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May 1, 2018 • Stay Connected!
         

QUESTION:  We have several clients who are buying and selling as LLCs, trusts, and so forth. While I understand that the entity can be the principal as named, how does that contract get signed? For example, ABC Group LLC is the seller and John Doe is the authorized signer. When John signs the documents, does he sign "John Doe" or "ABC Group LLC"?
 
I have been advising my brokers that signers must be *real* people, not the LLC. Yet I am getting push back when brokers talk to their escrow rep who tells them they don’t care how the contract is signed.



ANSWER:  The answer to this question is unequivocal and never changes from transaction to transaction. As a preliminary matter, there must be a disconnect between what escrow is truly saying and what brokers are reporting to their managing broker. There is no way that a competent escrow officer would "not care" how a contract is signed by an entity that owns the property which is the subject of a sale that escrow is closing.
 
When an entity is the seller, the entity MUST sign the PSA but the only way that an entity can sign is through a human being. This means that every entity must have a human being (or more than one human being) authorized by the entity to sign contracts binding the entity. Assuming John Doe is the authorized signer for ABC Group LLC, the signature line should say, often directly underneath where the signature is actually placed, "ABC Group LLC, by its managing member, John Doe".
 
The entity could be a corporation, a partnership, a guardian, a trust a "power of attorney" or many others. Each entity will authorize a uniquely identified leader to sign for the entity. For example, the authorized signer of a corporation is typically the "president". The authorized signer for a partnership may be either a "partner" or a "managing partner". The authorized signer for a trust would be the "trustee", etc. As a result, the signature line for the seller entity will reflect the title of the leader appointed to sign on behalf of the entity. This means that if the ABC Group were a corporation rather than an LLC, the signature line would say "ABC Group, Inc., by John Doe, its president". If the seller is signing through a power of attorney, then the signature line would say, "Martha Doe by John Doe, her attorney in fact".
 
The best way to determine the name of the human being who is the authorized signer and that person's title is to obtain the written document that creates the entity. At the same time the listing is taken, listing broker should request from the seller, the documentation that gives authority to the signer. Upon receipt of the documentation, listing broker should immediately deliver that documentation to the title officer who will be asked to insure title to the property. That title officer will be able to advise listing broker as to how the signature line for seller should read. The signature line should be consistent between the PSA and all closing documents. Anywhere that the seller puts a full signature, the signature line should reflect the language given by the title officer. Initials on addenda may simply be the human's initials.
 
Additionally, if broker represents a buyer that is an entity, buyer's broker should request from buyer, a copy of the documentation that gives the signer authority to bind the buyer entity. That documentation should also be delivered to the title officer who, again, will advise as to how the buyer's signature line should be drafted.
 
It should be remembered that it is the signature of a party on a contract that binds the party. The signature must be correct or the intended party will not be bound by the PSA. Brokers must help their clients to get this issue right.

 

The Legal Hotline Lawyer does not represent Washington REALTORS or its members. To browse through our database of past Q & A's, visit www.warealtor.org. Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week. Please submit questions to legalhotline@warealtor.org . Please tell us your NRDS number when you e-mail the Hotline with your question.


 

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 UPCOMING CLASSES
Date Class Location CE  
03-MAY  2018 Legal Symposium Seattle 7.5 SOLD OUT
10-MAY Current Issues in WA RE Bellingham3.5More info...
17-MAY Real Estate Safety Matters Hood River3.5More info...
21-MAY  Accredited Buyers Representative Puyallup 15.0 More info...
23-MAY At Home With Diversity Olympia7.5More info...
23-MAY Corral That DealWalla Walla 3.5 More info...
23-MAY Into the BreachWalla Walla4.0More info...
29-MAY To Disclose or Not to Disclose Wenatchee3.5More info...
29-MAY Best of the Legal HotlineWenatchee4.0More info...
30-MAY CORE & MoreKennewick7.5More info...


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