Title Insurance for an LLC that Acquires Real Estate from a Member

Question:  I own Arizona rental real estate.  I want to form a limited liability company to own the real estate for asset protection.  If I transfer title to the real estate to my one hundred percent owned Arizona LLC will the LLC be covered by the title insurance policy issued to me when I bought the land?

Answer:  No unless you take action that causes the title insurance company to add the LLC to your title insurance policy.  As a real estate attorney I recommend that the owner(s) of the LLC always do what is necessary to cause the LLC to be covered by the title insurance when the LLC acquires real estate from the owner(s) of the LLC.

A nationally recognized title insurance expert named John C. Murray wrote an excellent article called “Title Insurance For Limited Liability Company Transactions” in which he says:

“The best solution may be for the grantee LLC to request an ‘additional insured’ endorsement from the title insurer (in those jurisdictions where it is available), which would be effective as of the date of the conveyance. This endorsement specifically amends the existing owner’s policy to add the LLC as a named insured. The cost of the endorsement is usually nominal ($100 to $300) and many title insurers will routinely issue the endorsement for successor LLCs”

See also the Adobe pdf file that contains an article called “Do I still have Coverage if I transfer my property to.”  The author states the following with respect to a property owner who transfers land to the owner’s LLC:

“To ensure that title insurance coverage continues on the property, [the owner] should contact [the title insurance company] to discuss obtaining an additional insured endorsement to the current policy and/or discuss obtaining a new policy depending on the facts and circumstances supporting the transfer. Without doing that, they risk terminating title insurance coverage on the property.”

2018-08-04T09:03:03+00:00August 4th, 2018|FAQs, Real Estate Issues|0 Comments

About the Author:

The author of this article is Richard Keyt, an Arizona limited liability company attorney who has formed 6,000+ LLCs. His Silver & Gold LLC packages include the $85 expedited filing fee, a custom Operating Agreement and 170 ebook called the Arizona LLC Operations Manual. Connect with Richard at 480-664-7478 or on Google+