[WSBARP] Conveyance out of wholly owned LLC

Wed Feb 21 11:20:59 PST 2018

The form of the deed would not usually raise an exception by the title company.  However, if a WAC 458-61A-211 exemption to excise tax is claimed and it appears that the ownership of the LLC is not the same proportion as the ownership of the grantors, then the title company may raise an exception for excise tax owing.

John McCrady
Counsel
Puget Sound Title Company
5350 Orchard Street West
University Place WA 98467
253-476-5721
j.mccrady at pstitle.com

From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Robert Pampell
Sent: Wednesday, February 21, 2018 10:33 AM
To: 'WSBA Real Property Listserv' <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] Conveyance out of wholly owned LLC

Thank you Ron and John,
Yes, I would think the title company would want the LLC agreement and probably certificate of formation and report.  My question actually was poorly worded and was directed more at the form of conveyance into the LLC.

>From those older posts, it would seem that the conveyance could be made via warranty or bargain and sale or quitclaim, provided of course that the LLC was wholly owned by the grantor.  If the quitclaim or other deed in does not recite the absence of valuable consideration, would that create a problem?

Thanks and sorry for the confusion!

Bob Pampell

From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of John McCrady
Sent: Wednesday, February 21, 2018 9:02 AM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Subject: Re: [WSBARP] Conveyance out of wholly owned LLC

If I understand your question, all a title company would require, typically, would be a copy of the LLC Agreement.  We also look at the latest annual report and the Certificate of Formation, but we usually can obtain them from the Secretary of State web site.
Let me know if you have other questions.

John McCrady
Counsel
Puget Sound Title Company
5350 Orchard Street West
University Place WA 98467
253-476-5721
j.mccrady at pstitle.com<mailto:j.mccrady at pstitle.com>

From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Robert Pampell
Sent: Tuesday, February 20, 2018 2:40 PM
To: 'WSBA Real Property Listserv' <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Subject: [WSBARP] Conveyance out of wholly owned LLC

Hello all,
Property (residential investment property) is conveyed via quitclaim deed into an LLC owned 100% by the property owner.  Upon sale out of the LLC, will the title company require anything further from the owner in order to insure title in the purchaser?

I did find the thread below that may bear on this question.

Thanks!
Bob Pampell

Robert Pampell, Attorney
21st Century Law Office (r)
19125 Northcreek Parkway, Suite 120
Bothell, WA 98011
voice: 425-329-2629
fax: 877-640-6403
cell: 425-501-4784
email: rpampell at swcp.com<mailto:rpampell at swcp.com>
http://www.linkedin.com/in/robertpampell

________________________________
From: WSBA RPPT Real Property Discussion Forum [mailto:wsbarp at LISTSERV.NETHELPS.COM] On Behalf Of Nick Bergh
Sent: Thursday, August 15, 2013 11:33 AM
To: wsbarp at LISTSERV.NETHELPS.COM<mailto:wsbarp at LISTSERV.NETHELPS.COM>
Subject: Re: [WSBARP] Transfer to LLC

Forms of title policy were changed a while back to address the concerns expressed by Patrick and Deborah as to transfer of title to a related entity.  An owner's policy I recently obtained defines insured:

(c)"Insured": The Insured named in Schedule A.
(i) The    term    "Insured"    also includes
(A)      successors to the Title of the Insured by operation of law as distinguished from purchase, including heirs, devisees, survivors, personal representatives, or next of kin;
(B)      successors to an Insured by dissolution, merger, consolidation, distribution, or reorganization:
(C)      successors to an Insured by its conversion to another kind of Entity;
(D)      a grantee of an Insured under a deed delivered without payment of actual valuable consideration conveying the Title
(1) if the stock, shares, memberships, or other equity interests of the grantee are wholly-owned by the named Insured,
(2) if the grantee wholly owns the named Insured,
(3) if the grantee is wholly-owned by an affiliated Entity of the named Insured, provided the affiliated Entity and the named Insured are both wholly-owned by the same person or Entity, or
(4) if the grantee is a trustee or beneficiary of a trust created by a written instrument established by the Insured named in Schedule A for estate planning purposes.
(ii) With regard to (A), (B), (C), and (D) reserving, however, all rights and defenses as to any successor that the Company would have had against any predecessor Insured

