Real Estate Sales Requirements: Florida Corporations & LLCs
In this article, we’ll break down:
- Key Legal Considerations When Buying and Selling Florida Real Estate
- Requirements for the Documents Used to Convey Real Estate From a Corporation
- What Happens When the Property Consists of All Assets in the Corporation?
- What Happens if the Corporation Is Dissolved at the Time of the Transaction?
- Frequently Asked Questions
Corporations and LLCs are a popular choice for real estate ownership in Florida. This can be attributed to the advantages they offer investors, including liability protection, federal tax flexibility, ease of estate planning, and potential probate avoidance.
That said, real estate transactions involving Florida corporations and LLCs can be complex and require careful attention to legal issues outlined in our laws. Here’s a review of many of the common issues you need to know about, including the statutory requirements for facilitating a sale from a corporation or LLC.
Buying and Selling Real Estate: Key Legal Considerations
There are a variety of issues surrounding the sale of real estate from a corporation, chief among which include:
Requirements for the Documents Used to Convey Real Estate From a Corporation
The basic requirements for conveying any real estate in Florida are codified in Florida Statute §689.01. Essentially, the statute only requires a written instrument (Deed), signed in the presence of two subscribing witnesses. For corporations, the statute provides flexibility; a corporation may execute any and all conveyances in accordance with the statute or in accordance with statutes 692.01 and 692.02.
Thus, to lawfully convey corporately owned real estate, Florida Statute §692.01 only requires a corporation to 1) affix the common or corporate seal to a deed and 2) have the deed signed by the corporation’s president, vice president, or chief executive officer.
Meaning, a deed from a corporation does not require witnesses. Additionally, under this statute, there is no need to record a corporate resolution to evidence the authority of the person executing the deed, and the deed is valid whether or not the officer signing for the corporation was authorized to do so by the board of directors, in the absence of fraud in the transaction by the person receiving it.
Based on these statutes, here are some lawful scenarios for conveying real estate from a Florida corporation:
- A deed signed by the corporation’s president, vice president, or chief executive officer and embedded with the corporate seal. No proof of authority from the board of directors is required, nor does it need to be witnessed.
- A deed signed by the corporation’s president, vice president, or chief executive officer in the presence of two witnesses and embedded with the corporate seal backed by proof of authority from the board of directors. If a vice president signs a deed in a current transaction in the presence of two witnesses, a corporate seal is not required, but only if the board of directors passed a resolution authorizing the vice president to sign deeds. If a similar deed is present in the chain of title, then a board resolution isn’t required.
- A deed signed by an officer other than the corporation’s president, vice president, or chief executive officer, in the presence of two witnesses, may or may not be embedded with a corporate seal only if there’s a recorded resolution passed by the board of directors authorizing this officer to execute such deeds. (DGG Development Corp. v. Estate of Capponi, 983 So. 2d 1232 (Fla. Dist. Ct. App. 2008))
- A deed involving real estate held in a trust does not require a corporate seal but must be executed in the presence of two witnesses.
- A deed conveying partnership assets, executed by a corporation as a general partner in a limited or general partnership, must be signed in the presence of two witnesses. The provisions of Florida Statute §692.01 only apply to the conveyance of corporate assets.
What Happens When the Property Consists of All Assets in the Corporation?
Under Florida Statute §607.1201, a corporation’s shareholders do not need to approve the disposition of its assets in the normal course of business.
However, Florida Statute §607.1202 requires shareholder and board approval if a corporation needs to dispose of all or substantially all of its assets if the activities fall outside the scope of the normal course of business.
Before January 1, 2020, Florida Statute §607.1201 made it mandatory to seek board approval to sell all assets or a significant portion of them. The legislative amendments made to Chapter 607 in 2019 deleted this statutory requirement.
This move meant that a corporation’s governing documents would be used to determine whether or not board approval is required before selling or disposing of company assets in the normal course of business.
Effective January 1, 2020, pursuant to the provisions of Revised §607.1202 of the Florida Statutes, the sale or disposition of all or substantially all of a corporation’s assets in the normal course of business requires the following:
- The directors pass and adopt a resolution approving the disposition of assets;
- The adopted resolution be submitted to the shareholders for their approval;
- The board provides a recommendation of the transaction or a disclosure indicating reasons for not recommending it; and
- A notice stating the disposition, a description detailing the disposition, and the consideration received for said disposition be provided, if the approval is at a meeting.
It is worth noting that proof of compliance with the regulatory procedure outlined above is generally not required unless a corporate conveyance appears in the chain of title or any other relevant record showing that the corporation was previously involved in a similar transaction involving all or substantially all of its assets.
In such instances, proof of compliance, in the form of an affidavit detailing the material facts of the statutory procedure, is required.
On the other hand, if the sale or disposition of a corporation’s assets is not in the normal course of business, the first thing to establish is whether the transaction in question involves all or substantially of its assets.
If that’s the case, the corporation must show recorded proof of compliance with the statutory procedures outlined in Florida Statute §607.1202.
The question then becomes: What constitutes “all” or “substantially all” of a corporation’s assets?
According to Schwadel v. Uchitel, 455 So. 2d 401 (Fla. Dist. Ct. App. 1984), the test is whether the sale or disposition of the assets severely limits the corporation’s ability to conduct business or destroys the fundamental objective for which the corporation was established.
What Happens if the Corporation Is Dissolved at the Time of the Transaction?
Real estate conveyances involving dissolved corporations are governed by the provisions of Florida Statute §607.1405.
According to this statute, “a corporation that has dissolved continues its corporate existence, but the dissolved corporation may not carry on any business except that appropriate to wind up and liquidate its business and affairs.” For example, selling real estate that will not be distributed in kind to its shareholders is permitted.
Please note, there are separate rules apply depending on whether the real estate in question is:
- Transferred to a dissolved corporation;
- Transferred from a dissolved corporation; or
- Transferred to or from a corporation while it is in the dissolution process.
What Should You Do?
Real estate transactions involving Florida corporations or LLCs can have serious legal implications when not conducted properly. The parties should understand the process, including the statutory requirements and procedures involved.
A good piece of advice is to seek professional guidance when buying or selling property from a Florida corporation or LLC, which is a good way to ensure a smooth and seamless transaction.
Frequently Asked Questions (FAQs)
Do I need special authorization to sell property from a Florida corporation or LLC?
You do not need special authorization to dispose of a corporation’s assets in the normal course of business. However, the provisions of Florida Statute §607.1202 require shareholder and board approval if a corporation needs to dispose of all or substantially all of its assets when the activities fall outside the scope of its normal course of business.
Do I need to update state filings after selling property from a Florida corporation or LLC?
Yes, if you are withdrawing or dissolving the business, then you should file articles of dissolution with the Division of Corporations.
Can I sell property from a dissolved corporation or LLC?
A dissolved corporation will continue its corporate existence for the sole purpose of winding up its business affairs and liquidating its assets. This includes disposing of property and other assets that won’t be distributed in kind to shareholders. Real estate conveyances involving dissolved corporations are governed by the provisions of Florida Statute §607.1405.
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