Minnesota Real Estate Transactions With Legal Entities 2007

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MINNESOTA STATUTE OF FRAUDS, CONVEYANCE OF INTEREST IN LAND EXCEPT UP TO ONE-YEAR, AUTHORITY ISSUES, MINN. STAT. §513.05, MINN. STAT. §513.04 MINN. STAT. §513.01, MINN. STAT. §386.39, MINN. STAT. §507.24 RECORDABLE, MINN. STAT. §358.41(2) ACKNOWLEDGMENT, MINN. STAT. §358.43 NOTARIAL ACTS prima facie evidence that the signature is genuine and that the person holds the designated title, MINN. STAT. §358.48 FOR AN ACKNOWLEDGMENT IN A REPRESENTATIVE CAPACITY, MINN. STAT. §302A.305 DUTIES OF REQUIRED OFFICERS - sign and deliver in the name of the corporation any deeds, mortgages, bonds, contracts or other instruments pertaining to the business of the corporation, MINNESOTA TITLE STANDARDS, White Pages

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Minnesota Real Estate Transactions With Legal Entities 2007

  1. 1. REAL ESTATE TRANSACTIONS WITH LEGAL ENTITIES Jeffrey R. Peterson 612-643-1031 © 2007 Jeffrey R. Peterson 1 All Rights Reserved
  2. 2. A. AUTHORITY ISSUES A business entity could challenge the validity of a conveyance by arguing that the person who signed for the company was not an agent of the company and therefore had no legal authority to act on the company's behalf. Agency is the legal status in which one person, the agent, has authority to conduct business for another party, the principal. Many business entities must rely on their agents (employees) to transact business and make conveyances on behalf of their business entities. Principals can be bound by the deeds of their agents. An agent's authority to enter into transactions on behalf of the business entities can be ACTUAL, IMPLIED, or APPARENT. © 2007 Jeffrey R. Peterson 2 All Rights Reserved
  3. 3. AUTHORITY • Permission to act. Right to exercise powers. That which authorizes an agent to act on behalf of the principal. © 2007 Jeffrey R. Peterson 3 All Rights Reserved
  4. 4. ACTUAL EXPRESS AUTHORITY • Authority that has been lawfully and explicitly granted by the principal either orally or in writing; authority plainly conferred to another and not presumed from circumstances. • Actual authority is authority that the principal has intentionally given to an agent who has accepted it. © 2007 Jeffrey R. Peterson 4 All Rights Reserved
  5. 5. IMPLIED AUTHORITY • Implied authority results because of the agent's relationship with the principal or the principal's business, from custom, past practice or by acquiescence. • For example, a principal might not have intentionally authorized an employee to make purchases for the business entity on credit. If the principal has repeatedly paid off these debts incurred by the employee, the principal may inadvertently have created implied authority in that employee. © 2007 Jeffrey R. Peterson 5 All Rights Reserved
  6. 6. APPARENT AUTHORITY • That which, though not actually granted, the principal knowingly permits the agent to exercise. • Doctrine that a principal is responsible for the acts of his agent where the principal by his words or conduct suggests to a third person that the agent may act in the principal's behalf, and where the third person believes in the authority of the agent. • Apparent authority is the “power to affect the legal relations of another person by transactions with third persons, professedly as agent for the other, arising from, and in accordance with, the other’s manifestations to such third persons.” Restatement (Second) of Agency §8. Apparent authority differs from “authority” that is “the power of the agent to affect the legal relations of the principal by acts done in accordance with the principal’s manifestations of consent to him.” Id. At §7. • Apparent authority may come about if a principal acts in a way that would make a third party reasonably to believe that the agent had authority. For example if a business owner knows than a person is claiming authority to act on behalf of the business, the principal may have an obligation to explain that the employee really is not authorized to transact business for the business. © 2007 Jeffrey R. Peterson 6 All Rights Reserved
  7. 7. MINN. STAT. §513.01 STATUTE OF FRAUDS §513.01 NO ACTION ON AGREEMENT. No action shall be maintained, in either of the following cases, upon any agreement, unless such agreement, or some note or memorandum thereof, expressing the consideration, is in writing, and subscribed by the party charged therewith: writing (1) every agreement that by its terms is not to be performed within one year from the making thereof; (2) every special promise to answer for the debt, default or doings of another; (3) every agreement, promise, or undertaking made upon consideration of marriage, except mutual promises to marry; (4) every agreement, promise or undertaking to pay a debt which has been discharged by bankruptcy or insolvency proceedings. © 2007 Jeffrey R. Peterson 7 All Rights Reserved
