OBTAINING PROOF OF SIGNING
AUTHORITY IN REAL ESTATE TRANSACTIONS
If you are in practice for very long, you will commonly encounter situations in which parties will be signing on behalf of someone or something other than themselves. It won’t be always a church deal, but many will come up. In this section, I would like to go over some other common situations.
Whenever a person signing real-estate documents is signing on behalf of an entity or a party other than the person themselves, you, as the real-estate licensee, must request legal proof of authorization to sign. It is extremely important that the person signing the real-estate document has the legal authority to sign.
Common situations could include:
• Guardians of incompetent parties,
• Power of attorneys for principals not available,
• Personal representatives of an estate of a deceased,
• Trustee of a trust,
• Managing Members of Limited Liability Companies,
• Corporate Officers of Corporations.
********** PROOF OF AUTHORITY TO ACT: IN GENERAL
The proof of signatory authority should be available from the court of jurisdiction or from a notarized document, such as a Power of Attorney. These documents should be copied and included in the permanent real estate transaction file for the licensee. Many times the title company will need copies as well.
The proof of signatory authority varies depending on the situation. The following are the more common situations:
• Copy of Letters of Guardianship (Guardian);
• Copy of the Power of Attorney document (Power of Attorney);
• Copy of the Trust Agreement or an Abstract of the Trust Agreement identifying the trustee, trustor (creator of the trust) and beneficiary (Trustee);
********** PROOF OF AUTHORITY TO ACT: GUARDIAN
A Guardian is one appointed by the Superior Court to act for a person whom the Superior Court has found to be incapacitated. A Guardian can also be appointed for someone who is under the legal age (a minor).
The court may appoint a Guardian of the person, a Guardian of the estate or a Guardian of the person and the estate, depending on the needs and capabilities of the incapacitated person.
A Guardian is responsible for the individual’s “care, custody and control,” while considering and respecting the individual’s preferences.
A guardianship can also be limited in any manner that the court believes to be appropriate.
The powers of the Guardian are limited to those specified by the court order and the limitations are reflected in the letters of guardianship issued by the clerk of the Superior Court.
********** PROOF OF AUTHORITY TO ACT: POWER OF ATTORNEY
A Power of Attorney is a legal document used to provide authority for one person to act on behalf of another. That party who has such authority to act is deemed to be an “Attorney-In-Fact.”
Remember, just because the word “Attorney” is used does not mean that the party is in any fashion representing the party in a fashion that we normally expect of an “Attorney.”
The Power of Attorney creates authority to that delegated person to make legal decisions regarding matters specifically addressed and defined by the document itself.
A Power of Attorney is frequently used to assist in the event of a principal’s illness, disability [with a specific type of Durable Power of Attorney], or in a legal transaction where the principal cannot be present to sign the legal documents.
PRACTICE POINTER: Whenever you have a client who will be utilizing a Power of Attorney in any closing of a real estate transaction, it is best practice to seek review of that document by the title company providing escrow services to make certain it will be appropriate for the transaction. Never assume that your Power of Attorney will meet title insurance requirements. Make your title company title officer your friend.
PRACTICE POINTER: Whenever you are using a Power of Attorney, always plan on acquiring the ORIGINAL document. The title company will need to record that Power of Attorney along with the real estate conveyance document being recorded. Make your title company title officer your friend!
********** PROOF OF AUTHORITY TO ACT: PERSONAL REPRESENTATIVE OF AN ESTATE
When a party dies with a Will, the Will appoints a party to handle the affairs of wrapping up the estate on behalf of the deceased. In days gone, the name was Executor or Executrix, but now the more modern name is Personal Representative which is also gender neutral.
The powers of the personal representative are in most cases prescribed by statute. RCW 11.48.010 lays out the general framework of such duties:
• “It shall be the duty of every personal representative to settle the estate, including the administration of any nonprobate assets within control of the personal representative under RCW 11.18.200, in his or her hands as rapidly and as quickly as possible, without sacrifice to the probate of non-probate estate.”
• “The personal representatives shall collect all debts due the deceased and pay all debts as hereinafter provided. The personal representative shall be authorized in his or her own name to maintain and prosecute such actions as pertain to the management and settlement of the estate, and may institute suit to collect any debts due the estate or to recover any property, real or personal, or for trespass of any kind or character.”
PRACTICE POINTER: Upon the listing of a property for sale with an estate seller, confirm with the attorney for the estate, whether the personal representative has “Non-Intervention Powers” or not. If they do not, you will have to seek court approval for the sale of the real estate. This is best to know at the beginning. Make your title officer your friend here as well.
********** PROOF OF AUTHORITY TO ACT: TRUSTEE OF A TRUST
A Trust is a manner of holding ownership of an asset. There are many kinds of Trusts. A legal document creates the Trust. It is often not necessary that any documents be recorded to create a Trust.
Who may be a Trustee?: A Trustee is an individual or corporation named by a Trust, who sets aside property to be used for the benefit of another person, to manage the property as provided by the terms of the document that created the Trust arrangement.
