Bill Text: IA HSB208 | 2013-2014 | 85th General Assembly | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: A study bill to establish requirements relating to the transfer of an interest in real estate by or on behalf of certain entities formed or organized on a profit, cooperative, or not-for-profit basis, and including warranties and a limitation on actions.

Spectrum: Unknown

Status: (N/A - Dead) 2013-03-07 - Voted - Judiciary. [HSB208 Detail]

Download: Iowa-2013-HSB208-Introduced.html

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House Study Bill 208 - Introduced
HOUSE FILE _____
BY (PROPOSED COMMITTEE
ON JUDICIARY BILL BY
CHAIRPERSON BALTIMORE)
A BILL FOR
An Act to establish requirements relating to the transfer
of an interest in real estate by or on behalf of certain
entities formed or organized on a profit, cooperative,
or not-for-profit basis, and including warranties and a
limitation on actions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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DIVISION I
STATEMENT OF AUTHORITY
Section 1. Section 486A.303, subsection 7, Code 2013, is
amended to read as follows:
7. Unless earlier canceled, a filed A statement of
partnership authority is canceled by operation of law five
years after the date on which the statement, or the most
recent amendment, was filed with by the secretary of state
is effective until amended or canceled, unless an earlier
cancellation date is specified in the statement .
Sec. 2. Section 489.302, subsection 10, Code 2013, is
amended to read as follows:
10. Unless earlier canceled, an effective A statement of
authority is canceled by operation of law five years after the
date on which the statement, or its most recent amendment,
becomes effective filed by the secretary of state under section
489.205, subsection 1, is effective until amended or canceled
as provided in subsection 2, unless an earlier cancellation
date is specified in the statement . This cancellation operates
without need for any recording under subsection 6 or 7 .
Sec. 3. Section 501B.7, subsection 7, Code 2013, is amended
to read as follows:
7. Unless canceled earlier, a filed A statement of authority
and its most recent amendment expire five years after the
date of the most recent filing filed by the county recorder
as provided in subsection 2 is effective until amended or
canceled, unless an earlier cancellation date is specified in
the statement .
DIVISION II
LIMITED LIABILITY COMPANIES
Sec. 4. NEW SECTION . 489.407A Real estate interest
transferred by limited liability company or foreign limited
liability company.
1. A transfer of an interest in real estate situated in this
state held by a limited liability company or a foreign limited
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liability company authorized to transact business in this state
is subject to the provisions of this section.
2. a. In a member-managed company, a transfer of an
interest in real estate held by the company may be undertaken
by any of the following:
(1) As provided in the operating agreement, or if the
operating agreement does not so provide, only with the consent
of all members.
(2) As provided in a statement of authority filed by the
company with the secretary of state and the recorder of the
county where the real estate is situated pursuant to section
489.302.
b. A requirement of paragraph “a” is applicable to every
transfer of an interest in real estate situated in this state
held by a member-managed company, whether or not the transfer
is in the ordinary course of the company’s business.
3. a. In a manager-managed company, a transfer of an
interest in real estate held by the company may be undertaken
by any of the following:
(1) As provided in the operating agreement, or if the
operating agreement does not so provide, only with the consent
of a majority of all managers.
(2) As provided in a statement of authority filed by the
company with the secretary of state and the recorder of the
county where the real estate is situated pursuant to section
489.302.
b. A requirement in paragraph “a” is applicable to every
transfer of an interest in real estate situated in this state
held by a manager-managed limited liability company, whether
or not the transfer is in the ordinary course of the company’s
business.
DIVISION III
TRANSFERS BY ENTITIES —— WARRANTY AND STATUTE OF LIMITATIONS
Sec. 5. NEW SECTION . 558.72 Real estate transfers by
certain entities.
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1. As used in this section, unless the context otherwise
requires:
a. “Entity” means any of the following:
(1) A partnership, limited liability partnership, or
foreign limited liability partnership as provided in chapter
486A.
(2) A limited partnership, foreign limited partnership,
limited liability limited partnership, or foreign limited
liability limited partnership as provided in chapter 488.
