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I am inquiring about an LLC-owned property that I am renting. I, along with my three brothers, are owners of the LLC.

My parents bought the house originally but then the LLC bought the property and house that the property is on.

Could anyone tell me if it is legal for my dad to charge me rent for the property that I am renting? Wouldn't any profit from my rent go to the LLC holders, myself included?

Would this differ in certain states or is it the same across the board?

Any help would be greatly appreciated.

Paul
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L.Schroeder
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3 Answers3

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Your dad isn't an owner, that is equivalent to any stranger down the street charging you rent for a house your company owns, unless he lives there.

If your dad lives there, then he is beholden to the tenant agreement with the landlord which is the LLC. If the LLC lets him charge rent, then he can charge it. The real question then becomes, why is he charging you. Do you live there too?

And finally, why are you guys doing things like this at all? You didn't explain anything relevant to the question. Do you need to live in the house? Does he need to live in the house. Why even act like it is an investment property if this is the primary home of your parents and one of the LLC owners? Why don't your parents just join the LLC alongside your brothers? Why not set up a trust instead? So many problems

CQM
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Could anyone tell me if it is legal for my dad to charge me rent for the property that I am renting? Wouldn't any profit from my rent go to the LLC holders, myself included?

Would this differ in certain states or is it the same across the board?

Let's see if I understand correctly.

  • Your parents originally purchased the property
  • At the time you rented from them and lived there
  • Then, you and your three brothers purchased the house from your parents
  • You and your brothers now hold it via an LLC
  • The LLC isn't using your dad to collect the rent for them

If this is all true, then your parents no longer have any financial stake in the property. Any rent you pay should go to the LLC.

As far as "is it legal" you can simply tell you dad that you don't owe him rent. He could choose to take you to court and would lose, if my understanding is correct.

This has nothing to do with certain states. Your dad isn't the owner. The LLC would collect the rent.

Joe Strazzere
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Let me take a guess at the arrangement:

  1. Your Dad purchased the property.
  2. Your Dad, as he is getting old, didn't want his estate to pay taxes on his death, so he gave the property to the LLC which is in you and your brother's name. This way, you will get a larger inheritance.
  3. When he did this, he had a gentlemen's agreement with you guys that the property was his in reality, and yours legally. This way, when he dies, you won't pay estate taxes. This arrangement is fairly common.
  4. He is charging you rent based on the idea that the property is his in reality and yours only "legally". Probably this money is going toward maintenance of the property.

If I am right, then legally, you don't have to pay rent. However, if you didn't pay rent, you'd be going back on your agreement (#3) with him. Without getting into the parable of the prodigal son, this is an odd situation.

Is the rent at least lower than market rate? It seems like it might be time to go off on your own and rent an apartment not affiliated with your family. Then, the property you legally own be managed by your dad, and he can use the revenue to maintain the property you will receive when he passes.

Astor Florida
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