Who can sell a property when the owner is an inactive LLC?

General Real Estate Investing
1

I recently came across a property that had an LLC as the current owner on the deed. (Texas). I tracked down one of the directors and he was surprised to learn the property was still in the name of the LLC as he and the other primary director had a pretty bad falling out and he thought the LLC had been dissolved. I explained how I located him and that Title searches still show the LLC as the owner and that ‘someone’ has been paying the taxes for the past few years; although the city has two liens on the property for mowing. The status of the LLC is reported as ‘inactive’ in state records.

So who can sell the property? Can this director sign the necessary papers? He and I are both trying to figure this out b/c he wants his name cleared from the property and he would be happy to sign the property away. I now have the contact info for the partner but not sure if I should contact him yet if we only need the first director to sign; given the sour nature of their breakup.

thanks!

2

Hi,

What typically happens is the other managing partner probable signed a quit claim deed for the property to himself or another entity prior to the LLC going into default, this would explain why the other managing partner thought this property was no longer in the LLC at the time it went into default with the Secretary of State, however the other partner or current owner has evidently never recorded the quit claim deed and thus title and property tax bill still show up in the LLC name, even though the LLC no longer owns it.

No the old managing partner you found can not sign anything as this corporate entity (LLC) is no longer a valid entity! The person who can sell this property is the person who possesses a unrecorded document conveying title! Follow the property taxes and who pays them and you have the possessor of the unrecorded documents!

But since someone who is obviously an investor has been paying taxes on this property don’t expect them to be willing or desire to sell this as there is some reason this person has been paying the taxes and holding it?

Good luck,

             GR
3

Okay, thanks, that is similar to what I think is going on except the director I’m in touch with right now is the only one left on the records. I’m going to offer to pay for the next steps; reinstate the LLC, file old tax returns so he can sell me the property. We’ll first make sure of what is going on with the prior director and make sure he has no claims or if he does, try to get that worked out through the title company.

I wonder if I can go ahead at this point and write up a contract and get a Title company to start their process to at least tie up the property until we can get the LLC issues worked out. At the very least it will put a cloud on the title if the inactive partner attempts to block or do anything with the property and will give us the info on the city lien amounts and mortgage balance.

thanks!

4

Hi,

The LLC can not be reinstated unless all (Everyone) who was part of this LLC agrees to it being reinstated as every person who owned a percentage of this LLC's interests is a party to potential property!

You would be foolish to spend what could be thousands of dollars for reinstatement to bring this thing into good standing only to find out the other partner had a quick claim deed notarized and signed in 2008 for example conveying him or her self the property from the LLC to John or Jane Doe!

How do you write a contract as there is no LLC and nobody to legally sign for the LLC! Who do you present a contract to? The old partner just opens a can of worms and could end up with millions of dollars in liability signing a document (Contract) when there is no legal entity to sign for! In fact the District Attorney’s Office will consider this Fraud!

As this partner and all other partners might have been able to sign documents when this was a legal LLC, but this thing does not exist any more, do you understand this???

This LLC could not even be reinstated unless all of the original owners agree to it, it can not be reinstated by just one partner!

Inactive, everyone is inactive because no one still owns any interest in a corporate entity originally filed as an LLC!!!

I just said to you in my first (1st) posting “Who ever has been paying the property taxes I guarantee you has a signed and notarized Quit Claim Deed signed to themselves which was never recorded”. Why do you think someone would pay property taxes if they did not believe they had legal rights to it?

I have properties I control which were Quit Claimed to me in which I have never recorded the original documents because the property is sitting vacant and for tax reasons or because our corporate entity is not currently legal to do business in a different state we have not recorded title! Sometimes title is not recorded right away because of a divorce, bankruptcy or because if legal ownership were known a creditor could step in and place a lien on the property!

I can appreciate you want to buy a property but don’t put this LLC member in a position where he breaks the law or signs to something he can not legally sign!

In an LLC they are know as “Managing Member”, as a director (Board of Directors) is a corporate entity known as a C or S Corporation!

The LLC can not be re-instated by any state without all members agreeing to the entities re-instatement which would mean all partners would have to sign and agree, if these two members had a falling out I can guarantee you the other does not want to be back in business with the member you found!!

Quit Claim Deed

We The People LLC deed our interest in real property at 12345 East West Central Street, Anywhere USA 98765

To John Doe on this first day (1st) of June 2008!

       John Doe signing                                                                    John Doe
       for The People LLC  
            SELLER                                                                               Buyer

Notarized by Dated June 1, 2008

Sahara Parker
My commission expires 6/1/2010
:smile

                    GR
5

Okay, I hear you, but “Calm Down.” The situation is not as dire as you’re warning. Trust me, no one is going to do anything illegal. There are only two members of the LLC and both want this one resolved and put to rest (not to mention their wives!). There was no Quit Claim deed signed by either party so neither can sign without first going through the proper steps in Texas.

I’ll work with both to file the necessary paperwork to get the LLC reinstated, file the correct IRS tax forms for the past 2 years, and then get the property under contract. This will be a win-win for everyone when we are finished. Or else I’ll just walk away if there are any questionable issues or if the partners decide they want to lawyer up on this one. The property is not worth fighting over; it’s a small 3-2 ARV ,$90k, unoccupied and just gathering city liens for mowing. Just so happens it’s right next to a home I just bought to flip so it would be nice to have the property cleaned up a bit.

6

buy the LLC. reinstate it yourself and do what you want with the property that the LLC owns.

7

Better listen to Gold River.

Most all real estate investors/buyer/speculators, etc…fail to understand one simple rule of law.

A DEED DOES NOT HAVE TO BE RECORDED TO CONVEY TITLE.

It only has to be delivered during the live of the grantor.

Whomever the director deed to is the owner and probably the one paying the taxes.

DO NOT waste your $$$ until you find out who can deliver title to you.