Bulletin: CO2014002

Date:
December 16, 2014
To:
All Colorado Issuing Offices
RE:
UNDERWRITING - Conveyances to Colorado Business Entities Other than Trusts - REVISED

Dear Associates:

Title companies require evidence of the existence and authority of a Colorado business entity where an entity intends to acquire, convey, or encumber real property held in the true name of the entity or a trade name. However, questions and inconsistencies continue to arise from title examiners regarding exactly what constitutes appropriate evidence of the existence and authority of a Colorado business entity holding title to property. This bulletin is intended to provide general information on conveyances to Colorado business entities other than trusts.

Since 1997, pursuant to CRS §38-30-172, recordation of a Statement of Authority provides prima facie evidence of the existence of an entity and of the authority of identified persons to act on behalf of an entity to acquire, convey, encumber, or otherwise affect title to real property. Although the Statement of Authority does not create such authority, a person executing a Statement of Authority must nevertheless be able to establish that he or she has actual authority to acquire, convey, encumber, or otherwise affect title to real property on behalf of the entity.

As described in detail below, any transaction involving an entity should have a recorded Statement of Authority to identify the person(s) who will execute documents on behalf of the entity. If a previously recorded Statement of Authority contains accurate information, examiners can rely on the recorded document, referring to the document in the Requirements section of the commitment. If the previously recorded Statement of Authority contains inaccurate information for the current transaction, or if there is no recorded Statement of Authority, then examiners should add a Requirement in the commitment for recordation of a Statement of Authority.

The Statement of Authority only needs to identify the person(s) that will execute documents on behalf of the entity in the insured transaction. The document does not need to describe all of the parties involved in the entity. Thus, the Statement of Authority will contain the same information that is provided in a notary acknowledgement (i.e.-person, title, entity), without revealing additional parties that are involved with the entity. Examiners may review authorization documents provided by the entity to confirm the authority of person(s) who will execute documents, but the Statement of Authority should be recorded to identify those individuals on behalf of the entity.

The remainder of this Bulletin will discuss the appropriate use of the Statement of Authority as evidence of the existence and of the authority when insuring conveyances involving business entities other than trusts. This Bulletin is divided into the following sections: (A) Corporation; (B) Limited Liability Company; (C) General Partnership; (D) Limited Partnership; (E) Limited Liability Partnership; (F) Limited Liability Limited Partnership; (G) Sole Proprietorship; (H) Joint Venture; (I) Unincorporated Non-Profit Association; (J) Foreign Corporations; (K) Foreign Limited Liability Company; (L) Foreign General Partnership; (M) Foreign Limited Partnership; (N) Foreign Registered Limited Liability Partnership; (O) Foreign Registered Limited Liability Limited Partnership; (P) Foreign Non-Profit Corporation.

(A)   CORPORATION: FOR-PROFIT AND NON-PROFIT

Secretary of State:

Check the website for the Colorado Secretary of State (http://www.sos.state.co.us/biz/BusinessEntityCriteriaExt.do) to confirm the corporation is in good standing.

If not conducting business under the true name, then the filing of a Statement of Trade Name with Secretary of State is REQUIRED for a for-profit corporation, but the filing of this Statement only is PERMITTED for a non-profit corporation.

County Clerk & Recorder:

Recordation of a Statement of Authority is preferred for either type of corporation. We can rely on a previously recorded Statement of Authority when the information contained in the Statement continues to be accurate.

We should obtain and record a new Statement of Authority when different individuals are identified as having authority to execute documents on behalf of the corporation (the Statement of Authority can be executed by the person identified in the Statement as having such authority). We should review a recent Resolution from the Board of Directors of the corporation authorizing the individuals to act on behalf of the corporation.

(B)  LIMITED LIABILITY COMPANY (LLC)

Secretary of State:

Check the website for the Colorado Secretary of State (http://www.sos.state.co.us/biz/BusinessEntityCriteriaExt.do) to confirm the LLC is in good standing. Review the filed Articles of Organization to determine whether managers or members are authorized to manage the affairs of the LLC.

If not conducting business under the true name, then the filing of a Statement of Trade Name with the Secretary of State is REQUIRED (CRS 7-71-101).

County Clerk & Recorder:

Recordation of a Statement of Authority is preferred for an LLC. We can rely on a previously recorded Statement of Authority when the information contained in the Statement continues to be accurate.  

We should obtain and record a new Statement of Authority when different individuals are identified as having authority to execute documents on behalf of the LLC. If the LLC has a written Operating Agreement, we should review the Agreement to verify whether all managers or members must agree to actions on behalf of the LLC, or whether only one manager or member can act on behalf of the LLC.

