Q: I have been approached to take a Listing on a prime two-acre parcel that is owned by a Partnership. There are only two partners and each owns 50 percent of the general and limited partnership interests. The partners are siblings who have never gotten along and they cannot agree as to what is to be done with the Property. Can I safely list the Property for sale with only one of the partners signing the Listing? The other partner, who does not want to sell, is well known in our community because he frequently files lawsuits and I am afraid he will sue me.
A: You should not take a listing if the “owners” cannot agree as to what is to be done with the Property. Getting in the middle of a long-standing feud, especially if any of the feuding parties are known to be litigious (i.e., they file many lawsuits), is the perfect recipe for a troublesome lawsuit that could take years to resolve. Even if you are not named as a party to such a lawsuit, you could become a witness which will necessitate a great deal of time and effort on your part with no guarantee that you will ever get the listing.
In this particular instance, you legally cannot take the listing. California Corporations Code §15904.06(a) requires majority consent to act on behalf of the Partnership. With both partners owning 50% of the partnership, neither partner can individually provide the majority consent necessary for the Partnership to list the Property for sale.
Unless the Partnership Agreement provides for a mechanism to have a neutral third-party quickly resolve such disputes (a mechanism which may not work or may not be properly provided for in the Partnership Agreement), both partners would need to agree to list the Property for sale with your brokerage before you could safely take the listing.
The best course of action for the partner who wants to sell is to consult with a qualified California real estate attorney regarding that partner’s legal rights if the two partners cannot work cooperatively with each other. Unless and until there is a final resolution of the Partnership dispute, you should not attempt to list the Property.
PRACTICE TIPS
- If you are asked to take a listing on real property owned in the name of an entity (such as a Corporation, Limited Liability Company, or Partnership), the first critical step is to obtain the documentation regarding the entity that owns the Property (such as the Partnership Agreement) before anyone signs the Listing Agreement.
- The documentation regarding the entity needs to be reviewed by a Title Officer to determine all three of the following issues:
(a) Who is legally authorized to act on behalf of that entity so as to sell the Property?
(b) How many of the individuals who are legally authorized to sell the entity’s real Property must sign the deed transferring title?
(c) Is any additional documentation, such as an authorizing resolution, needed to sell the Property?
- Whatever the Title Officer will need to ensure that the individual(s) signing the documents can transfer title to the Property to a new owner is exactly what the Listing Agent will need to ensure that there is a legally-enforceable Listing Agreement. Whoever is legally required to sign the deed on behalf of that entity will be the individual(s) who must sign the Listing Agreement.
- Once you know who must sign the Listing Agreement and what documentation is needed, use the CAR Representative Capacity Signature Disclosure for Sellers (Form RCSD-S) with the CAR Listing Agreement or use a Listing Agreement form that has the Representative Capacity Signature provisions built into the form such as the PRDS® Exclusive Authorization and Right to Sell (Form EXA Rev. 8/18).
This Weekly Practice Tip is an attorney-client privileged document for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
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