How to Change Property Ownership

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The exact rules for a change of property ownership vary from state to state. The one thing always required when your business buys or sells property is a legally executed deed. Any errors making out the deed can cause significant problems for your company, so don't hesitate to call in a real estate lawyer who can draft it correctly.

TL;DR (Too Long; Didn't Read)

Your business transfers property into or out of the company by a written deed. The exact requirements for a legal deed transfer depend on the laws of your state, but typically include a notary witnessing the transfer. The person who signs the deed must be authorized by the business to make the property transfer.

Property Transfer by Deed

Written deeds, filed with the county where the property is located, are the tool for a change of property ownership. Deeds come in two main varieties, warranty and quitclaim deeds.

A warranty deed transfers property to the buyer with a guarantee that it is, indeed, the seller's property. Real estate ownership can become incredibly complicated, and it's not always clear who has the right to sell. For example, say you're buying an office building, and the seller is making a property transfer to your business:

  • It turns out there's a tax lien on the property that the seller didn't disclose.

  • The property is an inheritance, and the heirs argue over who has the title to the building.

  • The mortgage was paid off, but the relevant documents were never filed.

  • The seller bought the building from a partnership, and the partner who sold it wasn't authorized to do so.

A warranty deed says that the title is clear of any such clouds; if clouds develop, the seller is obligated to resolve the problems for the buyer. A change of property ownership by quitclaim deed transfers the seller's claims to the property, but it makes no guarantees about a clear title. Buyers are safer with a warranty deed.

Business Property Transfer

If you're a sole proprietor, everything your business owns belongs to you personally. To sell real estate, you proceed much as if you are selling your personal home. For other business structures, the situation is different.

Corporations are separate legal individuals from their owners, so the business owns real estate in its name. Typically, the CEO, president and vice president are authorized to execute the mortgage on the company's behalf. Other corporate officers may have to provide a certified copy of their authorization before signing the deed.

A partnership makes the property transfer in the name of the partnership, not the individual partners. The partnership agreement should make clear which partners are authorized to execute a deed on behalf of the business. Limited partners cannot execute a deed.

Making the Deed Legal

For your business's property transfer to be legal, the deed has to be legal. All deeds have to be notarized, but five states require one or two witnesses, and some of the states allow the notary to be one of the witnesses.

The deed transfer cost varies too. The cost depends on the notary fees, filing fees to record the deed with the local registry, and any real estate taxes on the transfer. Title insurance fees will also vary based on the title company and the property. However, some rules are constant everywhere:

  • The deed must include the name of the person or business taking ownership.

  • Someone authorized to sign for the seller must sign the deed in the presence of the notary.

  • The deed must contain a detailed legal description of the property.

  • The deed must be delivered to the buyer.

  • The buyer usually records the new deed with the county registry. Some states don't require this to make the transfer legal, but it does formally establish the change of property ownership. 

Each state has very different laws and regulations regarding property, so if you are transferring ownership to or from your business, it is in your best interest to hire an experienced real estate agent and/or a real estate lawyer.