title and that by using Warranty Deed to transfer to LLC during the refinance, the title was still clear. If we had used Quit Claim Deed, it doesnt guarantee that the title is clear when it is transferred. Again, Im no expert, but thats just what I remember from the conversation I had with the Chicago Title guy 5 months ago…