(C)   GENERAL PARTNERSHIP

Secretary of State:

No organization documents are required to be filed with the Secretary of State. If a written partnership agreement exists, we should review the agreement to verify whether all partners need to execute documents affecting the real property owned by the partnership. Check the website for the Colorado Secretary of State (http://www.sos.state.co.us/biz/BusinessEntityCriteriaExt.do) to look for a Statement of Partnership Authority, which is PERMITTED to be filed (the Statement will identify the partners).  

If not conducting business under the true name of each general partner, then the filing of a Statement of Trade Name with the Secretary of State is REQUIRED (CRS 7-71-101).

County Clerk & Recorder:

Recordation of a Statement of Authority is preferred for a general partnership. We can rely on a previously recorded Statement of Authority when the information contained in the Statement continues to be accurate.

(D)   LIMITED PARTNERSHIP

Secretary of State:

Limited Partnerships formed prior to 10-31-1981 did not have to file any documents with the Secretary of State. However, limited partnerships formed after 11-1-1981 must have a Certificate of Limited Partnership filed with the Secretary of State. Check the website for the Colorado Secretary of State (http://www.sos.state.co.us/biz/BusinessEntityCriteriaExt.do) to confirm the Certificate has been filed.

If not conducting business under the true name of the limited partnership, then the filing of a Statement of Trade Name with the Secretary of State is REQUIRED (CRS 7-71-101).

Review a copy of the Statement of Partnership Authority if filed with the Secretary of State. (This is PERMITTED, but not required by statute).

County Clerk & Recorder:

Prior to 10-31-1981, recordation of a Certificate of Limited Partnership was REQUIRED to form a Colorado limited partnership. These old limited partnerships can elect to be governed by the updated statutes by recording an Amendment to Certificate of Limited Partnership.

Recordation of a Statement of Authority is preferred for a limited partnership. We can rely on a previously recorded Statement of Authority when the information contained in the Statement continues to be accurate. We also can rely on a recorded Statement of Partnership Authority if the information contained in the Statement continues to be accurate.

Authorization Documents of Organization of Entity:

We should examine a copy of the partnership agreement, and any amendments, to confirm that the general partner(s) has the right and power to take actions that affect the property, and to confirm whether any limited partners need to consent to the actions that affect the property.

(E)   LIMITED LIABILITY PARTNERSHIP (LLP)

Secretary of State:

A General Partnership that desires limited liability protections. Check the website for the Colorado Secretary of State (http://www.sos.state.co.us/biz/BusinessEntityCriteriaExt.do) to review the Statement of Registration to Register as a Limited Liability Partnership (which is REQUIRED to form a LLP), and to verify good standing.

If not conducting business under the true name of the LLP, then the filing of a Statement of Trade Name with the Secretary of State is REQUIRED.

Review a copy of the Statement of Partnership Authority, if filed with the Secretary of State. (This filing is PERMITTED, but is not required).

County Clerk & Recorder:

Recordation of a Statement of Authority is preferred for a LLP.

We can rely on a previously recorded Statement of Authority when the information contained in the Statement continues to be accurate. We also can rely on a recorded Statement of Partnership Authority if the information contained in the Statement continues to be accurate.

Authorization Documents of Organization of Entity:

We should examine a copy of the partnership agreement, and any amendments, to confirm that the general partner(s) has the right and power to take actions that affect the property, and to confirm whether all partners need to consent to the actions that affect the property.

(F)   LIMITED LIABILITY LIMITED PARTNERSHIP (LLLP)

Secretary of State:

A Limited Partnership that desires limited liability protections. Always require a filed copy of the Combined Certificate of Limited Partnership and Statement of Registration to Register as Limited Liability Limited Partnership, as this is REQUIRED to form a new LLLP (CRS 7-62- 201 and 7-60-144 (UPL) or 7-62- 201 and 7-64-1002(CUPA)).

Always require a filed copy of the Statement of Registration for a Limited Partnership, REQUIRED to convert an existing partnership into an LLLP (CRS 7-60-144 (UPL) and CRS 7-64-1002 (CUPA)).

If not conducting business under the true name, then the filing of a Statement of Trade Name with Secretary of State is REQUIRED pursuant to CRS 7-71-101.

Review a copy of the Statement of Partnership Authority, if filed with the Secretary of State. This is PERMITTED, but not required, whether the Colorado LLLP is governed by the UPL (pursuant to CRS 7-60-144.5) or has elected to be governed by CUPA.(pursuant to CRS 7-64-303).

Always require and review a Certificate of Good Standing from the State of formation (if outside of Colorado).

County Clerk & Recorder:

Recordation of a Statement of Authority is preferred.

