Title Tale: Why Title Companies “Ask So Much” – A Cautionary Tale About LLC Signing Authority
In today’s fast-paced lending environment, efficiency is everything. Lenders understandably want clean, quick closings with minimal back-and-forth. Yet title companies are often perceived as slowing things down—requesting operating agreements, amendments, resolutions, and even seemingly obscure internal documents when an LLC is involved. It can feel excessive, especially when a transaction appears straightforward on its face.
The reason for this level of scrutiny is simple: the risk of getting it wrong is far greater than the inconvenience of asking a few extra questions. What may appear to be routine is not always so once you look beneath the surface.
The following scenario is loosely based on a claim recently handled by a major title company:
The title company sued an attorney who issued a title policy on a multi-million refinance without confirming that a mortgage release was properly authorized. The release was later challenged by the LLC as fraudulent, and the title company paid nearly $1M to settle the claim. The core issue was the attorney’s failure to verify the authority of the signer of the LLC and related entities.
That’s not so much an issue with corporations, because many states, including California, have statutes that basically put their stamp of approval on corporate documents if they are signed by the corporation’s President and one other officer, usually the Secretary or Treasurer (of course, the title company still needs to verify that the signers are really the officers they say they are.)
Not so with limited liability companies. There are no statutory protections for reliance on the signatures of anyone signing LLC documents. This is where the title company’s role becomes critical. Their job is not to create additional work, but to identify and resolve risks before documents are signed and funds are disbursed. That process includes confirming how the LLC is structured, who actually has authority, what approvals are required, and whether those approvals have been properly obtained.
Perhaps most importantly, it helps to view requests from the title company in the right light. When additional documentation is requested, it is usually because a potential issue has been identified—not because one is being created. Addressing that issue before closing is far preferable to discovering it later, when the stakes are much higher.
Ultimately, investigating an LLC’s signing authority is not just a procedural step—it is a fundamental safeguard for the entire transaction. It helps ensure that loan documents are enforceable, liens are valid, and title insurance remains effective. While it may add a bit of time and attention on the front end, it provides a level of certainty and protection that benefits everyone involved.
What may seem like extra questions in the moment are, in reality, an essential part of closing with confidence.
