[WSBARP] Property in Name of LLC?

[John McCrady]

The issue from a title company perspective is that "Mom, as manager of Mom LLC" is not an entity capable of holding title to real estate.  We would not see any reason to insure through this issue when the fix is so straightforward.

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>
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From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of rpampell at swcp.com
Sent: Thursday, September 02, 2021 2:32 PM
To: 'WSBA Real Property Listserv' <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] Property in Name of LLC?

Sure, if the parties are willing to do correction deeds and that is consistent with their intention as to the ownership of the properties, that would be appropriate.

But it looks to me, given the language of the operating agreement, that the forms of conveyance were consistent with the intent of the agreement.  The provision in the operating agreement does seem pretty clear, and I can't think of any reason why it can't authorize this.  Nominee arrangements have been used extensively in deeds of trust (with varying results for other reasons) and are quite common in the oil and gas industry.

I wonder why the title officer balked at the deeds?  Maybe it is because nominee arrangements are sometimes done in anticipation of subsequent transfers of the properties being held?  If the deeds had said "to Mom, as trustee" for a different trust, would he have the same reaction?

Bob Pampell


From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> <wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com>> On Behalf Of Paul Neumiller
Sent: Thursday, September 2, 2021 12:42 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Subject: Re: [WSBARP] Property in Name of LLC?

Thanks to all who responded my post.  In answer to a few questions, Mom and the Mom Trust are NOT members of the LLC.  Also, I did run this past a local senior title officer and he felt the quitclaim deeds failed to transfer the property into the LLC so the Mom Trust still owned the property.  Contra, there is a provision in the LLC Operating Agreement that states:  "the Manager may direct that legal title to all or a portion of the Company's property be acquired or held in a name other than the Company's name....The Manager may cause title to be acquired and held in its name or in the names of trustees, nominees, or straw parties for the Company.  It is expressly understood and agreed that the manner of holding title to the Company's property ( or any part thereof) is solely for the convenience of the Company and all of that property shall be treated as Company property."

OK, so this section is pretty clear but I was afraid of the unknown because this is what the Operating Agreement says but I'm not convinced that the Operating Agreement can actually authorize this.  Also, I recognize and appreciate Mr. Anderson's observation that is would probably be cheaper to just prepare correction deeds instead of trying to figure the thing out.  I was hoping there was a quick answer due to a LLC act section similar to the partnership section.


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From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> <wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com>> On Behalf Of rpampell at swcp.com<mailto:rpampell at swcp.com>
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Subject: Re: [WSBARP] Property in Name of LLC?

Paul,
When I saw this question in a prior post, I was curious and checked the WA LLC Act.  Unfortunately, there is no such provision to be found.  This may have something to do with the theoretical character of partnerships as aggregates of the partners, as opposed to entities like corporations.  LLCs, being strictly statutory creatures, lie somewhere in-between.

That said, looking at RCW 25.15.154(2), your client's argument might be that because the manager "is an agent of the limited liability company and has the authority to bind the limited liability company with regard to matters in the ordinary course of its activities," the manager can accept the property on behalf of and for the account of the LLC.  Otherwise, manager-Mom would be acting as a nominee or trustee or something similar for the LLC; this doesn't make a lot of sense unless there is evidence of that intention.  But I suppose that even she is acting in that kind of role, the principal/beneficial owner of the property is the LLC and not Mom.

Is Mom or the trust a member of the LLC?  If so, then it would seem fairly clear that it's a member contribution to the LLC, albeit poorly worded.

Bob Pampell

From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> <wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com>> On Behalf Of Paul Neumiller
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Subject: [WSBARP] Property in Name of LLC?


Listmates, a perusal of casemaker doesn't reveal an answer.  I have a matter where there was a 2007 quitclaim deed that said (paraphrasing): "Mom, trustee of the Mom family trust, quitclaims the property to Mom, manager of the Mom, LLC."  OK, so RCW 25,05.065 says that for a partnership "property is partnership property if acquired in the name of ....one or more of the partners with an indication in the instrument transferring title to the property of the person's capacity as a partner or of the existence of a partnership...".  So, is there a comparable provision for LLCs?  I can't find one.  Client desires to have the IRS accept that the property is in the LLC.  We could prepare and record a "correction" deed naming the LLC as the "correct" grantee but would rather not if unnecessary.



[Paul A_ Neumiller2]



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