When there is a Statement of Authority already recorded with the clerk and recorder of the county in which the real property is located, that varies from the authority granted under the entity Authorization Documents, notify the parties, require, and record a new Statement of Authority.

If a Statement of Partnership Authority is recorded pursuant to CRS 7-64-303, it may be used in lieu of any Statement of Authority.

Authorization Documents of Organization of Entity:

Always require and examine a copy of the partnership agreement to confirm that the general partner(s) has the right and power to possess property. All limited partners should join in the execution of any real estate instrument, unless the Partnership Agreement (1) indicates there is authority for less than all of the limited partners to act; or (2) only requires consent of all the limited partners.

(G)  SOLE PROPRIETORSHIP

A sole proprietorship is really an individual doing business under a "trade name." Situations where an individual intends to acquire, convey, or encumber title to real property solely under a trade name raise serious concerns for title insurers. Under CRS §38-30-172, the definition of "entity" excludes an individual. Since a sole proprietorship is a business which is owned by an individual who has the legal right or exclusive title to property, a Statement of Authority is not a suitable instrument to evidence the existence of a sole proprietorship or the authority of an individual using a trade name to acquire convey, encumber, or otherwise affect title to real property.

COMPANY POLICY: Before allowing any individual to acquire, convey or encumber property using a trade name, the agent should always verify that an active Statement of Trade Name pursuant to CRS §7-71-101 is filed with the Colorado Secretary of State and a Trade Name Affidavit in compliance with CRS §7-71-108 is recorded in the real property records.

If an individual (sole proprietor) intends to acquire, convey, or encumber real property held in a trade name, we prefer the instrument affecting title to the property describe the grantee, mortgagor or grantor as "[individual name] dba [trade name]" and not merely the trade name. Example: "Grantee, John Doe d/b/a Doe Enterprises;" NOT "Grantee: Doe Enterprises."

However, vesting title in the Trade Name alone is allowed under Colorado Law and deemed marketable under Colorado Real Estate Title Standard 5.3.2 as long as the Statement of Trade Name is filed and active with the Colorado Secretary of State and a Trade Name Affidavit is recorded in the real property records.

Secretary of State:

No statutory formation requirements.

If not conducting business in own name, filing of Statement of Trade Name is REQUIRED pursuant to CRS 7-71-101.

County Clerk & Recorder (Requirements for property held in a trade name):

If the property is held in the name of the sole proprietorship under the trade name, require and record a Trade Name Affidavit with the clerk and recorder of the county in which the real property is located (CRS 7-71-108).

Authorization Documents of Organization:

N/A

(H)   JOINT VENTURES

Secretary of State:

No statutory formation requirements.

If not conducting business under the true name of each joint venture, then the filing of a Statement of Trade Name with Secretary of State is REQUIRED pursuant to CRS §7-71-101.

County Clerk & Recorder:

Always require and record a Joint Venture Affidavit when a Joint Venture intends to acquire, convey, or encumber real property in the name of the joint venture. The Joint Venture Affidavit may be recorded before or after the conveyance to the Joint Venture with the clerk and recorder of the county in which the real property is located. This does not apply to Joint Ventures, which are considered partnerships under formation rules or requirements (CRS 38-30-166 and Title Standard 6.1.1).

If the Joint Venture is an entity capable of holding title to real property, then require and record a Statement of Authority with the clerk and recorder of the county in which the real property is located (CRS 38-30-172).

Authorization Documents of Organization of Entity

The examiner must examine the joint venture agreement to determine whether there are any requirements or restrictions relating to how the joint venturers deal with real property.

(I)    UNINCORPORATED NONPROFIT ASSOCIATION

Secretary of State:

No statutory formation requirements.

If not conducting business under the true names of all the members of the unincorporated nonprofit association, the filing of Statement of Trade Name is PERMITTED but not required pursuant to CRS 7-71-107.

County Clerk & Recorder:

Always require and record a Statement of Authority when an unincorporated nonprofit association will acquire, convey or encumber or transfer real property in the name of an unincorporated nonprofit association (CRS 7-30-105 and Title Standards 6.1.1 and 6.2.1).

Authorization Documents of Organization of Entity:

Always require and review documents under which the organization operates (constitution, articles of association, charter, rules, discipline, bylaws) to determine the power and capacity of the organization to acquire, encumber or convey title to property.

(J)   FOREIGN CORPORATION

Secretary of State:

Always review a filed copy of the Statement of Foreign Entity Authority REQUIRED to transact business in Colorado (CRS. 7-90-801 and 7-115-101).

If not conducting business under the true name, then the filing of a Statement of Trade Name with Secretary of State is REQUIRED pursuant to CRS 7-71-101.

