--- title: "How to Avoid Triggering the Due-on-Sale Clause When Using an LLC | LLC Attorney" description: "Practical steps real estate investors use to reduce due-on-sale risk when moving a mortgaged property into an LLC — from the Fannie Mae/Freddie Mac exemption to land trust structures." canonical: https://llcattorney.com/small-business-blog/avoid-due-on-sale-clause-llc image: https://llcattorney.com/images/share-cover.png source_path: /small-business-blog/avoid-due-on-sale-clause-llc --- If you're moving a mortgaged property into an LLC for asset protection or privacy, the due-on-sale clause in your mortgage is the biggest practical risk you're taking on. As we cover in [our deep dive on whether an LLC transfer triggers the due-on-sale clause](/small-business-blog/llc-transfer-due-on-sale-clause), the Garn-St. Germain Act doesn't exempt LLC transfers, and whatever protection you get in practice usually comes from Fannie Mae or Freddie Mac servicing policy, your specific lender's goodwill, or the structure you use to make the transfer. This guide walks through the concrete ways investors reduce that risk. ## 1\. Confirm Whether Your Loan Already Qualifies for the LLC Exemption Before you look at workarounds, check whether your loan simply qualifies for the exemption Fannie Mae and Freddie Mac already give servicers permission to apply: - **Fannie Mae:** the loan must have been purchased or securitized by Fannie Mae on or after June 1, 2016, and the LLC must be controlled by you, or you must hold a majority interest in it (Fannie Mae Servicing Guide § D1-4.1-02). - **Freddie Mac:** at least 12 months must have passed since your loan's origination date, and you must be the managing member (or general partner) of the LLC or LP receiving title (Freddie Mac Servicing Guide § 8406.4, effective October 20, 2021). If your loan checks these boxes, transferring directly into a properly structured, borrower-controlled LLC is the simplest path — no trust wrapper required. Use Fannie Mae's and Freddie Mac's loan look-up tools, or just ask your servicer who owns your loan, before assuming either policy applies. ## 2\. Ask Your Lender for Written Consent If your loan isn't owned by Fannie Mae or Freddie Mac — a portfolio loan, a commercial mortgage, a HELOC, or a private/hard-money loan — the agency exemptions above don't apply, and your note's due-on-sale language governs on its own terms. Many lenders will consent to a transfer into a borrower-owned LLC in writing if you simply ask, particularly if you're current on payments and can show the LLC is wholly owned and controlled by you. A short consent or assumption letter from the lender is far cheaper insurance than hoping the transfer goes unnoticed. ## 3\. Use a Land Trust as a Buffer Between the Mortgage and the LLC The one entity-adjacent transfer Garn-St. Germain protects outright is a transfer into a revocable [land trust](/estate-planning/land-trust) in which you remain a beneficiary and occupancy doesn't change (12 U.S.C. § 1701j-3(d)(8)). Because of that, a common structure among real estate investors is: - Deed the property into a land trust, with you as trustor and initial beneficiary — this step is squarely covered by the statutory exception. - Assign the trust's beneficial interest to your LLC, so the LLC becomes the party that economically owns the property, while legal title stays with the trustee. This keeps the county recorder's index showing the trust, not the LLC, as titleholder, and land trusts generally aren't required to be filed with any state or federal agency — see our full breakdown of [land trust benefits and disadvantages](/estate-planning/land-trust). But be clear-eyed about what's actually protected here: the statute protects step one (into the trust). Whether assigning the beneficial interest to an LLC afterward carries the same statutory protection is genuinely unsettled — it isn't spelled out in the statute, and attorneys disagree on how much legal cover it adds versus how much it just keeps the change private. Treat this as a privacy and practical-risk-reduction structure, not a guaranteed legal exemption, and have a real estate attorney review the trust and assignment documents before you rely on it. If you're deciding whether a land trust or a different vehicle fits your goals, our comparisons of a [land trust versus a living trust](/estate-planning/land-trust/vs-living-trust) and a [land trust versus a revocable living trust](/estate-planning/land-trust/vs-revocable-living-trust) explain how each is funded, who controls it, and which is actually built for real estate versus general estate planning. ## 4\. Check Your State's Land Trust Rules Before You Rely on One Land trust law isn't uniform. Florida has a dedicated land trust statute (the Florida Land Trust Act, Fla. Stat. § 689.071) that spells out what a trustee can and can't do and how beneficial interests are held — see our guide to [how a Florida land trust works](/states/fl/land-trust-florida). Delaware doesn't have an equivalent land-trust-specific statute; land trusts there rely more on common-law trust principles, which changes what you should expect a Delaware trustee agreement to cover — see our [Delaware land trust guide](/states/de/land-trust-delaware) for the state-specific mechanics. If your properties are spread across multiple states, don't assume the trust structure that works in one state transfers cleanly to another without local counsel confirming it. ## 5\. Or Skip the Transfer Entirely — Finance in the LLC's Name From the Start The due-on-sale question only exists because the loan originated in your personal name and title later moved to the LLC. If you're still shopping for financing — or refinancing a property that's already titled in an LLC — DSCR loans, portfolio loans, and many commercial lenders will close with the LLC as the borrower and titleholder from day one, which avoids the transfer (and the due-on-sale exposure) altogether. See [can I get a mortgage in a holding company or LLC name](/small-business-blog/mortgage-in-llc-name) for how that financing actually works, what it costs relative to a conventional loan, and what lenders will still want from you personally. ## 6\. Keep the Paper Trail Consistent After You Transfer - **Update your insurance** so the LLC is a named insured on the property and liability policies — a claim can be denied if the policy still only names you personally. - **Keep the LLC majority-owned and controlled by the same person who signed the note.** Both Fannie Mae's and Freddie Mac's policies (and most lenders' informal comfort with a transfer) hinge on that continuity. - **Don't co-mingle funds.** Run rent, mortgage payments, and repairs through the LLC's own bank account once the transfer is complete, both for asset-protection reasons and because a lender reviewing the file will expect to see it. - **Plan for refinancing in advance.** If your loan is with Fannie Mae or Freddie Mac, remember both require the property to move back to a natural person before a standard conventional refinance — decide now whether you'll deed it back temporarily or refinance through a lender that keeps LLC-titled loans in portfolio. None of the structures above eliminates due-on-sale risk completely outside of the specific Fannie Mae/Freddie Mac conditions. A real estate or asset-protection attorney who can read your actual note, confirm who owns your loan, and draft (or review) the trust and LLC documents is the difference between a structure that holds up and one that just looks protective on paper. Let's Make Your Business Official.Free BOI/CTA filing for all clients. Receive your LLC, EIN, and bank account SAME-DAY.[Start My Business](https://app.llcattorney.com/formation?intake_type=formation) [Back to blog](/small-business-blog)