  8. 8. MINN. STAT. §513.04 CONVEYANCE OF INTEREST IN LAND EXCEPT UP TO ONE-YEAR LEASE. No estate or interest in lands, other than leases for a term not exceeding one year, nor any trust or power over or concerning lands, or in any manner relating thereto, shall hereafter be created, granted, assigned, surrendered, or declared, unless by act or operation of law, or by deed or conveyance in writing, subscribed by the parties creating, granting, assigning, surrendering, or declaring the same, or by their lawful agent thereunto authorized by writing. This section shall not affect in any manner the power of a testator in the disposition of real estate by will; nor prevent any trust from arising or being extinguished by implication or operation of law. © 2007 Jeffrey R. Peterson 8 All Rights Reserved
  9. 9. MINN. STAT. §513.05 LEASES; CONTRACTS FOR SALE OF LANDS Every contract for the leasing for a longer period than one year or for the sale of any lands, or any interest in lands, shall be void unless the contract, or some note or memorandum thereof, expressing the consideration, is in writing and subscribed by the party by whom the lease or sale is to be made, or by the party's lawful agent thereunto authorized in writing; and no such contract, when made by an agent, shall be entitled to record unless the authority of such agent be also recorded. © 2007 Jeffrey R. Peterson 9 All Rights Reserved
  10. 10. MINN. STAT. §386.39 INSTRUMENTS NOT PROPERLY EXECUTED Except where otherwise expressly provided by law, no county recorder shall record any conveyance, mortgage, or other instrument by which any interest in real estate may be in any way affected, unless the same is duly signed, executed and acknowledged according to law; any such officer offending herein shall be guilty of a misdemeanor and liable in damages to the party injured in a civil action. © 2007 Jeffrey R. Peterson 10 All Rights Reserved
  11. 11. MINN. STAT. §507.24 RECORDABLE, WHEN Subdivision 1. General. To entitle any conveyance, power of attorney, or other instrument affecting real estate to be recorded, it shall be legible and archivable, it shall be EXECUTED, ACKNOWLEDGED by the parties EXECUTED executing the same, and the ACKNOWLEDGMENT CERTIFIED, as CERTIFIED required by law. All such instruments may be recorded in every county where any of the lands lie. If the conveyance, power of attorney, or other instrument affecting real estate is executed out of state, it shall be entitled to record if executed as above provided or according to the laws of the place of execution so as to be entitled to record in such place. Subd. 2. Original signatures required. (a) Unless otherwise provided by law, an instrument affecting real estate that is to be recorded as provided in this section or other applicable law must contain the original signatures of the PARTIES WHO EXECUTE it and OF THE NOTARY PUBLIC or other officer taking an acknowledgment. However, a financing statement that is recorded as a filing pursuant to section 336.9-502(b) need not contain: (1) the signatures of the debtor or the secured party; or (2) an acknowledgment. © 2007 Jeffrey R. Peterson 11 All Rights Reserved
  12. 12. SUBSCRIBE Subscribe : meaning to sign at the end of a document. Execute : meaning to sign and make complete a document. Acknowledge : Signor affirms or verifies to the notary public that the signer has signed the deed to make it legally complete. © 2007 Jeffrey R. Peterson 12 All Rights Reserved
  13. 13. MINN. STAT. §358.41(2) ACKNOWLEDGMENT "Acknowledgment" means a declaration by a person that the person has executed an instrument or electronic record for the purposes stated therein and, if the instrument or electronic record is executed in a representative capacity, that the person signed the instrument with proper authority and executed it as the act of the person or entity represented and identified therein. • Acknowledgment (noun). The part of a document where a notary public verifies that the signer of the document states he/she actually signed it. • Certification of Acknowledgement: When the notary signs the acknowledgment and puts on his/her seal on the document, which is usually a rubber stamp. Minn. Stat. §358.47 © 2007 Jeffrey R. Peterson 13 All Rights Reserved
  14. 14. MINN. STAT. §358.43 NOTARIAL ACTS IN THIS STATE. (a) A notarial act may be performed within this state by the following persons: (1) a notary public of this state, (2) a judge, court administrator, or deputy court administrator of any court of this state, (3) a person authorized by the law of this state to administer oaths, or (4) any other person authorized to perform the specific act by the law of this state. (b) Notarial acts performed within this state under federal authority as provided in section 358.45 have the same effect as if performed by a notarial officer of this state. (c) The SIGNATURE and Title of a person performing a notarial act are prima facie evidence that the signature is genuine and that the person holds the designated title.title © 2007 Jeffrey R. Peterson 14 All Rights Reserved