County Clerk & Recorder:

See the requirements for a Colorado corporation.

Authorization Documents of Organization of Entity:

See the requirements for a Colorado corporation.

(K)   FOREIGN LIMITED LIABILITY COMPANY

Secretary of State:

Always review a filed copy of the Statement of Foreign Entity Authority of a foreign LLC, REQUIRED to transact business in Colorado (CRS 7-90-801 and 7-80-901).

If not conducting business under the true name, then the filing of a Statement of Trade Name with Secretary of State is REQUIRED pursuant to CRS 7-71-101.

County Clerk & Recorder:

See the requirements for a Colorado LLC.

Authorization Documents of Organization of Entity:

See the requirements for a Colorado LLC.

(L)   FOREIGN GENERAL PARTNERSHIP

Secretary of State:

If not conducting business under the true name, then the filing of a Statement of Trade Name with Secretary of State is REQUIRED pursuant to CRS 7-71-101.

Review a copy of the Statement of Partnership Authority, if filed with the Secretary of State. This is PERMITTED, but not required by statute, pursuant to CRS 7-64-303.

NOTE: A foreign GP does not have to file a Statement of Foreign Entity Authority with the Secretary of State to transact business in Colorado EXCEPT when it is a foreign limited liability partnership as noted below (CRS 7-90-801).

County Clerk & Recorder:

See the requirements for a Colorado General Partnership (CUPA).

Authorization Documents of Organization of Entity:

See the requirements for a Colorado General Partnership (CUPA).

(M)  FOREIGN LIMITED PARTNERSHIP (LP)

Secretary of State:

Always review a filed copy of the Statement of Foreign Entity Authority as a foreign LP, REQUIRED to transact business in Colorado (CRS 7-90-801 and 7-62-902).

If not conducting business under the true name, then the filing of a Statement of Trade Name with Secretary of State is REQUIRED pursuant to CRS 7-71-101.

Review a copy of the Statement of Partnership Authority, if filed with the Secretary of State. This is PERMITTED, but not required by statute, pursuant to CRS 7-64-303.

County Clerk & Recorder:

See the requirements for a Colorado LP.

Authorization Documents of Organization of Entity:

See the requirements for a Colorado LP.

(N)   FOREIGN REGISTERED LIMITED LIABILITY PARTNERSHIP (LLP)

Secretary of State:

Always require a filed copy of the Statement of Foreign Entity Authority, REQUIRED to transact business in Colorado (CRS 7-90-801 and 7-64-1002).

If not conducting business under the true name, then the filing of a Statement of Trade Name with Secretary of State is REQUIRED pursuant to CRS 7-71-101.

Review a copy of the Statement of Partnership Authority, if filed with the Secretary of State. This is PERMITTED, but not required by statute, pursuant to CRS 7-64-303.

County Clerk & Recorder (Requirements for property held in entity name)

See the requirements for a Colorado LLP.

Authorization Documents of Organization of Entity

See the requirements for a Colorado LLP.

(O)  FOREIGN REGISTERED LIMITED LIABILITY LIMITED PARTNERSHIP (LLLP)

Secretary of State:

Always review a filed copy of the Statement of Foreign Entity Authority, REQUIRED to transact business in Colorado (CRS 7-90-801 and 7-64-1002).

If not conducting business under the true name, then the filing of a Statement of Trade Name with Secretary of State is REQUIRED pursuant to CRS 7-71-101.

Review a copy of the Statement of Partnership Authority, if filed with the Secretary of State. This is PERMITTED, but not required.

County Clerk & Recorder:

See the requirements for a Colorado LLLP.

Authorization Documents of Organization of Entity:

See the requirements for a Colorado LLLP.

(P)   FOREIGN NON-PROFIT CORPORATION

Secretary of State:

Always require a filed copy of the Statement of Foreign Entity Authority, REQUIRED to transact business in Colorado (CRS 7-90-801 and 7-135-101).

If not conducting business under the true name, then the filing of a Statement of Trade Name with Secretary of State is PERMITTED, but not required, pursuant to CRS 7-71-101.

County Clerk & Recorder:

See the requirements for a Colorado incorporated non-profit corporation.

Authorization Documents of Organization of Entity:

See the requirements for a Colorado incorporated non-profit corporation.

In the event that issues arise regarding entities, which are not specifically discussed here, please call State Underwriting Personnel.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
CO000037 Conveyances to Colorado Business Entities Other than Trusts
Related Bulletins:
CO000009 Limited Liability Companies in Colorado
 
CO000034 Conveyances to Trusts in Colorado
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
CO Statement of Authority 1