(3) A limited liability company or foreign limited
liability company as provided in chapter 489.
(4) A corporation or foreign corporation as provided in
chapter 490 or a nonprofit corporation or foreign nonprofit
corporation as provided in chapter 504.
(5) A cooperative association as provided in chapter 497
or 498; an association, corporation, or foreign corporation
as provided in chapter 499; a cooperative as provided in
chapter 499A; a cooperative as provided in chapter 501; or a
cooperative or foreign cooperative as provided in chapter 501A.
(6) An unincorporated nonprofit association as provided in
chapter 501B.
b. “Instrument transferring an interest in real estate” means
a deed, real estate contract, lease, easement, mortgage, deed
of trust, or any other instrument used to effect the transfer
of an interest in real estate situated in this state by any act
to sell, transfer, convey, assign, lease, mortgage, or encumber
the interest in the real estate.
2. An instrument transferring an interest in real estate
situated in this state by an entity, unless clearly and
conspicuously provided to the contrary in the instrument,
includes a warranty to the transferee by the person executing
the instrument of all of the following:
a. That the transferor entity is in existence at the time of
the transfer.
b. That the person executing the instrument has been duly
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authorized by the transferor entity to execute the instrument
on behalf of the entity.
c. That the person executing the instrument has the legal
capacity to execute the instrument.
d. That the person knows of no facts or legal claims that
might impair the validity of the transfer, including whether
the instrument was given in the ordinary course of business.
3. An action to invalidate a transfer of real estate by deed
or real estate contract by an entity shall be subject to the
time limitations set forth in section 614.14A.
Sec. 6. NEW SECTION . 614.14A Real estate interests
transferred by entities.
1. As used in this section, unless the context otherwise
requires:
a. (1) “Adverse claim” means a claim that the transfer
of an interest in real estate to a transferee is invalid and
should be set aside based on an allegation that the execution
and delivery of a deed or real estate contract was not
authorized by the entity.
(2) “Adverse claim” does not include a claim that a deed or
real estate contract purports to transfer a greater interest
than the entity legally could transfer.
b. “Entity” means the same as defined in section 558.72.
2. A transfer of an interest in real estate situated in this
state by an entity by a deed or real estate contract is subject
to the provisions of this section.
3. a. With regard to any deed or real estate contract
executed by an entity and filed of record with the recorder
of the county in which the real estate is situated, which is
recorded prior to the effective date of this Act, the holder of
an adverse claim shall not file an action, at law or in equity,
to enforce the adverse claim or to invalidate such transfer two
years after the effective date of this Act.
b. With regard to any deed or real estate contract executed
by an entity and filed of record with the recorder of the
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county in which the real estate is situated, which is recorded
on or after the effective date of this Act, the holder of an
adverse claim shall not file an action, at law or in equity, to
enforce the adverse claim or to invalidate such transfer more
than two years after the date of recording of the instrument.
4. This section shall not be construed to limit any personal
action against a person who executed an instrument purportedly
transferring an interest in real estate on behalf of an entity
for damages based on a claim arising out of an allegation that
the execution and delivery of the instrument was not authorized
by the entity or that a warranty required in section 558.72 was
false.
EXPLANATION
GENERAL. This bill addresses issues involving the execution
of instruments conveying an interest in real estate by certain
entities, including by providing for filing statements of
authority, creating a general warranty, and creating a statute
of limitations.
BACKGROUND. The bill amends provisions which relate to
business entities (referred to as “entities”) that are formed
under the laws of this state or organized under the laws of
a different state, and allowed to do business in this state,
by filing certain documents with the secretary of state and
conducting operations in a manner consistent with those laws.