Patrick's and Deborah's concerns about lapse in coverage are valid if the transferee does not fall within the definition of "insured". The same policy provides:

The coverage of this policy shall continue in force as of Date of Policy in favor of an Insured, but only so long as the Insured retains an estate or interest in the Land, or holds an obligation secured by a purchase money Mortgage given by a purchaser from the Insured, or only so long as the Insured shall have liability by reason of warranties in any transfer or conveyance of the Title. This policy shall not continue in force in favor of any purchaser from the Insured of either (i) an estate or interest in the Land, or (ii) an obligation secured by a purchase money Mortgage given to the Insured.

________________________
Nick Bergh
Law Office of G N Bergh
2006 South Post Street
Spokane WA 99203-2049
ph 509-624-4295  | fx 509-344-1844
nick at gnbergh.com<mailto:nick at gnbergh.com>

From: WSBA RPPT Real Property Discussion Forum [mailto:wsbarp at LISTSERV.NETHELPS.COM] On Behalf Of Deborah Berg
Sent: Thursday, August 15, 2013 9:56 AM
To: wsbarp at LISTSERV.NETHELPS.COM<mailto:wsbarp at LISTSERV.NETHELPS.COM>
Subject: Re: [WSBARP] Transfer to LLC

An alternative would be to use the QCD and get an additional insured endorsement adding the LLC as an insured on the title policy initially obtained by the client.  However, check the coverage amount on that policy - the land may have increased significantly in value since it was obtained.  If so, you might want to get a new policy anyway, with increased coverage.

Deborah Berg

From: WSBA RPPT Real Property Discussion Forum [mailto:wsbarp at LISTSERV.NETHELPS.COM] On Behalf Of Pat Aylward
Sent: Thursday, August 15, 2013 9:27 AM
To: wsbarp at LISTSERV.NETHELPS.COM<mailto:wsbarp at LISTSERV.NETHELPS.COM>
Subject: Re: [WSBARP] Transfer to LLC

Although using a QCD is the common practice in that fact pattern, I do not believe it is the best practice.  Assuming client had title insurance when client bought, you can use that coverage if you use a Warranty Deed.  If a title issue pops up, LLC makes claim against grantor on the warranty deed and the grantor (the original individual owner) tenders the claim to the insurance carrier.  Coverage does not end with transfer of the property.  If you use a QCD rather than a warranty deed and don't get a new title policy, LLC is running bare.  For that reason, unless there is some other very good reason not to, I use a warranty deed.

[cid:image001.jpg at 01D3AB06.0C898950]
J. Patrick Aylward
Attorney

Jeffers,Danielson, Sonn & Aylward, P.S.
2600 Chester Kimm Road
Wenatchee, Washington 98801
Telephone: 509.662.3685
Facsimile: 509.662.2452
www.jdsalaw.com<http://www.jdsalaw.com/>
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From: WSBA RPPT Real Property Discussion Forum [mailto:wsbarp at LISTSERV.NETHELPS.COM] On Behalf Of Sandra Bates Gay
Sent: Thursday, August 15, 2013 6:12 AM
To: wsbarp at LISTSERV.NETHELPS.COM<mailto:wsbarp at LISTSERV.NETHELPS.COM>
Subject: [WSBARP] Transfer to LLC

When an individual client who has ownership of real property and wants to transfer it to a family (husband and wife) LLC, I have always used a Quit Claim Deed for the transfer and claimed exempt from excise tax under WAC 458-61A-211(2)(a).  Is there any reason to use any other form of Deed other than a QCD?

Sandi Gay
Sandra Bates Gay, P.S.
Attorney at Law
Suite 400 Bellevue Place
800 Bellevue Way N.E.
Bellevue, WA  98004-4273
Phone:  (425) 637-3040
Fax:       (425)952-0156
E-Mail:  sgay at sbglaw-wa.com<mailto:sgay at sbglaw-wa.com>
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