Form-of-the-Week: Verification of Capacity to Represent Addendum – Form 252

Authority to bind a transaction participant

When a broker and their agent represent a client for the sale, lease/management or financing of real estate, it is common for a participant in a transaction to be:

  • an entity, such as a limited liability company (LLC), partnership or corporation;
  • a trust;
  • an estate, conservatorship or guardianship; or
  • an attorney-in-fact acting under a power of attorney. [See RPI Form 447]

Individuals acting on behalf of these participants to bind them to agreements in transactions are:

  • investors or syndicators controlling an entity;
  • a trustee holding title to property in trust;
  • an executor or administrator appointed by a court to manage property; or
  • an individual authorized to act under a power of attorney. [See RPI Form 447]

When an agent represents participants in a transaction which are to become bound to agreements by the signature of a separate individual, it is important the agent verifies:

  • the entity was formed and is in good standing with the state;
  • the trust, estate or guardianship was properly established; and
  • the individual signing on behalf of a participant has the authority to do so.

Further, the individual who enters into an agreement on behalf of a participant needs to provide documentation which confirms their representative capacity, along with a completed Verification of Capacity to Represent Addendum to be attached to the agreement. [See RPI Form 252]

Supporting documentation provided by the authorized individual includes:

  • an LLC operating agreement or partnership agreement [See RPI Form 372];
  • a corporate resolution;
  • a declaration of trust;
  • a court document appointing an executor or administrator; or
  • a power of attorney. [See RPI Form 447]

The Verification of Capacity to Represent Addendum — published by RPI (Realty Publications, Inc.) — is used by an agent when a participant entering into an agreement is an entity, trust, estate or guardianship, or has granted a power of attorney, to establish the identity of the participant in the transaction and verify the authority of the individual signing the agreement to bind the participant. [See RPI Form 252]

Verification of the individual’s authority by the agent establishes the individual signing an agreement on behalf of a participant is the agent of the participant and is not personally liable for performance of the agreement entered into by their signature.