I am planning to rent out my condo under a new LLC that I formed to protect myself in case I get sued. What is the legality of this? Can the condo board stop me from renting out my apartment?
In most cases, condo boards cannot refuse to let residents rent out their apartments, but you should be aware that using an LLC does not necessarily protect you from being sued, our experts say.
First, check your condo's bylaws, where the rules for renting out your apartment will be outlined. It's unlikely you'll run into any major issues there.
"Typically, a condominium does not have the right to approve apartment rentals," says Steven Wagner, partner at Wagner Berkow (a Brick sponsor). "Rather, the condo has a 'right of first refusal.' With a right of first refusal, if the condominium does not like the proposed tenant, it may rent the apartment instead of the tenant on the same terms and conditions as the proposed lease."
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However, he says, such a situation is a rarity, so you shouldn't have problems renting your condo to the tenant of your choosing.
Keep in mind, though, that renting out the apartment under an LLC will not offer you total legal protection. There are definite benefits: If a tenant were to sue you, for instance, your personal assets would be protected, and only those of the LLC would be vulnerable.
However, you still have some liability as the owner of the condo: You would still be considered legally responsible for issues like neglected maintenance of the apartment, or if a tenant or their guest was injured due to an issue with the apartment, for instance.
"If you are simply going to form the LLC to act as a leasing agent, there will be no additional protection for you, personally. As the principal of an agent, you will remain liable to the tenant," Wagner says. "You should probably consult with an attorney to figure out which of the arrangements is best for you to accomplish your goals."
To further protect yourself, make sure to update your insurance policy.
"If you make this change, the LLC must be added to your apartment insurance policy," says Jeffrey Schneider of Gotham Brokerage (a Brick sponsor.) "Usually, there is no charge for this."
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