In the case of a domestic entity, the secretary of state
recognizes its existence and in the case of a foreign entity,
the secretary of state authorizes its right to do business in
this state. Each of the various types of business entities
is governed by a separate Code chapter, often derived from
legislation proposed by national organizations such as uniform
acts by the national conference of commissioners on uniform
state laws including the revised uniform partnership Act herein
referred to as “UPA” (Code chapter 486A), the uniform limited
partnership Act referred to as “ULPA” (Code chapter 488),
the revised uniform limited liability company Act referred
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to as “RULLCA” (Code chapter 489), and the revised uniform
unincorporated nonprofit associations Act referred to as
“RUUNAA” (Code chapter 501B). Alternatively, several Code
chapters derive from model legislation proposed by the American
bar association including the Iowa business corporation Act
referred to as “IBCA” (Code chapter 490) and the revised
Iowa nonprofit corporation Act referred to as “RINCA” (Code
chapter 504). Iowa uniquely includes a number of Code chapters
governing cooperative associations, sometimes simply known
as cooperatives, including several types of cooperatives
originally chartered before July 1, 1935 (Code chapters 497
and 498), and those sometimes referred to as traditional
cooperatives (Code chapter 499) or closed cooperatives (Code
chapter 501). Iowa also recognizes a type of cooperative,
a cooperative-corporation, under the Iowa cooperative
associations Act referred to as “ICAA” which in some form has
been enacted in other states (Code chapter 501A). A special
chapter governs multiple housing organizations organized on
a cooperative basis (Code chapter 499A). Notwithstanding
that these chapters originate from different sources, their
provisions are often very similar.
TRANSFER OF REAL ESTATE —— STATEMENT OF AUTHORITY. The
bill amends provisions in the UPA, RULLCA, and RUUNAA, that
allow an entity to file a statement of authority with the
secretary of state or in the case of RUUNAA a county recorder.
The statement serves to establish a person who has authority
to execute a deed or other instrument conveying an interest
in real estate on behalf of the entity. The bill changes
the effective time period of a filed statement of authority.
Currently, the statement is canceled by five years after the
date the statement became effective. The bill provides that
the statement is effective indefinitely until amended or
canceled, unless an earlier cancellation date is specified in
the statement.
TRANSFER OF REAL ESTATE BY LIMITED LIABILITY COMPANIES.
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The bill amends provisions in the RULLCA by providing that a
member-managed or manager-managed limited liability company
may provide for the transfer of an interest in real estate
as provided in the company’s operating agreement, or with
the consent of all the company’s members or majority of all
managers, or as provided in a statement of authority.
TRANSFER OF REAL ESTATE BY ENTITIES —— WARRANTY. The bill
provides that unless clearly and conspicuously disclaimed in
an instrument transferring an interest in real estate situated
in this state by an entity, the instrument (e.g., deed, real
estate contract, lease, easement, mortgage, or deed of trust),
includes a warranty that the entity is in existence at the time
of the transfer, the person executing the transfer instrument
has been duly authorized by the entity to execute the transfer
instrument on behalf of the entity, the person executing the
transfer instrument has the legal capacity to execute the
transfer instrument, and the person knows of no facts or legal
claims that might impair the validity of the transfer.
TRANSFER OF REAL ESTATE BY ENTITIES —— STATUTE OF
LIMITATIONS. A statute of limitations establishes a length
of time during which a person may pursue a legal remedy for a
wrong, often measured from the date that the wrong occurs. One
feature of a statute of limitations applied against real estate
claims is that it affects marketability of title.
The bill addresses a claim alleging that a transfer of real
estate by an entity was invalid and should be set aside. Under
current law, after 1992, certain claims involving real estate
must be brought within 10 years after the claims first arose
(Code section 614.17A), but the time period is not applicable
in some cases to minors or persons suffering from mental
illness (Code section 619.19) or to spousal dower rights (Code
section 614.20). The statute of limitations is one year for a
transfer involving a trustee (Code section 614.14).
The bill establishes a two-year statute of limitations by a
person for challenging the authority of a person who executes
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a deed or real estate contract on behalf of an entity. The
holder of an adverse claim for a deed or real estate contract
executed and recorded prior to the effective date of the bill,
must file an action within two years after the effective
date. Otherwise, the holder must file an action two years
after the recording of the instrument. The bill affects the
real estate’s marketable title. The bill does not affect an
entity’s claim for damages against a person who did not have
the authority to transfer an interest in the entity’s real
estate.
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