Need your help on an LLC owernship process question

General Real Estate Investing
1

I have a situation would love to get help on. There is a piece of property owned by an LLC of which I am a member. A former member is attempting to sell this piece of property; he currently has no ownership in the LLC (assigned his share to another member). We found out by happenstance (from a neighbor) that this sale process is underway (it is thankfully not very far along).

Here’s my questions. If this person, call him Bob, goes to a real estate agent and states he is the operating manager of this LLC and wishes to sell the property, what kind of verification would a real estate agent typically do? Would they request a copy of the Operating Agreement?

Secondly, if the real estate agent proceeded and listed the property and it sells, would this fraud be uncovered in the title search process? Would someone uncover that he is not a current member of the LLC - it seems like the only way this can be verified is through the Operating Agreement which is not filed anymore. Plus, he could produce a fake Operating Agreement?

Last question, assuming we stop this sale process (and we will now that we know about it), what can be done to keep him from doing this again? The LLC owns several properties.

Yes, we know Bob is devious and evil. That’s why he is out of the LLC.

2

Hi,

 Is this real estate LLC actually owner of the property and the LLC name is written on the deed?

You need to call the title company and verify the property parcel number is your LLC’s property and then notify them this guy does not own any part of the LLC and that the property is not for sale, that this guy is committing fraud. Then notify the police, prosecutors office, real estate brokerage involved and any other related parties.

It is not the real estate brokerage who would require upfront proof, it’s the title / escrow company.

Who has your corporate package that includes your records and your corporate seal? Is this corporation (LLC) in good standing with the state? Who would be your managing member?

As you probable know an operating agreement could be copied, but a corporate seal and legal standing with the state can not be duplicated. (Names recorded with the yearly state filing.)

The LLC has to file every year and pay the yearly state fee’s and provide a legal process of service party to receive any mail or documents in the corporate name! Are you sure that 50.001 percent of current unit holders did not agree to a sale? They don’t have to necessarily notify unit holders unless you operating agreement calls for it, otherwise the property can be sold and you get a check without any notice.

How many members are unit holding parties in this LLC? Have you gotten ahold of the managing member and all other members?

If the title / escrow company finds a corporate entity on the deed they will look for the filed officers / managers names of record for 2015 / 2016 and will only allow a listed officer sign for the corporation! Plus their will need to be an authorization according to the operating agreement that states when and how an asset can be sold and who must agree to the sale?

If you and 50.001 percent of LLC unit holders want the sale stopped it’s easy to do, and you stop future action by getting an attorney, the police and city, county and state attorney’s involved in charging this guy with attempted fraud! He can’t do much from jail.

But if you have a bunch of members and say 17 out of 65 hold over 50.001 percent, they could authorize a sale without anyone else knowing if there is no notice provision in the operating agreement? In fact you would get a potential check only if the operating agreement called for disbursing sale proceeds to members, if not revenue would go into a bank account until that time the operating agreement calls for disbursement.

Could this be only on the dissolution of the LLC that all proceeds are dispersed? Only you know? Did you read the operating agreement in whole?
Does a corium have the ability to re-write the operating agreement with 50.001 percent of unit holders?

Are you sure Bob is out of the LLC or is he actually owner and beneficiary of the “Big B Trust” who owns 51% of the units and therefore can take action as a controlling party? Could Bob have bought out one of the other members and created a hostile owner group of 50.001 percent?

                 GR
3

Hi GR, thanks very much for your note.

Let’s see. The land is deeded to the LLC, no issue there.

When you say we need to call the title company, not sure what title company you are referencing? The “sale” has not occured - we just know that Bob is talking with the realtor about selling the land. When would a title company get involved?

My brother has all of the LLC records - not sure he has a seal. The LLC license is up to date and valid. This is in North Carolina. I am not sure the LLC owner names are filed with the annual filing.

All of the members are aware of what Bob is trying to do and he is for sure not a member of the LLC. He used to own this land and we are guessing he showed an old deed to the realtor. I guess the main question is what kind of verification does a real estate agent/broker do prior to listing a piece of real estate? If they looked up the current owner (the LLC) and then did a search on that LLC on the state data base, they would see that Bob is not listed as an owner of the LLC. Would a real estate agent/broker typically do this verification or would they wait until later in the process.

We are getting this stopped by writing a letter to the real estate agent. Question is - can he try this again with a different real estate agent, could he try to do this with other properties the LLC owns. We (the LLC members) only found out about this by happenstance - the real estate agent wrote to the neighbors asking about access and one of the neighbors contacted one of the LLC members. Any ideas on how to stop this before it starts. Thanks again for your detailed reply.

4

Hi,

A title / escrow company is selected and title / escrow opened when a contract is excepted.

Are you positive Bob is talking about your parcel and not a parcel abutting or adjacent to your land? Actually there is nothing illegal about talk providing Bob does not take action! How do you know Bob talked with a realtor about selling the land? Are you sure?

When an Corporate entity is originally filed the corporate kit that comes with your corporation (Provided it was offered by the company that filed for you) normally has a metal stamp which looks like a pair of Pliers with a big circle with a raised embossed circle with the year of incorporation, the company name and state on the seal.

No, talking does not constitute a crime!

Let’s use a well known corporation as an example, say Microsoft - The officers and directors listed are say 19 people, just because 19 people are listed on the state records does not mean someone did not just buy up 51% of the stock before yesterday secretly and now Mr. 51% controls the company, all 19 people listed keep their jobs, they now take there orders and direction from Mr. 51%.

Call this agent who has been talking to Bob and have a direct discussion with them if this person is a broker? If they are just an agent and have a managing Broker overseeing transactions then call the broker and have a conversation with the broker regarding there agent and Bob. Notify the state real estate board if the broker does not take it seriously!

Talking is not illegal, signing a listing agreement saying your the owner is!

Why would you write a letter? Get on the phone and talk to the agents Broker now!!!

Record a notice in the county recorders office on every property you own that there has been actions taken to defraud you as owner and that careful consideration is required to verify the owners and know this is a legitimate action before listing or titling / escrowing this property! Signed - Savannah for Savannah21 LLC.

Call the police, have a report taken and make sure you or your attorney talks with the city, county and state prosecuting attorney about this guy and if necessary get a court order for him to cease and desist!

Don’t wait, become pro-active and get on the phone and raise holy hell to protect your property!!!

               GR
5

If the deed was filed with the county clerk (or whoever in your state) then the title co will see that he has an old deed and order a full stop.

If he has a current deed, and is pretending to be a managing member, then at some point I would expect the title co to ask for the operating agreement, managing member resolution and agreement, and various other LLC documents… and order a full stop.

If he is moving forward with forged documents, then it is possible the title co will close, and you will have to bring suit to recover.

best bet is to have an atty send him a “cease and desist” asap, as well as copy the title co.