General Information Only. This article is for general informational purposes and does not constitute legal advice. Laws may have changed since publication. Your situation may differ; consult a licensed Virginia attorney about your specific matter.
The information in this article is for general informational purposes only and does not constitute legal advice. Laws change and individual circumstances vary. Consult a licensed Virginia attorney about your specific situation. Reading this article does not create an attorney-client relationship nor does merely contacting our office through this website or any other means.
You formed the LLC. Now the property has to actually get into it.
This is the step where owners occasionally create problems they did not have before, and it happens for an understandable reason: the deed is the visible part, and the deed is the easy part. Three other things move at the same time, and each has a specific Virginia answer worth knowing before anything is recorded.
The Due-on-Sale Question, and the Exception That Does Not Apply
Almost every mortgage contains a due-on-sale clause letting the lender accelerate the loan if the property is transferred. Federal law governs when that clause can be enforced.
The Garn-St Germain Depository Institutions Act, 12 U.S.C. § 1701j-3, lists transfers of residential real property containing fewer than five dwelling units on which a lender may not exercise a due-on-sale clause. The list includes creation of certain subordinate liens, transfers on death to a joint tenant or relative, transfers to a spouse or children, transfers arising from divorce or separation, leases of three years or less without a purchase option, and the one owners hear about: “a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy.”
That trust exception is what people cite when moving property into an LLC, and it does not reach the situation. It covers a transfer into an inter vivos trust. A limited liability company is not a trust, and nothing in the statutory list exempts a transfer to an LLC or to any other business entity.
Be precise about what that means, because it is not as alarming as it sounds. The statute does not prohibit you from conveying the property. It means the federal protections do not stop your lender from enforcing the clause if it chooses to. Many lenders do not. Some will consent if asked in advance.
That last point is the practical one. Asking beforehand and being discovered afterward are materially different positions to be in, and only one of them is available to you right now.
Recordation Tax, and an Exemption With a Threshold
Virginia taxes deeds when they are recorded. Under Va. Code § 58.1-801, the rate is “25 cents on every $100 or fraction thereof of (i) the consideration of the deed or (ii) the actual value of the property conveyed, whichever is greater.”
Note “whichever is greater.” Recording a deed for nominal consideration does not produce a nominal tax, because the actual value of the property controls when it is higher. That surprises people who assume a transfer between themselves and their own company is a paperwork event.
Virginia does exempt the transfer owners usually want to make. Section 58.1-811(A)(9) exempts a deed “[t]o a partnership or limited liability company, when the grantors are entitled to receive not less than 50 percent of the profits and surplus of such partnership or limited liability company.” Subsection (A)(10) provides the mirror image for a conveyance out, exempting a deed “[f]rom a partnership or limited liability company, when the grantees are entitled to receive not less than 50 percent of the profits and surplus.”
Three things to take from that.
The test is a 50 percent profits-and-surplus threshold, not simply membership. An owner contributing property to an entity in which they hold a minority position should not assume the exemption applies.
The exemption carries an anti-avoidance condition tied to whether the transfer is part of an arrangement to avoid recordation taxes. That condition is worth reading in the current statutory text rather than in a paraphrase.
And § 58.1-811 was amended in 2026, so confirm the current version before relying on any summary of it, including this one.
Title Insurance Does Not Automatically Follow the Deed
An owner’s title insurance policy insures the party named in it. When the named insured conveys the property to an LLC, whether coverage continues for the new owner depends on that policy’s own terms and definitions.
This is the step that gets skipped, and the reason is structural: nothing visible happens at recording. The problem surfaces years later, when a title defect appears and the entity that owns the property is not the party the policy names.
Do not resolve this from an article. Send your title insurer or closing attorney the deed you plan to record and ask, in writing, whether coverage continues after the transfer and what has to be done if it does not. File the answer with the policy.
What Else Moves With It
The deed is one document among several, and the rest are easy to forget in the week you record.
- Insurance. The named insured has to match the new owner. A policy in your personal name over property owned by an entity is an argument waiting to happen.
- The management agreement. If a manager operates the property, the owner party to that agreement just changed.
- Guest agreements. Your agreement should name the entity that actually owns the property, since that is the party granting occupancy.
- Bank accounts. Rental income goes to the entity’s account. This is the single behavior that most affects whether the entity gets respected.
- Escrow and tax bills. Mortgage escrow, real estate tax bills, and utility accounts all need to reflect the transfer.
- Leases and vendor contracts. Anything running with the property should be assigned rather than left in a prior owner’s name.
None of those are hard individually. They go wrong because they are treated as follow-up rather than as part of the same task.
The Questions Worth Sitting With
- Find the due-on-sale clause in your loan documents and read it before anything is recorded. You are looking for what triggers it and what notice it requires, and it is usually a paragraph.
- Will your lender consent if you ask in writing? That is a question you can put today and cannot un-ask later.
- Does your ownership of the LLC actually meet the 50 percent profits-and-surplus threshold, and has anyone read the current text of § 58.1-811?
- Has your title insurer confirmed in writing that coverage continues?
- If the deed were recorded tomorrow, which of the six items above would still be in the wrong name a month later?
Whether any of this creates a problem depends on your loan terms, your ownership percentages, your title policy, and the current statutory text. If you have already formed an entity and the deed has not gone to record, that pause is exactly the right moment to work through these with a Virginia attorney, and sequencing the whole transfer as one task is much easier than unwinding a piece of it later.
This article is general information only and is not legal advice. Laws change and individual circumstances vary, and outcomes depend on the specific facts of each situation. Do not rely on this article to make decisions about your specific situation; contact Valley Legal or a licensed Virginia attorney to discuss your case. Reading this article does not create an attorney-client relationship, nor does contacting our office through this website or any other means. Attorney advertising.
Valley Legal, PLLC is located at 107 Pepper St SE, Christiansburg, Virginia 24073, and serves the communities of the New River Valley of Virginia, including Montgomery County, Blacksburg, Radford, Pulaski County, Floyd County, and Giles County.