Deed transfers involving LLCs... explained
WELCOME TO THE LATEST INSTALLMENT OF OUR SERIES REGARDING DEED TRANSFERS.
In the first installment of our series on title transfers, we answered two very important questions commonly asked by our clients:
1) Who do I hire to prepare and record the deed and transfer forms?
2) How much will it cost me?
We then took a look at a common scenario that involves joint tenants who are unmarried in which one partner wishes to transfer her ownership interest to the other partner receiving no consideration.
Today we will look at a couple scenarios that involve transferring title from an individual to a Limited Liability Company or LLC.
Scenario 1: Transferring title to an LLC
John buys a condo as an investment property in his name and now wants to put it into an LLC, to limit his liability. How much will this cost?
In the District of Columbia, this deed would be subject to full transfer and recordation tax based on the assessed value on the DC Office of Tax and Revenue website. In John's case let's say the condo was assessed at $250,000, so this would be the basis for the transfer and the fees would be as follows:
| Deed Preparation | $ 500.00 (approximately) |
| Deed Recording Fee | $ 31.50 |
| Transfer & Recordation Tax | $ 5,500.00 |
| Total | $ 6,031.50 |
John says, "Hey, wait a minute. My appraisal only came in at $135,000. Why can’t I use that amount for transfer and recordation tax purposes?"
Answer: Because DC Recorder of Deeds Office says so.
In no consideration transactions, the Recorder of Deeds Office will only use the assessed value from the Office of Tax & Revenue for purposes of calculating transfer and recordation taxes for this type of transaction. Here's another common scenario.
Scenario 2: Refinancing a property owned by an LLC
Betty owns a property in the District of Columbia in the name of her sole member LLC and wants to refinance the property, but the lender will not let her take the loan in the name of the LLC.
She wants to know what to do next, and how much it will cost. There are a couple of ways she can handle this:
1) Dissolve the LLC and transfer the property to her individually. Betty would be required to pay any fees required to dissolve the LLC and get a copy of the Dissolution for recording purposes. Then she'd be able to go ahead with a no consideration deed and the fees would be as follows:
| Deed Preparation | $ 500.00 (approximately) |
| Deed Recording Fee | $ 31.50 |
| Transfer & Recordation Tax | $ 0.00 |
| Total | $ 531.50 |
Note: In order to be exempt from transfer and recordation taxes in the District of Columbia, you must provide a copy of the Dissolution to whoever is preparing and recording your deed.
2) Transfer the property from the LLC to her individually without dissolving the LLC. She'd be required to pay the transfer and recordation taxes as part of the transfer. Assuming the tax assessed value of the property is $450,000, then the fees for a no consideration deed will be as follows:
| Deed Preparation | $ 500.00 (approximately) |
| Deed Recording Fee | $ 31.50 |
| Transfer & Recordation Tax | $ 13,050.00 |
| Total | $ 13,581.50 |
Note: In the District of Columbia for no consideration deeds, the transfer and recordation taxes are calculated on the tax assessed value. If the tax assessed value is less than $400,000, then the taxes are 1.1% of the assessed value for each tax. If the tax assessed value is $400,000 or greater, the n the taxes are 1.45% of the assessed value for each tax.
In our next installment, we will examine deed transfer scenarios in Montgomery County, MD.
- Filed under: Business | Buying 'n' Selling | Deed Transfers | Explained | Real Estate | Taxes | Transfer or Recordation | Washington DC
About the Author
Catherine Schmitt
Catherine Schmitt is a retired U.S. Marine Corps lieutenant who received her Juris Doctor from Drake University Law School. She holds two bachelor's degrees from the University of Maryland and has more than 20 years of experience in the title insurance business.
Comments (0)