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Affidavit of Authority to Transfer
Bulletin No. 2019-120
The 86 th Texas Legislature (2019) passed House Bill 1833, which created Texas Property Code section 12.019. The section is intended to simplify the process of identifying who may sign for a business entity in a real estate transaction. This bulletin summarizes the new law and provides NITIC’s related underwriting guidelines.
 
Overview
The new Affidavit of Authority to Transfer (“AAT”) allows an entity to designate a person who has authority to sign for the entity when it transfers an estate or interest in real property. Here, the word “transfer” means “to sell, exchange, convey with or without covenants, quitclaim, release, surrender, mortgage, encumber, partition or consent to partitioning, subdivide, apply for zoning, rezoning, or other governmental permits, plat or consent to platting, develop, grant options concerning, lease or sublet, or otherwise dispose of an estate or interest in real property or a right incident to real property.”
 
A person (including a title company) is not required to accept an AAT. Similarly, a business entity may not be required to produce an AAT in a transaction involving a transfer of a real property interest. 
 
An AAT that complies with the statute and is filed with the county clerk acts as conclusive proof of the information in the AAT, and third parties may rely on it.
 
Transaction Size
The use of an AAT is limited to transactions where the real estate interest to be transferred is valued at $1 million or less.
 
Which Entities May Use an AAT
An AAT may only be used by the entity that owns the interest in real property that is to be transferred. Any of the following domestic entities 1 may use an AAT, as long as the entity is active or in good standing under the laws of the jurisdiction where the entity was formed:
  • a limited liability company;
  • a limited partnership;
  • a professional association, a professional corporation, or a professional limited liability corporation.
 
Foreign entities 2 also may utilize an AAT, but with certain restrictions.
 
The following entities may not use an AAT:
  • a nonprofit or tax-exempt entity;
  • a corporation; or
  • certain government entities.

[1] “Domestic entity” is used here to mean an organization formed under or the internal affairs of which are governed by the Texas Business Organizations Code.
[2] “Foreign entity” is used here to refer to an entity formed under, and whose internal affairs are governed by, the laws of a jurisdiction other than Texas.

 
Who May Sign an AAT
The individual who signs the AAT must have permission from the entity to do so. Only certain individuals may sign an Affidavit of Authority to Transfer, and it depends on the type of entity:
  1. LLC: an individual who is a manager or member of the LLC;
  2. LP: an individual who is the general partner of the LP;
  3. PA, PC, or PLLC: an individual who is a director or officer of the professional entity.
 
Who May Be the Designated Representative
In most cases, the individual who signs the AAT is not the person who will ultimately sign the closing documents. One company representative signs the AAT, and he or she designates a different person to sign for the transfer. The only exceptions to this rule are the following:
  1. the entity is an LLC and the affiant is the sole member and manager;
  2. the entity is a LP and the affiant is the sole general partner; or
  3. the entity is a PA, PC, or PLLC and the affiant is the sole director and officer.
 
Recording
The Affidavit must be filed for record in the real property records of the county in which the transfer is to occur. NITIC requires that the AAT is filed at or prior to the closing date of the transaction.
 
Validity of Recorded AAT
Each AAT is valid for only one year from the date it is recorded in the real property records. The entity may also terminate authority given previously in an AAT by filing a termination in the real property records. Otherwise, if an AAT was recorded in the county real property records and it is otherwise valid, it may still be relied on and does not have to be re-recorded.
 
  • NITIC Underwriting Standards
Generally, NITIC agents may rely on an AAT only when the entity transferring an interest in real estate has inadequate entity documents . Otherwise, you must obtain Underwriting approval to use an AAT.
 
NITIC agents may use the following checklist for an AAT:
Checklist

Please contact NITIC Underwriting with any questions you have regarding this new procedure.

Click Here for a printable checklist.

To rely on an AAT, use the following checklist:
1.      Transaction Size. The transaction may not exceed $1 million.

2.      Good Standing. The LLC, LP, or professional entity must be in good standing or active in the state where it was formed. If the entity was formed outside of the United States, underwriting approval is required.

3.      Affiant. Review the entity’s most recent franchise tax public information report and confirm that the affiant is an individual who is one of the following:
a)     a manager or member of the transferring LLC;
b)    the general partner of the transferring LP; or
c)     a director or officer of the transferring PA, PC, or PLLC.

4.      Designated Person. Confirm that the person signing the AAT is NOT the person given authority to sign the closing documents. If the affiant IS the person designated to sign, use the entity’s most recent franchise tax public information report to confirm:
a)     the affiant is an individual who is one of the following:
               i. the sole member and manager of the transferring LLC;
               ii. the sole general partner of the transferring LP; or
             iii. the sole director and officer of the transferring PA, PC, or PLLC; and
b)    the report identifies the affiant and no other person as an officer, director, member, manager, or general partner of the transferring entity.

5.      Content of Affidavit. The AAT must include the following:
a)     a statement that the affiant:
               i. is eighteen or older and fully competent to sign the affidavit;
             ii. understands that third parties are relying on the truthfulness of the AAT; and
                  iii. understands that the AAT is signed under penalty of perjury;
b)    the name of the transferring entity, and that the entity is active or in good standing under the laws of the state where the entity was formed;
c)     the address, including street address, of the entity’s principal place of business in Texas or, if the entity does not have a principal place of business in Texas, the address of the entity's principal place of business in the state or country where the entity was formed;
d)    the legal description of the subject real property and an explanation of the transfer authorized;
e)    the name and title of the individual authorized to sign for the entity in the pending transaction; and
f)      if the affiant is the person designated with authority to sign in the pending transaction, a statement describing which of the positions listed in 4(a), above, the affiant holds.

6.      Using an Old AAT. If an AAT was previously recorded for the pending transfer, confirm that it has not been terminated, meaning:
a)     it was recorded less than a year ago and did not contain an expiration date; and
b)    it has not been terminated by a separate document (conduct a name search to verify.)

7.      Good Faith. The agent may not rely on an AAT if the agent has actual knowledge that any material representation in the AAT is untrue.
 


VP, Texas Underwriting Counsel
VP, Texas Underwriting Counsel
VP, Texas Underwriting Counsel
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