A Trustee is a Fiduciary of the Trust Beneficiary. A Fiduciary is legally bound to act, within the confines of the law, in the best interests of the Beneficiary.
A Trustee is in a special position of confidence in relation to the Beneficiary because the trustee has control of property that is essentially owned by the Beneficiary. Most Trustees possess special knowledge about trusts and investments, but many Beneficiaries are ignorant of such matters.
This special knowledge is another feature of the Trustee-Beneficiary relationship that makes a Trustee a Fiduciary. A Trustee must submit honest reports to the Beneficiary and keep the Beneficiary informed of all matters relevant to the trust.
A Trustee is bound to the terms of the trust document. Trustees must fulfill the terms of the trust, which address such matters as when and how the trust property will be given to the Beneficiary and the kinds of transactions the Trustee may conduct with the trust property.
Unless the terms of the trust state otherwise, a Trustee may invest the trust property, but they must use reasonable skill and judgment in making the investments.
PRACTICE POINTER: Pay close attention to the fact that the title company will play an integral role of insuring your transaction at closing. It is best practice to contact the title officer and make sure the title company has all the legal trust documentation they need right as you list your trust property for sale. You will save yourself grief by doing so. Make your title officer your friend.
********** PROOF OF AUTHORITY TO ACT: MANAGING MEMBER OF AN LLC
A Limited Liability Company (“LLC”) is a separate legal entity that exists under state law. It is commonly used as a vehicle to own real estate. This entity formed under the laws of the State of Washington can own real estate.
A party authorized to act on behalf of the entity is commonly referred to as a “Managing Member.”
PRACTICE POINTER: It is suggested that at the time you are first dealing with the entity that you obtain a copy of the “Operating Agreement” as it is the document that specifies exactly the level of authority of anyone authorized to sign on behalf of the limited liability company. Make your title officer your friend.
********** PROOF OF AUTHORITY TO ACT: CORPORATE AUTHORITY
A corporation is a business entity created under Washington State law that can conduct any legal business enterprise in Washington, including the ownership of real estate. As it exists only in the law, it takes a living person to act on its behalf. A party authorized to act on behalf of a corporation is generally called a Corporate Officer.
PRACTICE POINTER: A real estate professional should always feel comfortable that the party signing contracts has requisite legal authority. The title company title officer may be helpful in making that determination to the extent that the title company is insuring the sale transaction. The real estate professional may ask that the Corporate Officer provide Proof of Authority. If the Licensee has any doubt about authority, the licensee should suggest that all parties affected seek legal counsel so that the issue can be resolved in an appropriate fashion.
If you are in practice for very long, you will commonly encounter situations in which parties will be signing on behalf of someone or something other than themselves. It won’t be always a church deal, but many will come up. In this section, I would like to go over some other common situations.
Whenever a person signing real-estate documents is signing on behalf of an entity or a party other than the person themselves, you, as the real-estate licensee, must request legal proof of authorization to sign. It is extremely important that the person signing the real-estate document has the legal authority to sign.
Common situations could include:
• Guardians of incompetent parties,
• Power of attorneys for principals not available,
• Personal representatives of an estate of a deceased,
• Trustee of a trust,
• Managing Members of Limited Liability Companies,
• Corporate Officers of Corporations.
********** PROOF OF AUTHORITY TO ACT: IN GENERAL
The proof of signatory authority should be available from the court of jurisdiction or from a notarized document, such as a Power of Attorney. These documents should be copied and included in the permanent real estate transaction file for the licensee. Many times the title company will need copies as well.
The proof of signatory authority varies depending on the situation. The following are the more common situations:
• Copy of Letters of Guardianship (Guardian);
• Copy of the Power of Attorney document (Power of Attorney);
• Copy of the Trust Agreement or an Abstract of the Trust Agreement identifying the trustee, trustor (creator of the trust) and beneficiary (Trustee);
********** PROOF OF AUTHORITY TO ACT: GUARDIAN
A Guardian is one appointed by the Superior Court to act for a person whom the Superior Court has found to be incapacitated. A Guardian can also be appointed for someone who is under the legal age (a minor).
The court may appoint a Guardian of the person, a Guardian of the estate or a Guardian of the person and the estate, depending on the needs and capabilities of the incapacitated person.
A Guardian is responsible for the individual’s “care, custody and control,” while considering and respecting the individual’s preferences.
A guardianship can also be limited in any manner that the court believes to be appropriate.
The powers of the Guardian are limited to those specified by the court order and the limitations are reflected in the letters of guardianship issued by the clerk of the Superior Court.
********** PROOF OF AUTHORITY TO ACT: POWER OF ATTORNEY
A Power of Attorney is a legal document used to provide authority for one person to act on behalf of another. That party who has such authority to act is deemed to be an “Attorney-In-Fact.”
Remember, just because the word “Attorney” is used does not mean that the party is in any fashion representing the party in a fashion that we normally expect of an “Attorney.”
The Power of Attorney creates authority to that delegated person to make legal decisions regarding matters specifically addressed and defined by the document itself.
