Iowa's New LLC Law and Real Estate Transfers
Beginning January 1, 2009 Iowa adopted a new set of laws governing limited liability companies or LLCs. My partner Rush Nigut has done a good job of detailing many of the important changes in his blog: www.rushonbusines.com.
LLCs have long been a favored entity of real estate and corporate attorneys for real estate ownership. This has not changed. What has changed is the reversal of the presumption all members of the LLC are agents of the LLC merely because of membership. New Iowa Code Section 489.302 permits, but does not obligate, the LLC to file a "Statement of Authority" with the Secretary of State. This Statement of Authority sets forth those parties which have the authority to bind the LLC.
When Iowa adopted the old LLC law - some sixteen years ago - authority issues troubled and complicated real estate transfers by LLCs. Certain provisions of the original LLC law suggested parties were imputed with knowledge of any limitations on the rights of members or managers to transfer real estate. This resulted in committee meetings and the preparation of form affidavits required for every real estate transfer to assure the party signing the documents had the requisite authority. The obvious result is a slow-down in LLC real estate transfers and an unnecessary increase in the cost. Some years later, these knowledge provisions were removed and the investigation and affidavit requirements were thankfully removed. Title examiners were entitled to presume signatories had the proper authority, without evidence filed of record to the contrary. I see no difference under the new law. Only with the filing of a Statement of Authority should a review of authority be required for title transfer purposes. If a Statement of Authority is not filed, the authority of the signatory should be presumed.
Title review is to be distinguished from a buyer's due diligence. As Mr. Nigut explains nicely in this post - www.rushonbusiness.com - third parties should continue to investigate proper authority before finalizing a transaction.
In short, I do not believe that title transfers under the new LLC law require anything more than an investigation into the existence of and adherence to a Statement of Authority properly filed with the Secretary of State. Otherwise, title examiners should be able to presume proper authority. I implore, no beg, Iowa title examiners to take the same position. Otherwise, we will needlessly complicate title transfers under the new LLC law. (And yet another argument for the adoption of Title Insurance in Iowa).
