Real estate lawyers are taking a dim view of a bill introduced for the 2009 Virginia General Assembly session designed to force disclosure of key members of corporations, LLCs, partnerships, and business trusts when buying property.
House Bill 1640 was introduced by Del. Robert G. Marshall, R-Manassas, who said “I don’t want people buying property that you don’t know who it is.”
The legislation would require the first clause of any deed or deed of trust to include, for a corporation, the names of the directors, officers and registered agent. For a limited liability company, the names of the members or managers and the registered agent would have to be listed. For a partnership, the partners’ names would be required. Trustees for a business trust would have to be disclosed.
Marshall explained one of his concerns was the frequent purchases of property at land auctions by agents for Middle East principals. “I think that is a situation we need to have more in the open,” he said.
Another motivation for the bill was a recent controversy in Prince William County, where a land use advisory committee apparently made recommendations that would benefit some of its members through property that they owned. The commonwealth’s attorney investigated and found no reason to charge anyone with a conflict of interest.
Marshall felt the situation called for more openness in land purchases. “Citizens like candor,” he said.
Nevertheless, John G. “Chip” Dicks III, who lobbies for the Virginia Board of Realtors, sees multiple problems with the proposed legislation. “I would not be a fan of the bill,” he said. “I would think there are a whole lot of problems with that kind of approach.”
First of all, he said, it would be onerous to list every officer and director when large corporations purchase real estate. Dominion Resources, for instance, has 10 directors and 12 executive officers. Also, Dicks said, the names change from time to time, so the information could be quickly outdated. “It would make it totally and completely unworkable in terms of a practical, real world situation.”
Also, Dicks said, the “sunshine” intent of the bill easily could be circumvented. He notes a partnership could buy property and, the very next day, transfer a large percentage of ownership of the partnership to someone who was not disclosed in the deed.
Further, Dicks noted, many real estate partnerships are made up of other business entities, not people, so the legislation would not bring many names of individuals to light. “The bill doesn’t accomplish what it is trying to get at in any event,” he said.
Real estate lawyers point out that much of the information sought, including names of all registered agents, is available through the clerk’s office at the State Corporation Commission, which has records available online.
“I don’t understand why this is necessary when all the information is available to the public on the SCC Web site or other public records,” said Northern Virginia real estate lawyer Craig E. Buck. “Public officials are already required to disclose their interest, so this is just more red tape.”
Beyond the other objections, said Dicks, there is a hassle of identifying and listing all of the principals involved in a corporate purchase. “As a real estate professional, I don’t want to junk up the title work by disclosure of all these principals.”