Author : Roy M. Kodani
Law offices of Roy.M.Kodani
Contents
1. About the Purchase Agreement when you transact in real estate personally
2. About the approval by the Board of Directors when you transact in real estate between personal and company
Case No. 1:
Facts: Sakamoto san offers to buy the land and house owned by his neighbor, Ito san. Sakamoto san and Ito san have been neighbors for more than fifty years. Sakamoto san says to Ito san that they should have a written Purchase Agreement, but Ito san says that he trusts Sakamoto san, and so, they do not need a written Purchase Agreement. On the day that Sakamoto agreed to pay for the house and land, Ito san refuses to sell the land and house to Sakamoto san. Sakamoto san says, “Ito san, you said it was not necessary to have a written Purchase Agreement, because you trust me. I have the cash ready to buy your property. You agreed to sell your property to me.”
Question: Does Sakamoto san have any legal right to compel Ito san to sell his land and house to Sakamoto san?
Answer: No.
Law: In Hawaii any agreement to sell and purchase any real estate, whether it is land, house, condominium, or time share, the agreement must be in writing and signed by the seller and buyer. Without a written Agreement signed by the seller and buyer, neither the seller nor the buyer can compel the other to go through with the transaction.
Case No. 2
Facts: Mr. Smith is the President, who owns 50% of the shares of stock in Smith Corporation, which owns land in Waikiki. "Kanemochi shacho", a wealthy Japanese investor, approaches Mr. Smith and offers to buy the land in Waikiki owned by Smith Corporation. Mr. Smith and "Kanemochi shacho" sign a Purchase Agreement to buy and sell the Waikiki property. Mr. Smith does not discuss the purchase and sale of the Waikiki property with his Board of Directors. Nor, do they know that Mr. Smith has signed a written Purchase Agreement to sell the land.
Question: Does "Kanemochi shacho" have the legal right to compel Smith Corporation to sell the land to him?
Answer: No.
Law: Under Hawaii law, if a corporation sells or buys real property, the Board of Directors of the corporation must approve the sale or purchase. The approval by the Board of Directors is done through written corporate resolutions. In this case, Mr. Smith did not disclose the Purchase Agreement with "Kanemochi shacho", and so the Board of Directors did not know of the transaction. Also, it does not appear that they approved the purchase and sale of the land by a written Certificate of Resolutions. Consequently, the sale of the land owned by the corporation was not a valid transaction and was not binding on Smith Corporation.
Additional Information: In Hawaii most real estate transactions are handled by an escrow agent. If the escrow agent, usually a company, does not receive a Certificate of Resolutions from the Board of Directors of a corporation approving the sale or purchase of real property, the escrow agent will not process the closing of the transaction. Usually, the escrow agent will request the Certificate of Resolutions before the closing. If not is presented to the escrow agent, the escrow agent will not close the transaction.
Author : Roy.M.Kodani
Office : Law offices of Roy M. Kodani
Career : Graduated from Lafayette College
Graduated from George Washington University Law School
Worked in the office of United States Senator Oren E. Long of Hawaii and in the law firm of Meyers & Batzell while attending in graduate school
License : Real estate broker (Hawaii), Lawyer (Hawaii)
Particular field : Real estate, Commercial law, Corporation law, Law suit, International law, Bank, Law of wills
Language : Japanese, English
Books : Open House: A Guide to Buying and Selling Hawaii Real Estate Published by University of Hawaii Press
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