  15. 15. PRIMA FACIE Prima facie, adj. Sufficient to establish a fact or raise a presumption unless disproved or rebutted <a prima facie showing>. Black's Law Dictionary (8th ed. 2004) • Prima facie evidence of a fact, is in law sufficient to establish the fact, unless rebutted. © 2007 Jeffrey R. Peterson 15 All Rights Reserved
  16. 16. MINN. STAT. §358.48 FOR AN ACKNOWLEDGMENT IN A REPRESENTATIVE CAPACITY VENUE DATE OF STATE OF MINNESOTA ACKNOWLEDGEMENT COUNTY OF HENNEPIN NAME OF SIGNOR This instrument was acknowledged before me on ..........(date) by ....................(name(s) of person(s)) as ........................................(type of authority, e.g., officer, trustee, etc.) of ............................. .................(name of party on behalf of whom the instrument was executed). SIGNATURE OF NOTARY (Signature of notarial officer) (Seal, if any) SEAL Title (and Rank) My commission expires: © 2007 Jeffrey R. Peterson 16 All Rights Reserved
  17. 17. BUSINESS ENTITIES • Corporations • Limited Liability Companies • General Partnerships • Limited Liability Partnerships • Limited Partnerships • Sole Proprietorships • Unincorporated Entities and Churches © 2007 Jeffrey R. Peterson 17 All Rights Reserved
  18. 18. MINN. STAT. §302A.301 OFFICERS REQUIRED. A corporation shall have one or more natural persons exercising the functions of the offices, however designated, of chief executive officer and chief financial officer. © 2007 Jeffrey R. Peterson 18 All Rights Reserved
  19. 19. MINN. STAT. §302A.305 DUTIES OF REQUIRED OFFICERS Subdivision 1. Presumption; modification. Unless the articles, the bylaws, or a resolution adopted by the board and not inconsistent with the articles or bylaws, provide otherwise, the chief executive officer and chief financial officer have the duties specified in this section. Subd. 2. Chief executive officer. The chief executive officer shall: (a) have general active management of the business of the corporation; (b) when present, preside at all meetings of the board and of the shareholders; (c) see that all orders and resolutions of the board are carried into effect; (d) sign and deliver in the name of the corporation any deeds,deeds mortgages, bonds, contracts or other instruments pertaining to the business of the corporation, except in cases in which the authority to sign and deliver is required by law to be exercised by another person or is expressly delegated by the articles or bylaws or by the board to some other officer or agent of the corporation; (e) maintain records of and, whenever necessary, certify all proceedings of the board and the shareholders; © 2007 Jeffrey R. Peterson 19 All Rights Reserved
  20. 20. CORPORATIONS 302A.661 TRANSFER OF ASSETS; WHEN PERMITTED. Subdivision 1. Shareholder approval; when not required. A corporation may, by affirmative vote of a majority of the directors present, upon those terms and conditions and for those considerations, which may be money, securities, or other instruments for the payment of money or other property, as the board deems expedient, and without shareholder approval: (1) sell, lease, transfer, or otherwise dispose of all or substantially all of its property and assets in the usual and regular course of its business; (2) grant a security interest in all or substantially all of its property and assets whether or not in the usual and regular course of its business; or (3) transfer any or all of its property to an organization all the shares or other ownership interests of which are owned by the corporation. Subd. 2. Shareholder approval; when required. (a) A corporation, by affirmative vote of a majority of the directors present, may sell, lease, transfer, or otherwise dispose of all or substantially all of its property and assets, including its good will, not in the usual and regular course of its business, upon those terms and conditions and for those considerations, which may be money, securities, or other instruments for the payment of money or other property, as the board deems expedient, when approved at a regular or special meeting of the shareholders by the affirmative vote of the holders of a majority of the voting power of the shares entitled to vote. Written notice of the meeting shall be given to all shareholders whether or not they are entitled to vote at the meeting. The written notice shall state that a purpose of the meeting is to consider the sale, lease, transfer, or other disposition of all or substantially