Issues of entity authority can be as confusing as they are common. Each kind of entity has its own documents and requirements, and sometimes multiple entities need to be examined to ensure just one party to a transaction has authority to act. Sorting it out could seem like a daunting task.
But first, why is it important? Put simply, it is because issues of entity authority are risks covered by Pennsylvania title insurance policies. An insured owner or lender may file a claim for a “failure of any person or entity to have authorized a transfer or conveyance,” (Covered Risk 2(a)(ii)), and a lender has additional coverage for “the insured mortgage not being properly … executed,” (Covered Risk 9(c)). Either one of these issues could result in a full failure of title, resulting in big claims.
The following information is intended to show why our title commitments contain the requirements they contain. Simply put, it is of vital importance that we ensure the entity executing a deed or mortgage has both actual authority to do so, and is doing so correctly. This will involve looking at the formation and governing documents to identify a person who has the power to sign on behalf of the entity in order to convey or mortgage the title. A brief summary of the items that should be reviewed foe each kind of entity follows.
