We’ve all been there. You sit on the Board of a local non-profit organization as the token lawyer. Or, you volunteered to assist with your house of worship’s finance committee because you have some practice experience with banks. Inevitably the scenario comes up: “You’re a lawyer. Will you help us buy that little piece of property next to the parking lot? The parcel is so small. It won’t take up too much of your time…”
Before you volunteer your time (and the benefits of your professional license) consider the following:
- If you decide to take on a real estate project for a non-profit organization, require the entity to hire an abstractor to run a complete abstract of title. Many times even seasoned lawyers believe they can adequately search the public records to “see what’s out there,” and most times they come up short. Strongly urge your non-profit group to pay for a professional abstractor. This professional is well acquainted with the nuances of searching the public records, and the cost of an abstract should be considered a necessary expense. Not only will an abstractor provide information on the ownership of property, but an abstractor should also provide information about servitudes, rights or way or other encumbrances that might make property substantially less valuable than it appears!
- Don’t forget to check the organization’s documents or applicable laws to determine who has authority to act. Non-profits and houses of worship typically have organizational documents that set forth the precise procedure for buying, selling or encumbering property in the name of the organization. In the event that the organization’s documents are silent, each type of organization has procedures set forth in the applicable Revised Statutes. These proper steps are critical to successfully completing a transaction. In certain instances, authority for a specific entity requires unanimous approval by all members of the organization. It is never safe to assume that the Organization’s President or the Church’s Pastor has authority to sign documents in the name of the organization.
- If your organization is buying property, consider having the entity purchase Title Insurance. Title insurance is a form of indemnity insurance which insures against financial loss from defects in the title to immovable property. It defends against a potential claim attacking the title or reimbursing the insured for monetary loss incurred, up to the dollar amount of the insurance provided by a policy. There is a one-time premium for title insurance and it will provide coverage so long as the purchaser has an insurable interest in the property.
- There are no short cuts. Remind all parties involved (repeatedly, if necessary) that real estate work can take a long time. The conveyance of property will include, at the very least, obtaining the property authority, researching title issues, negotiating a transfer (including a purchase price and additional accessory obligations) and moving through a successful closing. If there are title defects or problems associated with a piece of property, it can take an extended period of time to resolve the issues. Even the easiest and fastest of real estate closings require substantial cooperation by all involved.
- When in doubt, call a professional! Fast/easy/simple/quick/etc. projects often snowball into enormous traps for your time and patience. If you feel a project spinning out of control or you encounter issues that you do not feel qualified to investigate and resolve, call a real estate attorney. Encourage your non-profit organization or house of worship to hire an attorney to represent their best interest. A professional versed in business or real estate law can likely efficiently resolve negotiation and title issues.
We all recognize that non-profit organizations would like to keep an eye on expenses associated with legal work. Despite the best intentions, organizations can quickly fall into a situation where they’ve inadvertently created more problems by trying to save money relying upon “volunteer” legal advice. Accept these sorts of projects with the above advice in mind, and remember to ask for help if a project exceeds expectations.