Can a Virginia limited liability partnership serve as substitute trustee on a deed of trust?

Plain-English summary

In March 2012, Delegate Gregory Habeeb asked the AG a practical question for banks and law firms: can a Virginia limited liability partnership serve as a trustee under a deed of trust on Virginia real property, specifically as the substitute trustee a bank wanted to appoint? The AG said yes, provided the LLP is a "registered limited liability partnership" formed under Virginia law and the deed of trust falls within § 55-58.1.

Section 55-58.1 governs recording requirements for deeds of trust and provides, in relevant part, that "[n]o person not a resident of this Commonwealth may be named or act, in person or by agent or attorney, as the trustee of a security trust, either individually or as one of several trustees, the other or others of which are residents of this Commonwealth." So the statute speaks of "person" without defining it.

The chain of definitions did the work:

• § 1-230 (the Code-wide definition applied generally in construing all provisions of the Code) defines "person" as "any individual, corporation, partnership, association, cooperative, limited liability company, trust, joint venture, government, political subdivision, or any other legal or commercial entity and any successor, representative, agent, agency, or instrumentality thereof."
• The Virginia Uniform Partnership Act defines "partnership" as an association of two or more persons to carry on a business for profit and "includes, for all purposes of the laws of this Commonwealth, a registered limited liability partnership."

So an LLP is a partnership, a partnership is a "person," and a "person" can be a trustee under § 55-58.1, subject to the residency requirement. The AG noted that because the Code is a single body of law, other Code sections may be consulted as interpretive guides where the same phraseology is used.

The AG also pointed to a 2001 prior opinion that reached the same conclusion for limited liability companies (LLCs) using the parallel logic.

The AG flagged two assumptions: he was assuming the "Virginia limited liability partnership" in the request was a registered LLP under § 50-73.132, and that the subject deed of trust fell within the purview of § 55-58.1.

Currency note

This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

A deed of trust is Virginia's standard form of mortgage. Title to the real property securing a loan is conveyed to a trustee (often a lawyer or a bank's affiliated trustee) who holds it for the benefit of the lender, with the borrower retaining possession. If the borrower defaults, the trustee can foreclose. § 55-58.1 requires that any trustee be a Virginia resident (or act with at least one Virginia-resident co-trustee).

The Virginia Uniform Partnership Act (UPA) governs general partnerships and registered limited liability partnerships. It defines "partnership" to include, "for all purposes of the laws of this Commonwealth, a registered limited liability partnership." § 50-73.132 lays out the registration mechanics for LLPs.

§ 1-230 is Virginia's Code-wide definition of "person." The AG described it as a definition "to be applied generally in the construction of all provisions of the Code." It is broad and reaches partnerships, corporations, LLCs, and other entities.

Common questions

Q: Can a Virginia law firm organized as an LLP serve as substitute trustee on a deed of trust?
A: Per this opinion, yes, as long as it is a Virginia-registered LLP and the deed of trust falls within § 55-58.1. The general definition of "person" in § 1-230 brings partnerships, including LLPs, within the trustee-eligible universe.

Q: Does the trustee need to be a Virginia resident?
A: § 55-58.1 says yes, unless one of several co-trustees is a Virginia resident. A registered Virginia LLP qualifies as a Virginia resident for these purposes.

Q: What about an out-of-state LLP?
A: The opinion did not address that directly. § 55-58.1's residency requirement would still apply, so an out-of-state LLP could probably only act as one of several co-trustees with at least one Virginia-resident co-trustee.

Q: Can a limited liability company (LLC) also be a trustee under § 55-58.1?
A: Yes, per a 2001 AG opinion that this opinion cites approvingly. The same chain of definitions ("person" includes LLC; LLC formed in Virginia is a Virginia resident) yields the same conclusion.

Q: What if the deed of trust does not fall within § 55-58.1?
A: That is a separate question. The AG expressly assumed the subject deed of trust fell within § 55-58.1, and did not resolve whether any particular deed qualifies.

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2012/11-131_Habeeb.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II
Attorney General

March 23, 2012

900 East Main Street
Richmond, Virginia 23219
804-786-2071
FAX 804-786-1991
Virginia Relay Services
800-828-1120
7-1-1

The Honorable Gregory D. Habeeb
Member, House of Delegates
Post Office Box 882
Salem, Virginia 24153

Dear Delegate Habeeb:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issue Presented

You ask whether, under § 55-58.1, a Virginia limited liability partnership may serve as a trustee in a deed of trust on real property.

Response

It is my opinion that a registered limited liability partnership organized under the laws of the Commonwealth may serve as a trustee under a deed of trust covered by § 55-58.1.

For purposes of this opinion, I am assuming that the "Virginia limited liability partnership" to which you refer is a "registered limited liability partnership," meaning a partnership formed under the laws of the Commonwealth that is registered in accordance with the requirements of § 50-73.132. I am also assuming that the subject deed of trust falls within the purview of § 55-58.1.

Background

You relate that a bank would like to appoint a law firm, organized as a limited liability partnership, as the substitute trustee under a deed of trust held by the bank.

Applicable Law and Discussion

Section 55-58.1, which relates to the recording requirements of certain deeds of trust provides, in pertinent part, that "[n]o person not a resident of this Commonwealth may be named or act, in person or by agent or attorney, as the trustee of a security trust, either individually or as one of several trustees, the other or others of which are residents of this Commonwealth."

Although the Code does not define the term "person" specifically for purposes of § 55-58.1, § 1-230 provides a definition to be applied generally in the construction of all provisions of the Code. It establishes that "person" means "any individual, corporation, partnership, association, cooperative, limited liability company, trust, joint venture, government, political subdivision, or any other legal or commercial entity and any successor, representative, agent, agency, or instrumentality thereof." The Virginia Uniform Partnership Act, in turn, defines "partnership" as an "association of two or more persons to carry on as co-owners a business for profit [...] and includes, for all purposes of the laws of this Commonwealth, a registered limited liability partnership."

Thus, applying these definitions to § 55-58.1, and barring any contrary or limiting provision in the partnership agreement or applicable law, a partnership formed under the laws of the Commonwealth, including a registered limited liability partnership, may serve as a trustee under a deed of trust covered by § 55-58.1. Because the Code of Virginia constitutes a single body of law, the practice of referring to other Code sections as interpretive guides is well established and other sections may be looked to where the same phraseology is used. A 2001 opinion of this Office reached the same conclusion for limited liability companies, extending the definition of "person" in Title 1 to include LLCs and concluding that a Virginia LLC may serve as a trustee in a deed of trust on real property covered by § 55-58.1.

Conclusion

Accordingly, it is my opinion that a registered limited liability partnership organized under the laws of the Commonwealth may serve as a trustee under a deed of trust covered by § 55-58.1.

With kindest regards, I am

Very truly yours,

Kenneth T. Cuccinelli, II
Attorney General