all of the property and assets of the corporation. (b) Shareholder approval is not required under paragraph (a) if, following the sale, lease, transfer, or other disposition of its property and assets, the corporation retains a significant continuing business activity. If a corporation retains a business activity that represented at least (1) 25 percent of the corporation's total assets at the end of the most recently completed fiscal year and (2) 25 percent of either income from continuing operations before taxes or revenues from continuing operations for that fiscal year, measured on a consolidated basis with its subsidiaries for each of clauses (1) and (2), then the corporation will conclusively be deemed to have retained a significant continuing business activity. Subd. 3. Signing of documents. Confirmatory deeds, assignments, or similar instruments to evidence a sale, lease, transfer, or other disposition may be signed and delivered at any time in the name of the transferor by its current officers or, if the corporation no longer exists, by its R. Peterson © 2007 Jeffrey last officers. 20 All Rights Reserved
  21. 21. MINNESOTA TITLE STANDARDS • The “White Pages” supplement to the Minnesota Title Standards outline the highest standard of practice in undertaking real property transactions. • Stated focus is representing parties in current transactions. • Ambitious © 2007 Jeffrey R. Peterson 21 All Rights Reserved
  22. 22. HOW CAN YOU VERIFY THAT A CORPORATE OFFICER HAS AUTHORITY? Review and examine the following to determine if the officers signing has express corporate authority to convey the real property on behalf of the corporation: – Certificate of Good Standing from Secretary of State; – Certified copies of the articles of incorporation and any amendments; – Corporate director and shareholder minutes, bylaws, and stock transfer bylaws records;22 – Organizational Minutes; – Corporate resolutions approving action of the officer by the board of directors; – Certificate of Incumbency of officer signed by the corporate secretary {The document attests that the persons listed are actually officers of the corporation and are authorized to sign}; – Opinion from the corporation’s attorney; – Affidavit of corporate officer. © 2007 Jeffrey R. Peterson 22 All Rights Reserved
  23. 23. MINN. STAT. §302A.111 ARTICLES. Subd. 4. Optional provisions; specific subjects. The provisions in paragraphs (a), (g), (q), (r), and (u) may be included in the articles. Subd. 4. Optional provisions; specific subjects. The provisions in paragraphs (a), (g), (q), (r), and (u) may be included in the articles. (g) a larger than majority vote may be required for board action (section 302A.237); © 2007 Jeffrey R. Peterson 23 All Rights Reserved
  24. 24. MINN. STAT. §302A.237 ACT OF THE BOARD The board shall take action by the affirmative vote of the greater of (1) a majority of directors present at a duly held meeting at the time the action is taken, or (2) a majority of the minimum proportion or number of directors that would constitute a quorum for the transaction of business at the meeting, except where this chapter or the articles require the affirmative vote of a larger proportion or number. If the articles require a larger proportion or number than is required by this chapter for a particular action, the articles shall control. © 2007 Jeffrey R. Peterson 24 All Rights Reserved
  25. 25. MINN. STAT. §302A.165 EFFECT OF LACK OF POWER; ULTRA VIRES The doing, continuing, or performing by a corporation of an act, or an executed or wholly or partially executory contract, conveyance or transfer to or by the corporation, if otherwise lawful, is not invalid corporation because the corporation was without the power to do, continue, or perform the act, contract, conveyance, or transfer, unless the lack of power is established in a court in this state: (a) In a proceeding by a shareholder against the corporation to enjoin the doing, continuing, or performing of the act, contract, conveyance, or transfer. If the unauthorized act, continuation, or performance sought to be enjoined is being, or to be, performed or made pursuant to a contract to which the corporation is a party, the court may, if just and reasonable in the circumstances, set aside and enjoin the performance of the contract and in so doing may allow to the corporation or to the other parties to the contract compensation for the loss or damage sustained as a result of the action of the court in setting aside and enjoining the performance of the contract; (b) In a proceeding by or in the name of the corporation, whether acting directly or through a legal representative, or through shareholders in a representative or derivative suit, against the incumbent or former officers or directors of the corporation for exceeding or otherwise violating their authority, or against a person having actual knowledge of the lack of power; or (c) In a proceeding by the attorney general, as provided in section 302A.757, to dissolve the corporation, or in a proceeding by the attorney general to enjoin the corporation from the transaction of unauthorized business. © 2007 Jeffrey R. Peterson 25 All Rights Reserved
