The laws governing Limited Liability Companies in New Jersey have recently been amended. Enacted as NJSA 42:2C-1 et seq., this law repeals the prior law (NJSA 42:2B-1 et seq.); it becomes effective March 18, 2013 but will apply only to newly created LLCs (i.e. those created on or after the effective date) or those LLCs which elect to be subject to the new act; it will apply to all Limited Liability Companies, regardless of date of formation on April 1, 2014.
Much of the new law is familiar. Limited Liability Companies will continue to be formed by the filing of a Certificate of Formation with the Division of Revenue in the Department of the Treasury. There is still no statutory requirement that a LLC have a written Operating Agreement and the law continues to recognize single-member LLCs.
What’s new? How does this affect real estate transactions? Under the amended law, LLCs may file a “Statement of Authority” (NJSA 42:2C-28). A Statement of Authority, when filed may state, among other things, the authority of any person holding a specified position within the company to transfer real property or otherwise bind the LLC. It may also set forth the authority of a specific person or persons to take such actions.
The amended law provides that an effective Statement of Authority that grants the authority to transfer real property held in the name of the LLC and is recorded by certified copy in the office for recording transfers of real property is “conclusive in favor of a person that gives value in reliance on the grant without knowledge to the contrary …” (NJSA 42:2C-28(f)). This means that a certified copy of a limited liability company’s Statement of Authority which is recorded among the land records is proof that the person(s) named in it have the authority to bind the LLC.
A recorded Statement of Authority may not be relied upon if:
- The Statement filed with the Division has been cancelled or restrictively amended and a certified copy of the cancellation or restrictive amendment has been recorded among the land records; or
- A limitation on the grant is contained in another Statement of Authority that became effective later and that later effective statement is recorded in the land records.