Print Posted on 12/10/2016 in Notary News

Commercial Loans Come with Representative Capacity Notarial Certificates

Commercial Loans Come with Representative Capacity Notarial Certificates

The questions this article will answer are:

  • Where might you see representative capacity certificates?
  • What is an entity?
  • What does representative capacity mean?
  • What do their signature lines look like?
  • What do their notarial certificates look like?



If you spend much time reading or interacting in online notary forums, you have undoubtedly read, “I can’t notarize capacity,” or “I can’t certify capacity.”  

   Texans, cover your eyes!   

These statements generally come from notaries who are in California.  My understanding is that in California, notaries are not allowed to complete a notarial certificate that states a position or capacity like attorney-in-fact or president.  California notaries can’t indicate the position or title that the signer has or the name of the company.

In Texas, when appropriate, we do indicate this information on a notarial certificate and notaries should have a working knowledge of how the certificate should be filled out if it is not already completed for him or her at the table.  

I realize, however, these words mean nothing to someone who hasn’t had a little experience working in a field where business entities or powers of attorney were important to the notarial certificate.   So, I’m going to pause and to lay a little ground work, but I’m not going to get technical about what different entities do or why they are formed.  (You can look those up on Google easily.) 


Where might you see representative capacity certificates? 

If you do any commercial loan work, you already know the answer to this question! Commercial loan documents aren't the only types of documents that you'll see these with, but commercial loans are the primary reason that I want to bring up the subject. 

All of Notarydom is abuzz after reading about lucrative commercial signing appointments in the National Notary Association's recent article:  Give Your Business A Boost With Commercial Real Estate Signings
(Great article Kelly Rush!)


Get on the Commercial Loan Email List!

I'm rounding up documents to create a commercial loan package right now so we can have a mini-training session.   (As you will read in the NNA's article, you don't really need to understand a great deal about the document, generally speaking, but I've got several years experience with commercial loan documents and will be glad to share.)

I will share the document collection in the near future. If you want to get more information about commercial loan packages, get on my mailing list! Scroll to the bottom of this page and input your email address. 


What is an entity?

An entity may be a company, a non-profit corporation, a for-profit corporation, a trust, a probate estate, bankruptcy estate, partnership, etc. 

Business entities have officers like a president, vice-president, treasurer, or secretary.  Depending on its structure, an entity may also have board of directors, limited partners, partners, or general partners. 

An estate type of entity (guardianships, estate administrations, trusts) will have a representative who may be called a guardian, temporary guardian, administrator, temporary administrator, permanent administrator, executor, executrix, or trustee, to name a few.

What does representative capacity mean?

For our purposes, “representative capacity” is when a signer is representing another person or entity.  In the examples below, please assume that the purple or lavender print is the signer's handwriting.

Representative capacity relating to entities – Entities are formed to conduct business or to settle bankruptcy and probate matters. As the president of Smith Enterprises, Inc., Sam Smith signs documents on behalf of his company.  His signature line looks like this:

Sam Smith

_______________________

Sam Smith, President

Smith Enterprises, Inc.,

Texas corporation.

Therefore, the notarial certificate should also carry forth this information showing that Sam Smith signed in a representative capacity “President” representing Smith Enterprises, Inc.   The notarial certificate for Sam’s signature is shown below.

STATE OF TEXAS

COUNTY OF HARRIS

This instrument was acknowledged before me on January 1, 2016 by Sam Smith, President, Smith Enterprises, Inc., a Texas corporation.

________________________

Notary Public, State of Texas


Representative capacity of another person -  John Jones, a person serving as an attorney-in-fact under a power of attorney signed by Karen Klein must state his representative capacity as attorney-in-fact when he signs documents on behalf of Karen Klein.  

John’s signature line will look similar to one of these below:

Karen Klein by John Jones, 

her attorney-in-fact

________________________________

Karen Klein signed by attorney-in-fact


OR

Karen Klein

________________________________

Karen Klein signed by attorney-in-fact


BY: 

John Jones, her attorney-in-fact

_____________________________

John Jones, her Attorney-in-Fact


The notarial certificate for John’s signature is shown below.

STATE OF TEXAS

COUNTY OF HARRIS

This instrument was acknowledged before me on January 1, 2016 by John Jones as attorney-in-fact on behalf

of Karen Klein.

________________________

Notary Public, State of Texas


Why use a representative capacity certificate? (Isn’t a regular individual certificate just as good?)

It’s tempting to use an individual certificate rather than a long, drawn out, representative capacity certificate, but we must use representative certificates when they are required by the document drafter or requested by the signer.

If a document is being executed by a representative of a business entity or an attorney-in-fact, don’t mark out the certificate indicating representative capacity and attach one for an individual.  Likewise, if a document of the same type is presented to you, show the signer forms that relate to representative capacity and individual capacity and allow the signer to make a selection.

Civil Practices and Remedies Code Section 16.033 says if a document lacks the signature of a proper corporate office, a partner, officer, manager, or member, the document is defective. A document is technically defective if the acknowledgment is completed as if an individual signed it rather that a signer in a representative capacity.   Here is your smoking gun: “(6) acknowledgment of the instrument in an individual, rather than a representative or official, capacity.” (See the entire section of law below—emphasis added.)

Sec. 16.033.  TECHNICAL DEFECTS IN INSTRUMENT.  (a)  A person with a right of action for the recovery of real property or an interest in real property conveyed by an instrument with one of the following defects must bring suit not later than two years after the day the instrument was filed for record with the county clerk of the county where the real property is located:

(1)  lack of the signature of a proper corporate officer, partner, or company officer, manager, or member;

(2)  lack of a corporate seal;

(3)  failure of the record to show the corporate seal used;

(4)  failure of the record to show authority of the board of directors or stockholders of a corporation, partners of a partnership, or officers, managers, or members of a company;

(5)  execution and delivery of the instrument by a corporation, partnership, or other company that had been dissolved, whose charter had expired, or whose franchise had been canceled, withdrawn, or forfeited;

(6)  acknowledgment of the instrument in an individual, rather than a representative or official, capacity;

(7)  execution of the instrument by a trustee without record of the authority of the trustee or proof of the facts recited in the instrument;

(8)  failure of the record or instrument to show an acknowledgment or jurat that complies with applicable law; or

(9)  wording of the stated consideration that may or might create an implied lien in favor of the grantor.

(b)  This section does not apply to a forged instrument.

(c)  For the purposes of this section, an instrument affecting real property containing a ministerial defect, omission, or informality in the certificate of acknowledgment that has been filed for record for longer than two years in the office of the county recorder of the county in which the property is located is considered to have been lawfully recorded and to be notice of the existence of the instrument on and after the date the instrument is filed.

The Secretary of State provides statutory forms for certificates used on documents that are signed in a representative capacity. 

Where a document indicates representative capacity on its signature line, notaries should complete the proper certificate form that indicates representative capacity pre-attached to the document and state the individual’s name who is signing the document, the entity being represented, and the signer’s title of representative capacity. As mentioned above, if required to attach a certificate before notarizing a document where the signer is signing in a representative capacity, show the signer forms that relate to representative capacity as well as individual capacity and allow the signer to make a selection.


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