Many times landlords will come to me and ask if they should transfer their rental property into an LLC. The answer is yes, if you can. The biggest factor is whether that property is subject to a mortgage. If the rental property is subject to a mortgage, you must go to your mortgage lender and ask them for permission. Chances are they’re going to say no. In some cases they will agree, but they may raise your interest rates.
The reason being, almost every mortgage has what’s called an acceleration provision. That means that if there’s any change in ownership of the property, they can immediately accelerate the mortgage and ask for all payments due under that mortgage. If you own your rental property free and clear of mortgages, you definitely should transfer it to an LLC to avoid liability from your renters. If you are subject to a mortgage, you should ask your lender for permission and consider the economic consequences of an increased interest rate. Either way, you should discuss this with an experienced business attorney in New Jersey.
The attorneys at Mattleman, Weinroth & Miller, P.C., are experienced in business law in the state of New Jersey. To discuss the options for your business, please contact the office for your free initial consultation.