  26. 26. NEED FOR SHAREHOLDER APPROVAL WHEN A CORPORATION DISPOSES OF A SIGNIFICANT AMOUNT OF ASSETS • Shareholder approval is required for an asset sale outside the ordinary course only if it would leave the corporation without a “significant continuing business activity.” Minn. Stat. §302A.661 © 2007 Jeffrey R. Peterson 26 All Rights Reserved
  27. 27. ULTRA VIRES Latin for "beyond powers." It refers to action by a corporation or its officers that exceeds the powers granted by law. © 2007 Jeffrey R. Peterson 27 All Rights Reserved
  28. 28. SPECIAL CONSIDERATIONS • Churches and Religious Corporations – Special denominational rules and regulations may have to be complied with in the certificate of organization of the religious body. It is necessary to determine if the entity is incorporated under Chapter 317A or Chapter 315. • Non Profits • Municipal and Political Corporations – Resolution by the board or council is typically required. © 2007 Jeffrey R. Peterson 28 All Rights Reserved
  29. 29. LIMITED LIABILITY COMPANIES Review and examine the following to determine if the officers signing has express authority to convey the real property on behalf of the LLC: – Articles of Organization, – Member control agreement – Operating Agreement, – Certificate of Good Standing, – Written resolutions and consents authorizing managers to execute conveyance documents by members © 2007 Jeffrey R. Peterson 29 All Rights Reserved
  30. 30. MINN. STAT. §322B.77 TRANSFER OF ASSETS AND WHEN PERMITTED 322B.77 TRANSFER OF ASSETS AND WHEN PERMITTED. Subdivision 1. Member approval and when not required. A limited liability company may, by affirmative vote of a majority of the governors present, upon those terms and conditions and for those considerations, which may be money, securities, or other instruments for the payment of money or other property, as the board of governors considers expedient, and without member approval: (1) sell, lease, transfer, or otherwise dispose of all or substantially all of its property and assets in the usual and regular course of its business; (2) grant a security interest in all or substantially all of its property and assets whether or not in the usual and regular course of its business; or (3) transfer any or all of its property to an organization all the ownership interests of which are owned by the limited liability company. Subd. 2. Member approval and when required. (a) A limited liability company, by affirmative vote of a majority of the governors present, may sell, lease, transfer, or otherwise dispose of all or substantially all of its property and assets, including its good will, not in the usual and regular course of its business, upon those terms and conditions and for those considerations, which may be money, securities, or other instruments for the payment of money or other property, as the board of governors considers expedient, when approved at a regular or special meeting of the members by the affirmative vote of the owners of a majority of the voting power of the interests entitled to vote. Written notice of the meeting must be given to all members whether or not they are entitled to vote at the meeting. The written notice must state that a purpose of the meeting is to consider the sale, lease, transfer, or other disposition of all or substantially all of the property and assets of the limited liability company. (b) Member approval is not required under paragraph (a) if, following the sale, lease, transfer, or other disposition of its property and assets, the limited liability company retains a significant continuing business activity. If a limited liability company retains a business activity that represented at least (i) 25 percent of the limited liability company's total assets at the end of the most recently completed fiscal year and (ii) 25 percent of either income from continuing operations before taxes or revenues from continuing operations for that fiscal year, measured on a consolidated basis with its subsidiaries for each of clauses (i) and (ii), then the limited liability company will conclusively be deemed to have retained a significant continuing business activity. Subd. 3. Signing of documents. Confirmatory deeds, assignments, or similar instruments to evidence a sale, lease, transfer, or other disposition may be signed and delivered at any time in the name of the transferor by its current managers or authorized agents or, if the limited liability company no longer exists, by its last managers.
