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Is a quit claim deed legal if not recorded?

Discussion in 'Quitclaim Deeds' started by Jayneanne, Jun 8, 2021.

  1. Jayneanne

    Jayneanne Law Topic Starter New Member

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    I owned a property in an LLC and sold half to a partner I have in another LLC and did a quit claim frim my LLC to the partnership one but did not record it because of the mortgage. It's time to refinance and I planned to put the new mortgage in the partnership LLC. I had a lien placed against my LLC and am having trouble refinancing the partnership property. My attorney said since I didn't file the quit claim its not legal and the partnership LLC does not own this 2nd property but I don't think that is correct. Is it?
     
  2. Zigner

    Zigner Well-Known Member

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    Who are we to second-guess your attorney?
     
  3. army judge

    army judge Super Moderator

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    No internet stranger knows more about YOUR affairs than YOUR attorney.

    If you don't understand or fail to fully comprehend what your attorney told you, meet with her and ask her to explain everything you don't understand.

    Don't ask strangers who know NOTHING about your personal affairs and finances.
     
  4. Tax Counsel

    Tax Counsel Well-Known Member

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    Is your attorney a real estate lawyer? If not, then ask a real estate lawyer. In general the way this works is that as between the LLC and the partnership that deed is good even though not recorded. However, since the deed was not recorded, third parties have no public notice of the transaction. Thus, if a lien is recorded against the LLC after the deed was given to the partnership but before that deed is recorded, that lien is going to attach to the property. That lien then becomes a problem the partnership is going to need to deal with.
     
  5. flyingron

    flyingron Well-Known Member

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    TC answered it better while I was typing.
     
  6. zddoodah

    zddoodah Well-Known Member

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    I think what you meant here is that your LLC (let's call it "LLC1") owned the property, that LLC1 sold a one-half interest in the property to another LLC (let's call it "LLC2"), that the sale was memorialized in a quitclaim deed, and that the deed was never recorded. Correct?

    It's worth pointing out that you (the individual) owning the property is different from LLC1 owning the property, even if you are the sole owner of LLC1. Likewise, selling the 1/2 interest in the property to your "partner" is different than selling the interest to LLC2. Last, I assume that you and the person to whom you referred to as a "partner" are actually co-members of LLC2 (LLCs don't have "partners;" they have members).

    What consideration was given for the sale (i.e., what did LLC2 pay to LLC1)? Also, when you say that the quitclaim deed was not recorded "because of the mortgage," I assume that means you were seeking to avoid a due on sale clause in the mortgage. Correct?

    When you cay you "had a lien placed against my LLC," that means LLC1, right? And what exactly does that mean? A tax lien? A judgment lien? Some other kind of lien?

    What sort of trouble are you having with the refinancing? At the very least, I assume you're having problem with getting a loan in LLC2's name because, as a matter of public record, LLC1 is the owner of the property. Correct?

    No, it's not correct, and the adjective "legal" doesn't make sense in this context. The transfer of the property, as evidenced by the quitclaim deed, is still valid. However, since no one recorded the deed, as far as the rest of the world is concerned, LLC1 still owns the property.

    There are at least a couple ways to deal with this mess, and I suggest you discuss with your attorney the best one for you and your LLCs.
     
  7. Jayneanne

    Jayneanne Law Topic Starter New Member

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    The lien is a city code violation fine which I am appealing. I did receive compensation from my partner for half equity and I quit claimed the entire property into our LLC. Now we can't refinance it (I don't even know if I can record the quit claim) unless the lien for the code violation is paid. I can't pay it as I woukd not get it back if I win my appeal on it which is likely.
     
  8. Zigner

    Zigner Well-Known Member

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    That is not true. If you pay it and the fine is later reversed due to your successful appeal, you will be refunded whatever amount you paid for the fine.
     
  9. welkin

    welkin Active Member

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    The lien attaches to the property not to the owners (whoever they are). You should be able to record the deed.
     
  10. army judge

    army judge Super Moderator

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