Power of Attorney – To Give or Not To Give
Let me just preface this subject with my personal thought: In my community, the casual use of a Power of Attorney happens too often, and many times for not the correct reason. It is a matter of great concern.
What is a “Power of Attorney” (POA)? Simply put, it is a legal document that gives another person the right to act on your behalf, representing you in all aspects that are stated in the form. The implications, however, are not as simple.
There are two types of POAs: The General form allows the person being appointed – “Attorney-In-Fact” – to handle everything and anything for the Appointor (person giving the power of attorney). The SpecialPOA limits the powers to certain acts, which have to be stated clearly in the body of the document. The second form is the required form by Lenders for borrowing purposes. Both forms, however, incorporate the following language: “Giving and granting unto said Attorney in Fact full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do if personally present…” It is this language that highlights the cautionary steps we need to take when giving or accepting a Power of Attorney.
Here are the following guidelines that should be addressed in the use of the POA:
- Limit the use only to those circumstances in which the Appointor absolutely cannot be present to sign his own name due to distance considerations. Not to be used solely as a “convenience”.
- We prefer the Appointor to physically sign certain parts of the paperwork, for instance, the Purchase Contract, the Escrow Instructions, which will acknowledge their acceptance of the terms of the transaction, and leave the Attorney in Fact to sign the documents which requires a personal appearance of the signor.
- The POA should not be given to the Appointor’s real estate agent, loan agent, escrow officer or anyone who is part of the transaction.
- Lenders, Title and Escrow companies, all prefer the use of a Special Power of Attorney, and the use of the document should be stated clearly, “for the sale/purchase/refinance of the property located at ___________”.
- In order that the form can be used in a real estate transaction, there are certain words that must appear in the body of the form: “…to lease, let demise, bargain, sell, remise, release, convey in trust, and hypothecate…”
- We prefer that a term, or time limitation be inserted in the body.
- Any POA form that is over two (2) years old may not be acceptable for use.
- The use of an older POA may require the Attorney in Fact to sign, under penalty of perjury, an “Affidavit Concerning Non-Revocation or Non Termination of Power of Attorney” form before the POA will be accepted.
- A POA cannot be given by a Trustee of a Trust, a personal representative or Executor of an Estate, Guardian of a Conservatorship, a Manager of a Limited Liability Company (LLC) or an Officer of a Corporation.
- The POA becomes invalid if the Appointor dies.
- The Attorney in Fact is not allowed to sign any form on behalf of the Appointor in which he will be giving himself consideration, compensation or interest. This is called “self serving”. An example of this is if John Doe gives James Smith his POA and James Smith signs a document on behalf of John Doe in which the net proceeds are given to James Smith. That is an absolute no-no.
- The original POA form must be given to Escrow early in the transaction so that it can be approved, not only by the Buyer’s Lender, but also by the Title Company insuring the transaction, especially if this is a form that was drawn by someone other than an Escrow Officer familiar with the approved forms.
- If the POA is used at any time during the transaction then the original POA must be recorded at the County Recorder’s at the close of escrow.
- Once the POA has satisfied its intent, revoke the document and record the revocation so that it is made of public record. See our “Revocation of Power of Attorney” form in our Forms section.
Given that the Attorney in Fact has full power and authority to act, it is important to remember that this is a serious responsibility, not to be taken lightly. It is also important to remember that this Attorney in Fact will also be fully responsible if any litigation should arise due to his acts.
The abuse of the use of Powers of Attorney can create tremendous underwriting issues for the title insurance companies and prospective lenders. Lenders have been known to request an explanation letter from the actual Borrower regarding the reason behind giving a POA. We have had lenders demand that the title insurance company issue a letter acknowledging that they will accept the power of attorney and will insure the transaction. It is a sign of the breakdown of trust and fear of fraud when demands like these are given.
In closing, words of caution: Do not lightly give away your responsibilities. Once given, be sure to keep yourself in the loop at all times. After the need has been satisfied, revoke the original document.
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