<p>It is not exactly my house, but I am the trustee of my Parent’s house on behalf of my mom. The house has been leased to the current tenants for a year. It is the time to renew the lease. There is no problem with the term and the rent, however, the tenants insisted the lessee names changed to a Corporation, which they are the owners of the corporation. Basically, they want to take advantage of tax deductions when the lessee name is in their corporate name. When their names are on the lease, they have to receive the income from the corporation and pay tax on the income and the rent is not deductable.</p>
<p>I don’t like the idea to lease this house to a small corporation like that where they can close the corporation or declare bankruptcy to get out of the lease. Eviction is also a problem, since they are not on the lease. Basically I have problem to evict a closed corporation.</p>
<p>One of the solution I was thinking is to ask a full year of rent up front, so at least if they want to get out the lease I have the money in hand already.</p>
<p>Check with the local state and city tenant-landlord laws. There may or may not be a problem regarding possible eviction of the owners of the corporation. Don’t assume getting a year in advance will solve the problem. I know an owner who got 1 year of rent $ from a couple of physicians (interns) who never paid a penny after the year, and it took months to get them out with eviction proceedings.</p>
<p>I checked out the corporation, actually it is an LLC and the curent tenants are not the owners of the corporation, their son is. So, it added more complication to the table.</p>
<p>What about if I get 4 months of deposits instead?</p>
<p>Artlover, you seem reluctant to rent with this proposed arrangement. It sounds like it has some benefits for the tenants…my question is what is the benefit for YOU?</p>
<p>I would say NO. I was a landlord and preferred to deal with people, not their family businesses. </p>
They are elderly couple, no pets, no kids, less wear and tear to the house. In addition, they are extremely clean.
They pay rent on time and with little fuss, good tenants.
They are willing to rent long terms, ie 3 years, if they get the corporate name on the lease.
Tenant turnover could cost 2 months of rent and will create headaches again to select another good tenant, we are very selective.</p>
<p>OTOH, with the high flying rent in the Silicon Valley, our rent is below the market and will be more below the market if I gave them longer terms.</p>
<p>I am willing to keep the current tenants and take in a little less, but I am reluctant to lease to a corporation in this fashion.</p>
<p>Your financial concerns can be taken care of by getting them to each individually sign the lease as guarantors. This shouldn’t affect their tax dodge, er, I mean tax situation, and you can go after them personally in the event the LLC defaults on the lease.</p>
<p>You could use a standard lease from an apartment owners association, like AOAUsa or some other. The contract could be between artloverplus and Smith Jones LLC, Mr. Smith and Ms. Jones, officers. Listed residents would be Mr. Smith and Ms. Jones. Something like that. This is not legal advice, but low cost or free such advice is offered by these landlord organizations.</p>
<p>MommaJ beat me to it…get personal guarantees from the individuals. </p>
<p>The rights of the people to stay in the house flow from the rights of the corporation to be in the house (kind of like a sub-tenant). If the corporation quits paying and no longer has a right to be in the house, then the people have no right to be in the house. Why couldn’t you evict them?</p>
<p>Yes…corporations are people…but in this case the “corporation” is NOT the same people as those who will be living in the house.</p>
<p>This is the story as I see it…</p>
<ol>
<li>The house really doesn’t belong to Artlovers…but he is taking care of the rental of it.</li>
<li>The folks renting it want it to be rented to a corporation that is some entity OTHER than themselves.</li>
</ol>
<p>Sounds like TOO many “once removed” players to me.</p>
<p>I think they are feeling you out to see if you will go along with their little “tax thing”. Things I would try to find out…how is the “corporation” saying they are USING your rental dwelling? Are they using it as a business expense? You do NOT want to get involved in any of their funny business…in my opinion.</p>
<p>Just say NO…tell them the lease is available to them under the current terms. My guess is they will sign.</p>
<p>As shown in #5, the benefits of this particular couple are pretty large. I’ve had multiple units for 12 years–old, no kids, no pets, clean, no whiners, pay on time–good things to have :)</p>
<p>I’d get the individual guarantees and do it.</p>
<p>Maybe I have a different personality, but I don’t assume it’s a tax dodge without evidence beyond what we know here. Their rent could very well be a legitimate cost to son’s llc. If one or both work for the company, work as a consultant, or if this is considered retirement, then it is legitimate compensation.</p>
<p>Like artlover, I see the benefit of these tenants as lover has described. But I strongly agree with posters that have advised artlover get legal advice from a lawyer. You may need authorization from the current legal owner of the llc, and I suspect adding the personal guarantor idea would cover it, but a quick call to your attorney can’t cost much.
If they sign “for the llc” but aren’t authorized to do so, then you’d probably have no right to go after the llc for monies.</p>
<p>If they work for the corporation isn’t the free housing taxable</p>
<p>Here is what they said=When their names are on the lease, they have to receive the income from the corporation and pay tax on the income and the rent is not deductable.</p>
<p>If they are claiming the income there is no issue. I bet they want the deduction and will not claim the fair value of free housing as income.</p>
<p>What’s in it for you? Why do you have to do this especially when your rent is below average? I potential see it could get you into trouble with the IRS. You may be guilty of aiding/conspiring your tenants into filing a false tax return. If you REALLY want to do this, you need your cut. :D</p>
<p>I can’t see that it’s up to the landlord to oversee how the tenant does his tax return.<br>
As a landlord, I can see there is a lot of good in this for the landlord, as artlover outlined in a previous post.(What’s “in it” for the LL?)</p>
<p>If this property is in good condition, is priced well, and is in a good area accessible to the Silicon Valley…you should be able to rent it easily for the MARKET value to good tenants…without a third party corporation involved.</p>
<p>If you really want THESE tenants, then fine…but DO protect yourself. Make sure you have a plan for dealing with the tenant and corporation should problems arise.</p>
<p>One problem that I see with renting to a corporation is that, unless you specify in the lease, they can put anyone into that house–it’s OK now because Mom and Dad are in the house, but what if they move out or die?</p>
<p>I see no downside to this arrangement, provided you get the personal guarantees and specify in the lease who can occupy the apartment. I lease out an apartment, and if you have great tenants, you treasure them. Your next tenants could wreck the place, bail on you, pay rent late, etc., you never know. And there’s not a snowball’s chance in hell that you could get in trouble with the IRS.</p>