By Stephen Saler, principal and co-founder,
Langdon Title Agency, LLC
Langdon Title Agency was recently asked to insure the purchase of a mixed-use property in Brooklyn, NY.
Upon our review of the abstract of title, we noted that some time in April of 2006, a New York limited liability company (Company A) conveyed its interest in the property to another New York limited liability company (Company B) for over $16 million.
We then discovered that no more than three months later, Company B conveyed its interest in the Property to a third New York limited liability company (Company C”) for no consideration.
This no-consideration deed was executed by one member of Company B. The insurable transaction before us was for the purchase of the Property from Company C.
Langdon Title first reviewed the no-consideration deed from Company B to Company C. In an effort to ensure that this conveyance was properly authorized by Company B, we requested that Company B provide us with their operating agreement (along with any amendments) and a resolution pertaining to the transaction.
The operating agreement indicated that any and all transactions related to the Property had to be approved by both members of Company B. Company B was not able to provide a resolution confirming that all members had approved the transaction.
Furthermore, as the deed only contained the signature of one of the members, we asked to speak to the other member to confirm that she had authorized the transaction and would provide written confirmation of such authorization.
Upon Langdon Title’s request for the other member’s contact information, the seller’s attorney was very hesitant in sending her contact information and even suggested to the purchaser’s attorney that the transaction be moved to another title company that would insure without this proof.
Obviously the purchaser’s attorney became quite skeptical and refused the seller’s attorney’s suggestion.
Our counsel was able to retrieve the contact information of the other member. She told us that she did not authorize the transaction and that she was planning to sue the other member on numerous grounds.
Langdon Title informed the purchaser’s attorney that the transaction would not be insurable under the circumstances given that there was potential fraud occurring as the no consideration transfer between Company B and Company C was not properly authorized and actually being contested.
Based on our diligence, the purchaser terminated the contract with the seller. One month later, the non-signing member of Company B brought an action to quiet title.
By engaging in diligent underwriting, Langdon Title helped the potential purchaser avoid a future loss and imminent title claim.