  31. 31. GENERAL PARTNERSHIPS & LIMITED LIABILITY PARTNERSHIPS Review and examine the following to determine if the person signing has express authority to convey the real property on behalf of the partnership: – Partnership Agreement and any amendments; – Certificate of Limited Partnership, – Written consent authorizing partners to execute conveyance documents signed by all partners; – Statutory Statement of Partnership Authority. © 2007 Jeffrey R. Peterson 31 All Rights Reserved
  32. 32. MINN. STAT. §323A.0303 STATEMENT OF PARTNERSHIP AUTHORITY (d) A filed statement of partnership authority supplements the authority of a partner to enter into transactions on behalf of the partnership as follows: (1) Except for transfers of real property, a grant of authority contained in a filed statement of partnership authority is conclusive in favor of a person who gives value without knowledge to the contrary, so long as and to the extent that a limitation on that authority is not then contained in another filed statement. A filed cancellation of a limitation on authority revives the previous grant of authority. (2) A grant of authority to transfer real property held in the name of the partnership contained in a filed statement of partnership authority, whether or not a certified copy of the filed statement is recorded, is conclusive in favor of a person who gives value without knowledge to the contrary, so long as and to the extent that a certified copy of a filed statement containing a limitation on that authority is not then of record. The recording of a certified copy of a filed cancellation of a limitation on authority revives the previous grant of authority. (e) A person not a partner is deemed to know of a limitation on the authority of a partner to transfer real property held in the name of the partnership only if a certified copy of the filed statement containing the limitation on authority is of record. © 2007 Jeffrey R. Peterson 32 All Rights Reserved
  33. 33. AFFIDAVIT FOR LIMITED LIABILITY COMPANY State of Minnesota County of Hennepin _______________________, being duly sworn, on oath says that she is the chief manager of ____________________, LLC, a ______________ limited liability company, the limited liability company named as mortgagor in the document dated ________________________, and filed of record on ____________, as Document No. ____________ in the office of the Registrar of Titles of ___________ County, _________. That said limited liability company is a duly organized and validly existing limited liability company in good standing under the laws of the State of _____________ and has full power and legal authority to do business in the State of Minnesota; That there are no bankruptcy proceedings and that there are no unsatisfied judgments of record, nor any actions pending in any court, State or Federal, nor any tax liens filed against the above named limited liability company, except as herein stated; That any judgments, bankruptcies, probate proceedings, State or Federal tax liens, of record against parties with the same or similar names are not against the above named limited liability company; That there has been no labor or materials furnished to the premises described in the above mentioned document during the last 120 days for which payment has not been made; That there are no encroachments, boundary disputes, unrecorded contracts, leases, easements, or other agreements or interests, relating to the said premises, of which affiant has knowledge except as stated herein; The affiant has not received notice, nor knows of any recent or future planned improvements, (such as street paving, sidewalks, street lighting, etc.) that would result in a special assessment against the property and are not now involved or participating in assessment liability against said property. The affiant knows the matters herein stated are true and makes this affidavit for the purpose of inducing the passing of the title to the premises referred to in said document, free and clear of all judgments, State or Federal tax liens, bankruptcy and unrecorded interests. Affiant hereby specifically and affirmatively states that she is the ________ of, _______, LLC, a ________ limited liability company and that she is properly authorized to act on behalf of said limited liability company in all dealings concerning this transaction, that said limited liability company is desirous of effecting this conveyance of the herein described real property, and that said limited liability company has specifically and affirmatively authorized said affiant to execute any and all documents necessary to effect such conveyance. Subscribed and sworn to before me _________________________________ this _____ day of __________, 200___. _____________ ___________________________________ Notary Public © 2007 Jeffrey R. Peterson 33 All Rights Reserved
  34. 34. OPINION OF COUNSEL LETTER Re: $12,500,000.00 Loan to _____________________ Ladies and Gentlemen: We have acted as counsel to the Borrower, a Minnesota limited liability company, in connection with: The borrowing by Borrower of monies from _____________________ (“Lender”) in the amount of 00/100 Dollars ($12,500,000.00) evidenced by a Promissory Mortgage Note in such principal sum (the “Note”) and secured by a Combination Mortgage, Security Agreement and Fixture Financing Statement (“Mortgage”) and other documents hereinafter referred to. The execution and delivery by the Borrower to Lender of the following instruments each dated ____ ____, 200__ (“Loan Documents”): the Note; the Loan Agreement; a first Mortgage executed by Borrower mortgaging certain real property owned by Borrower (the “Mortgage”) and more fully described in the Mortgage as security or said Note (collectively, the “Property”); an Assignment of Leases and Rents executed by Borrower (the “Assignment”) assigning the rents and leases of the Property; certain UCC financing statements (“Financing Statements”) perfecting a security interest in all rents, equipment and personal property of the Borrower located on and/or used in the operation of the Property; Environmental and ADA Indemnification