Legal Question in Real Estate Law in California

Re: Does Quit Claiming relieve liability?

Your initial instinct offers the best solution. Only a fool would operate a business in California without liability insurance. At a minimum, you should protect yourself by buying your own insurance to cover premises liability. Although abandoning your rights in the property might shield you from liability, by no means will it prevent someone from suing you. Even as a former owner, someone might argue you caused some defective condition on the property. You would still have to pay a lawyer to defend yourself. Since your child does not qualify for a loan, a plaintiff's lawyer would look for someone else (i.e. you) with money to pay a claim.

Do not transfer the property to the child without getting legal, financial and tax advice. If you give the property to your child, you will likely owe gift tax, depending on the size of the gift. You might also consider whether a business based on family gifts can survive. In the long run, your child might be better off having to make a profit on his own.

In addition, your instinct is probably correct that transferring the property without the lender's permission would violate your loan agreement. You should check with the lender first.

Based on the facts you have given, you have two choices. First, you can and should get your own insurance. Check with a broker. The other option would be to insist that the child operate the business responsibly and obtain liability insurance. If you like, I can help you set this on a business like footing. Please call if you would like help.