What happens when a purported seller signs the deed without actual legal authority to do so?

Whether the property is held in an LLC, a trust, or a corporation, verifying authority to convey is not optional. Without proper authority, the deed may be void or voidable, triggering title defects, litigation, and potential claims against the attorney.

Closings can unravel quickly when authority is assumed, not proven. Let’s unpack the best practices for verifying and documenting authority when selling out of business entities or fiduciary arrangements in North Carolina real estate.

Why Authority Matters

North Carolina is a “pure race” state, which means the first one to the courthouse has priority, assuming the deed is valid to begin with.

If the signer lacked legal authority to convey the property on behalf of an entity or trust, the conveyance could be:

• Void or voidable

• Subject to future legal challenge

• Uninsurable by the title company

• A breach of fiduciary duty or fraud

You can’t insure or rely on a deed signed by the wrong person.

LLCs: What You Must Confirm

Limited Liability Companies (LLCs) commonly hold investment properties and commercial real estate, but signing authority isn’t always clear.

Here’s what you need to verify:

Is the signatory a Manager or Member?

• Single-member LLCs may authorize the member directly.

• Multi-member LLCs may require manager approval or authorization under the Operating Agreement, including member consent.

Is there an Operating Agreement?

• If so, it governs who has authority to bind the LLC.

• If not, North Carolina default rules apply (N.C. Gen. Stat. § 57D-3-20).

Does the LLC still exist?

Confirm through the North Carolina Secretary of State that the LLC is active and in good standing.

Are all signatories authorized?

Even if a person is listed in filings, they lack authority to convey real property without written approval.

Key Tip: Always request a copy of the Operating Agreement and a signed resolution authorizing the sale. Title insurers typically require these documents before issuing coverage.

Corporations: Don’t Assume Officers Can Sell

Just because someone holds the position of company “President” or “CEO,” they may not have blanket power to convey real estate. Corporations must act through their board of directors or an officer with properly delegated authority.

Best practices include:

• Requesting a corporate resolution approving the conveyance and identifying the authorized signer(s).

• Verifying corporate existence and good standing through the North Carolina Secretary of State.

• Reviewing the corporation’s bylaws if there’s uncertainty about officer authority.

Note for paralegals and closing staff: Deeds should clearly reference the signer’s capacity (e.g., “Jane Smith, President of ABC Corp.”) and be consistent with the authority granted in the corporate resolution.

Trusts: The Danger of “I’m the Trustee”

Many attorneys have seen this: a seller claims to be the trustee of a family trust and signs the deed confidently. But unless the trust authorizes the sale and the trustee has express authority to sell real property, the deed may not be valid.

For revocable living trusts, title insurers typically require:

• A complete copy of the trust agreement, including all amendments, or

• A certification of trust per N.C. Gen. Stat. § 36C-10-1013.

For irrevocable trusts or older or non-standard estate-planning trusts:

• Proof that the trustee has specific authority to sell real property

• Documentation confirming the trust is in full force and effect

• Approval from all co-trustees, if required by the trust terms

Key Tip: Never rely on a trustee’s verbal confirmation. Always document the trustee’s authority in writing and confirm that the trust has not been revoked or amended in a way that affects authority.

Estate and Probate Sales: Additional Landmines

If the property is being sold from a decedent’s estate, authority typically flows from:

• A court-appointed executor or administrator

• A court order (especially if the will didn’t authorize sale)

• Statutory authority under Chapter 28A of the North Carolina General Statutes 

Confirm:

• That the estate is open and active

• That the sale is within the scope of authority granted by will, a court order, or statute

• That any heirs or devisees have not taken possession or asserted ownership of the property (which can complicate authority)

Key Tip: Even in straightforward estate sales, title insurers may require a copy of the will, letters testamentary or letters of administration, and notices to heirs. Start gathering early.

Common Mistakes That Kill Validity

• Relying on expired, revoked, or insufficient powers of attorney

• Allowing a member of an LLC to sign without verified authority

• Recording a deed from a trustee without trust documentation or a certification of trust

• Accepting resolutions without verifying the signer’s corporate role or authority

• Assuming co-trustees can act alone when the trust requires joint action

• Using outdated operating agreements that conflict with current ownership or management structure

These aren’t just technical errors. They’re title defects in the making.

Key Tips to Avoid Authority Challenges

• Always identify the type of entity or fiduciary structure

• Request internal governing documents early (Operating Agreements, trust instruments, resolutions)

• Cross-check entity status with the North Carolina Secretary of State

• Clearly document signer’s capacity in the deed and notary acknowledgment

• Keep signed copies of all authority documents in the closing file

• Loop in the underwriter early when the ownership structure is complex

While Key Title reviews entity authority as part of our standard title clearance process, attorneys are responsible for verifying authority and drafting conveyance documents..

What Title Insurance Can and Can’t Do

Title insurance may cover defects in chain of title, but it generally does not protect against:

• Fraudulent signatures or forged documents

• Conveyances made outside the scope of the signer’s authority 

• Undisclosed or revoked trust agreements

• Lack of authority that could have reasonably been discovered through due diligence

Authority verification rests with the closing attorney, making thorough documentation essential.

Key Takeaway

When you’re closing property owned by an LLC, corporation, trust, or estate, assumptions create risk.

Authority to convey must be proven, not presumed, and properly documented for the record and the title insurer. Otherwise, the deed may be invalid, and you face potential liability.

Key Title is here to support your team with entity reviews, curative actions, and authority verification before it becomes a post-closing problem.