Underwriting Manual: TX


Unincorporated Associations

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Underwriting Manual Subtopic

In General

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An unincorporated association is a voluntary group of persons organized by mutual consent to promote a common enterprise by mutual consent to promote a common enterprise or objective. It may or may not have written articles, constitution or charter, and it is referred to by a common or association name.

Unincorporated associations are basically divided into two groups:

·  Associations organized for profit purposes:

¨  Common law partnerships (as distinguished from statutory partnerships).

¨  Joint ventures (see “Joint Ventures” Section 10.04).

¨  Joint stock companies.

¨  Business trusts or Massachusetts trusts.

·  Associations organized for nonprofit purposes:

¨  Fraternal and benevolent associations.

¨  Local lodges.

¨  Churches and other religious corporations not organized as religious or nonprofit corporations (See “Churches And Religious Associations” Section 3.16).

¨  Charitable associations not organized as nonprofit corporations.

¨  Associations organized for public purposes and not organized as nonprofit corporations.

Underwriting Manual Subtopic

Legal Status

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At common law, unincorporated associations were not considered legal entities and, consequently, without capacity to acquire, hold or transfer legal title to real property in the association’s name.

In several states, this position has been modified either by statute or case law. However, it must be noted that these modifications have been limited to certain forms of unincorporated associations and that they differ from state to state.

The law of the state where the land is located controls and determines the right, if any, of an unincorporated association to acquire, hold and convey title in its own name.

Underwriting Manual Subtopic

Statutory Approaches

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·  Entity Theory

In states where the entity theory persists in relation to real property ownership, a conveyance is void if the grantee is not a duly qualified legal entity. However, a number of state jurisdictions including Texas have recognized in some unincorporated associations a quasi-corporate existence, thus enabling certain unincorporated associations such as churches or charitable organizations to take, hold and convey real property in the church’s or association’s name.

·  Trustees

In some states, in order to circumvent the inconvenience caused by the lack of an association being a legal entity and consequently having no legal capacity to hold title to real property, title is taken in the names of the officers or trustees and they hold legal title in trust for the individual members of the association. Questions involving the continuity of authority, in the case of change of officers or trustees or death or disassociation of such parties from the association, are always present.

·  Members

In some other states, a grant to an unincorporated association in its name may be construed as a grant to the members of the association, the members’ interest being collective and not individual.

·  Charitable Objectives

Finally, in a few states, if the unincorporated association has a charitable objective, any title acquired by the association is considered to have established legal title in the trustees.

Underwriting Manual Subtopic

Transfers of Title Considerations

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·  Where title is held or to be held in the name of an unincorporated association, state law must be researched in order to determine whether, first, the conveyance can be made by the association and, second, the manner in which such a conveyance can be made. In some cases, title may be held in the name of a certain unincorporated association, the rule may not necessarily apply to every unincorporated association.

·  Where title is held in the name of the officers or trustees of the unincorporated association any conveyance by said parties must be adequately supported with documentation relating to the identity and authority of said officers or trustees to execute the conveyance or encumbrance of the property.

·  Where under state law title is considered to be vested in the members jointly, equity may consider the active members of the unincorporated association as trustees who must then unanimously authorize any conveyance.