Confirming landowners’ signatory authority is crucial when preparing renewable energy leases or conducting due diligence in a renewable energy financing transaction. It is not enough to rely on a landowner’s word that he or she owns a proposed project area and has the right to encumber it with a renewable energy lease. While some leases include language certifying that the landowner executing the agreement has signatory authority, failing to properly confirm that authority can result in title issues, potentially requiring lease amendments or resulting in the denial of title insurance.
Ensuring proper landowner signatures starts with obtaining and reviewing the deed(s) that conveyed ownership of the real estate at issue to the current landowner. These are often called “vesting deeds,” which can be obtained in different ways depending on the amount of information about the land available. Ideally, the landowner or project company will have a recorded version of the vesting deed available. If not, vesting deeds can be obtained from a county’s public records utilizing various information: landowner’s name, parcel IDs or tax IDs, recording information (i.e., book and page or instrument numbers), and short form legal descriptions. Researching deeds can be either quick or time consuming, depending on the sophistication of a county’s public records database and the complexity of the parcels. Some counties charge for access to full deed records and recording documents (rather than a parcel summary, for example), and these costs can add up, depending on the size of the project and the number of vesting deeds.
Once a vesting deed is obtained, it is important to confirm that (i) the landowner’s name in the vesting deed exactly matches the landowner’s name in the lease, and (ii) the land covered in the lease is captured in the vesting deed. Note, it is not necessary that the legal descriptions in the lease and vesting deed match exactly, so long as the vesting deed covers all the leased land.
If land is owned by a trust or an entity, an additional layer of due diligence is required. For trusts, a valid trust instrument or a certificate of trust is required to confirm the proper person signed the lease for the trust. It is also important to consider state-specific rules around requesting trust information. For example, in Texas, a person making a demand for a trust instrument in addition to a certificate of trust that meets statutory requirements could be liable for damages. See Tex. Prop. Code § 114.086. For an entity, a valid governing agreement will indicate who has authority to sign for the entity. The agreement can be redacted, so long as the reviewer can confirm (i) signatory authority on behalf of the entity, (ii) that the entity is authorized to enter into real estate transactions, and (iii) that the agreement was properly executed.
If issues occur during review, all is not lost. There are several ways to cure a signatory title defect. If the defect exists within the vesting deed itself (like the misspelling of a person’s name), a “scrivener’s error” affidavit or a corrective deed could resolve the discrepancy. If a defect exists within the renewable energy lease, the parties could prepare an amendment or joinder and ratification to the lease, depending on the nature of the defect. It is important that, prior to executing and recording any title curative documents, the parties communicate with their title company to confirm the intended curative documents are acceptable for title insurance purposes.
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