Agreements executed by Borrower and Guarantor in favor of Lender (collectively, the “Indemnification Agreement”). In connection with the foregoing we have reviewed and examined executed counterparts of: the Loan Documents; the commitment for title insurance on the Property issued by _________. (“Title”); and Articles of Organization, Member Control Agreement, Operating Agreement, or Bylaws, if any, and the records of corporate proceedings taken by Borrower, in connection with the Loan and the transactions contemplated thereby; and have made such legal and factual examinations and have made such inquiries and have examined such other documents and proceedings as deemed necessary or appropriate for the purpose of this opinion. Based upon the foregoing, we are of the opinion that: Borrower is a duly organized, validly existing limited liability company in good standing under the laws of the State of Minnesota and has the power to carry on its business as it is now being conducted and as it is presently proposed to be conducted and to own all of the property as presently owned by it, and to enter into, continue and complete the transactions embodied in the Loan Documents. The Note and other Loan Documents have been duly authorized, executed and delivered by the Borrower and each is a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with their terms. Except for the recording of the Mortgage and Assignment in the offices of the _______ County Recorder’s office and/or filing in the office of the _______ County Registrar of Title’s office, and the filing of the Financing Statement with the Secretary of State of Minnesota, no other recordations or filings (except for any UCC continuation statements to be filed every 5 years) are necessary in order to perfect the lien and security interest of the Mortgage and Assignment with respect to the Property in favor of Lender. We know of no lien or encumbrance affecting title to the property not shown on the title report except those being created in connection with the Loan. All taxes, fees and other charges payable under the laws of the State of Minnesota and the County in connection with the execution and delivery of the Loan Documents and in connection with the recording of the mortgage and other Loan Documents to be recorded have been duly paid or the amounts required to pay the same have been deposited with Title. The execution and delivery of the Loan Documents do not, and the performance and observation of the terms thereof will not contravene any provision of existing law or regulation and will not conflict with, or result in any breach of the terms, conditions or provisions of, or constitute a default under, or result in or permit the creation or imposition of any lien, charge or encumbrance upon any of the properties of the Borrower pursuant to any indenture, mortgage or other agreement or instrument to which the Borrower is a party or by which its assets are bound other than the liens created by the Mortgage, Assignment and Financing Statements. To the best of our knowledge, there are no threatened or outstanding liens, taxes, judgments, actions or proceedings concerning Borrower, the Guarantor or the Property pending before any court or governmental authority, bureau or agency. The Loan Documents are in appropriate form to document this transaction in Minnesota and are sufficient to permit Lender upon default of the Borrower to acquire the Property by foreclosure. To the best of our knowledge, the Borrower is in compliance with all provisions of all planning, zoning, subdivision, inland wetland, air pollution, disposal of effluent waste, fire and building code and occupational safety and health rules, environmental laws, regulations and statutes to which it or the Property is subject and has obtained all licenses, permits, and approvals necessary for the ownership and occupation of the Property. This opinion is rendered to induce Lender to enter and accept the Loan Documents and fund the Loan. It is made knowing that Lender will rely on this opinion. Very truly yours, ___________________________________________ By: _______________________________________ Its: ______________________________________ © 2007 Jeffrey R. Peterson 34 All Rights Reserved
  35. 35. INCUMBENCY OF THE COMPANY'S CERTIFICATE OFFICERS THE UNDERSIGNED HEREBY CERTIFIES individually and on behalf of [insert the name of the Company], a [insert the state of formation] [insert corporation] (the "Company"), and for purposes of the opinion to be rendered by [insert the name of your law firm] in connection with [identify the contract or the transaction], that I am the duly elected and duly qualified Secretary of the Company and that: each of the persons named below is a duly elected or appointed and a duly qualified officer of the Company and has consistently held since before [insert a date prior to date of the execution of any document being delivered] and now; holds the respective offices set forth after his name below, and that the signature appearing opposite his name below is his genuine signature: Name Office Signature ______________________ ______________________ ______________________ [insert names and offices, including those of the Assistant Secretary or other person signing the second certificate below] IN WITNESS WHEREOF, I have hereunto set my hand this _______ day of ____________, 20___. ___________________ [name], individually and as Secretary THE UNDERSIGNED HEREBY CERTIFIES individually and on behalf of the Company, and for such purposes, that I am the duly [elected][appointed] and duly qualified [Assistant Secretary or other office, as appropriate] of the Company and that [insert name of the Secretary] has consistently been since before [insert same date prior to the date of the execution of any document being delivered] and is now the duly elected and the duly qualified Secretary of the Company and that his signature is as set forth over his name above. ___________________ [name], individually and as [title] Dated: ____________, 20___ © 2007 Jeffrey R. Peterson 35 All Rights Reserved

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