CORPORATIONS AND REAL ESTATE TRANSACTIONS

Generally, a corporation has the power to sell and mortgage real estate to which it has legal title. The power of a corporation to convey real estate may be limited, however, by provisions of its own charter, articles of incorporation, or by-laws. These instruments should be examined for possible limitations whenever you have a transaction involving a deed or mortgage from a corporation.

In addition to reviewing the corporate documents to determine if there is authority to convey property, it is necessary to determine that the officer acting for the corporation has the authority to execute the deed and/or mortgage. When the sale or mortgage is in the ordinary course of business (i.e., the transaction does not involve a sale of all or substantially all of the corporation's assets), it is usual to obtain and record a certificate of the clerk of the corporation stating that there was a vote of the directors authorizing the officer(s) to act on the behalf of the corporation. If the sale or mortgage is not in the usual course of business, you should obtain a clerk's certificate stating that the person signing on behalf of the corporation is authorized and directed to do so by a vote of not less than 2/3 of all the stockholders in the corporation.

In Massachusetts, you may rely on the apparent authority of the signatories assuming three conditions are met. First, the corporation must be in existence. Second, you must rely on the instrument in good-faith and have no knowledge of the lack of authority of the signatories. Finally, the instrument must be signed by the president or vice president and the treasurer or assistant treasurer. For further information, see Massachusetts Conveyancers Association Title Standard No. 11 and Mass. Gen. L. c. 155, §8, Mass. Gen. L. c. 156B, §115 and Mass. Gen. L. c. 180, §10A.