Authority to Sign a Commercial Lease in Colorado

AUTHORITY TO SIGN THE LEASE                                           

Who has the authority to sign a lease on behalf of an entity? The simplest answer is that the lease may be signed only by a person who has genuine power to bind the entity. However, the actual answer is significantly different: anybody with apparent authority may sign.

Colorado law also has various legislative presumptions of power, which are described in further detail below. Both landlords and renters should ensure that the other party’s signatory can sign on their behalf so that the other party may never attempt to terminate the lease on the basis that it did not approve it.

Executive Authority

Anyone having “apparent power” may sign a lease on behalf of an entity in the usual course of business, and the lease will be binding on the entity. When a person seems to third parties to be authorized to sign on behalf of an organization, he or she gets apparent authority.

The idea of apparent authority was designed to relieve parties of the constant burden of determining whether the person they are dealing with has real power to engage in an agreement or bind an organization.

There are no hard and fast standards governing who has apparent power inside a company corporation.

If the person with the largest office and a brass “President” sign on her desk signs a corporation’s lease, one may reasonably infer that he or she has apparent (and presumably real) power to do so. Generally, the same would apply if the sign said “Chief Executive Officer.”

However, a secretary or “Director of Human Resources” would likely lack apparent power to bind the firm. Closer examination occurs when the individual signing the lease is the company’s vice president or the party signing is the office manager who negotiated the lease on the tenant’s behalf. Generally, the bigger the organization, the lower the perceived authority appears in the chain of command.

Generally, the closer the person signing the lease is to the decision-making process about the lease’s provisions, the more likely the person signing the lease will be viewed as having apparent power to sign the lease.

Statutory Authority Presumptions

By legislation, a person may depend on the signing authority of specific individuals. Their authority may be relied on securely by parties who lack real information to the contrary — that is, the knowledge that the individual cannot sign the lease for whatever reason.

The reliance is warranted for transactions that occur in the “ordinary course of business,” which encompasses the majority of leases. The following jobs have this degree of authority:

  • The president or other “head office” of a corporation, if the president or officer’s signature is confirmed by the corporation’s secretary and the lease is sealed with the corporation’s seal.
  • A general partner in a partnership, a limited partnership, a limited liability partnership (LLP), or a limited liability limited partnership (LLLP).
  • A person identified as having the power to sign in a statement of partnership authority submitted in the Secretary of State’s records by any form of partnership.
  • The management of a limited liability business controlled by a manager (LLC).
  • A member of a limited liability corporation administered by its members.
  • A person designated as having the power to sign in a declaration of authority registered in the
  • county’s clerk and recorder’s office in which the premises are situated.
  • The executor of the estate of a dead individual.
  • A trustee of a trust who has filed a declaration of authority with the clerk and recorder’s office of the county in which the premises are located.

Executive Authority

If it is uncertain whether the individual signing the lease has apparent permission to sign on behalf of the landlord or tenant, or if the lease is being signed in the “regular course of business,” the sole option is to request confirmation of real authority from the other party. Actual authority proof  differs according to the kind of organization.

For a company, the proof often required is a board of directors’ decision authorizing the lease and naming the persons who may sign it. The proof in the case of a partnership would be the partnership agreement and, if needed under the partnership agreement, the partners’ approval.

For a limited liability business, the necessary proof would be the operating agreement and, if needed by the operating agreement, the permission of the  management (if there are any) or members (if there areany).

The necessary proof for an estate would be the letters of appointment designating the personal representative. The proof in the case of a trustee would be the trust agreement.

In actuality, landlords and renters seldom delve into the organizational paperwork of one another. A party may request a corporate resolution, a partnership agreement, or a limited liability company agreement, but that is all.

Establishing real power necessitates reaching a legal decision. The reality is that most of the time, one party does not want to do that service for the other, or it may be impossible to perform due to legal uncertainties.

If a party has a problem, it is prudent to get a legal opinion about the power of the lease’s signing. Due to the uncommon nature of this request in a conventional lease transaction, the opposing party is likely to object to a request for a legal opinion. However, legal opinions are more typical in big lease contracts and lease deals involving institutional funding.