A Power of Attorney is frequently used to assist in the event of a principal’s illness, disability [with a specific type of Durable Power of Attorney], or in a legal transaction where the principal cannot be present to sign the legal documents.
PRACTICE POINTER: Whenever you have a client who will be utilizing a Power of Attorney in any closing of a real estate transaction, it is best practice to seek review of that document by the title company providing escrow services to make certain it will be appropriate for the transaction. Never assume that your Power of Attorney will meet title insurance requirements. Make your title company title officer your friend.
PRACTICE POINTER: Whenever you are using a Power of Attorney, always plan on acquiring the ORIGINAL document. The title company will need to record that Power of Attorney along with the real estate conveyance document being recorded. Make your title company title officer your friend!
********** PROOF OF AUTHORITY TO ACT: PERSONAL REPRESENTATIVE OF AN ESTATE
When a party dies with a Will, the Will appoints a party to handle the affairs of wrapping up the estate on behalf of the deceased. In days gone, the name was Executor or Executrix, but now the more modern name is Personal Representative which is also gender neutral.
The powers of the personal representative are in most cases prescribed by statute. RCW 11.48.010 lays out the general framework of such duties:
• “It shall be the duty of every personal representative to settle the estate, including the administration of any nonprobate assets within control of the personal representative under RCW 11.18.200, in his or her hands as rapidly and as quickly as possible, without sacrifice to the probate of non-probate estate.”
• “The personal representatives shall collect all debts due the deceased and pay all debts as hereinafter provided. The personal representative shall be authorized in his or her own name to maintain and prosecute such actions as pertain to the management and settlement of the estate, and may institute suit to collect any debts due the estate or to recover any property, real or personal, or for trespass of any kind or character.”
PRACTICE POINTER: Upon the listing of a property for sale with an estate seller, confirm with the attorney for the estate, whether the personal representative has “Non-Intervention Powers” or not. If they do not, you will have to seek court approval for the sale of the real estate. This is best to know at the beginning. Make your title officer your friend here as well.
********** PROOF OF AUTHORITY TO ACT: TRUSTEE OF A TRUST
A Trust is a manner of holding ownership of an asset. There are many kinds of Trusts. A legal document creates the Trust. It is often not necessary that any documents be recorded to create a Trust.
Who may be a Trustee?: A Trustee is an individual or corporation named by a Trust, who sets aside property to be used for the benefit of another person, to manage the property as provided by the terms of the document that created the Trust arrangement.
A Trustee is a Fiduciary of the Trust Beneficiary. A Fiduciary is legally bound to act, within the confines of the law, in the best interests of the Beneficiary.
A Trustee is in a special position of confidence in relation to the Beneficiary because the trustee has control of property that is essentially owned by the Beneficiary. Most Trustees possess special knowledge about trusts and investments, but many Beneficiaries are ignorant of such matters.
This special knowledge is another feature of the Trustee-Beneficiary relationship that makes a Trustee a Fiduciary. A Trustee must submit honest reports to the Beneficiary and keep the Beneficiary informed of all matters relevant to the trust.
A Trustee is bound to the terms of the trust document. Trustees must fulfill the terms of the trust, which address such matters as when and how the trust property will be given to the Beneficiary and the kinds of transactions the Trustee may conduct with the trust property.
Unless the terms of the trust state otherwise, a Trustee may invest the trust property, but they must use reasonable skill and judgment in making the investments.
PRACTICE POINTER: Pay close attention to the fact that the title company will play an integral role of insuring your transaction at closing. It is best practice to contact the title officer and make sure the title company has all the legal trust documentation they need right as you list your trust property for sale. You will save yourself grief by doing so. Make your title officer your friend.
********** PROOF OF AUTHORITY TO ACT: MANAGING MEMBER OF AN LLC
A Limited Liability Company (“LLC”) is a separate legal entity that exists under state law. It is commonly used as a vehicle to own real estate. This entity formed under the laws of the State of Washington can own real estate.
A party authorized to act on behalf of the entity is commonly referred to as a “Managing Member.”
PRACTICE POINTER: It is suggested that at the time you are first dealing with the entity that you obtain a copy of the “Operating Agreement” as it is the document that specifies exactly the level of authority of anyone authorized to sign on behalf of the limited liability company. Make your title officer your friend.
********** PROOF OF AUTHORITY TO ACT: CORPORATE AUTHORITY
A corporation is a business entity created under Washington State law that can conduct any legal business enterprise in Washington, including the ownership of real estate. As it exists only in the law, it takes a living person to act on its behalf. A party authorized to act on behalf of a corporation is generally called a Corporate Officer.
PRACTICE POINTER: A real estate professional should always feel comfortable that the party signing contracts has requisite legal authority. The title company title officer may be helpful in making that determination to the extent that the title company is insuring the sale transaction. The real estate professional may ask that the Corporate Officer provide Proof of Authority. If the Licensee has any doubt about authority, the licensee should suggest that all parties affected seek legal counsel so that the issue can be resolved in an appropriate fashion.
Happy Investing!
Today's guest blog courtesy of McFerran and Burns
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