Utilizing Powers of Attorney in Real Estate Transactions

Power of attorney

A Power of Attorney is a legal document delegating authority from one person to another. The “Principal” is the person who is delegating authority to another person to act on his or her behalf, and the “Agent” is the person who receives the power to act on behalf of the principal. The Agent is sometimes referred to as an “attorney-in-fact.” However, the term “attorney-in-fact” does not mean the person is a lawyer; in fact, rarely is the “attorney-in-fact” a lawyer.

In order for a Power of Attorney to be used for execution of a deed in the State of Florida, the Power of Attorney must be executed with the same formalities (requirements) as a deed. In the context of a real estate transaction, a Power of Attorney might be used to allow another person to sign a contract, a deed, handle financial transactions (including signing a promissory note and a mortgage), or sign other closing documents for the Principal. When executing documents under a Power of Attorney, the Agent will always include after his or her signature that the document is being signed “as agent for” or “attorney-in-fact for” the Principal. If the Agent signs only his or her own name, the Agent may be held personally liable for whatever was signed. Though somewhat tedious, it is always recommended to sign as follows: “John Q. Smith, as attorney-in-fact for Jane Q. Doe,” or “John Q. Smith, by Jane Q. Doe, his attorney-in-fact.”

Notwithstanding any popular notion to the contrary, parties should be loath to utilize a Power of Attorney when the Principal is otherwise available. By virtue of the fact that the Principal is not present, questions arise as to the circumstances for the Principal’s absence, such as, fraud, forgery, incapacity, undue influence, sibling conflicts and family infighting. Powers of Attorney are easily abused, and such abuse is not always easy to spot. Moreover, extreme caution should be used to avoid possible conflicts of interest, such as when a real estate agent or attorney is requested to serve as an Agent of a Principal under a Power of Attorney, particularly where they are the Listing Agent and Closing Agent, respectively. Questions of undue influence are more likely to arise in such situations.

For this reason, Powers of Attorney are not always accepted for use, notwithstanding that it was lawfully executed and has not been revoked, suspended or terminated. Financial institutions (i.e. mortgage lenders) are setting their own requirements and policies for accepting a Power of Attorney; some require the use of their own forms. The same may be true of title insurance underwriters who are being asked to insure deeds and mortgages executed under a Power of Attorney. At minimum, consent from the lender and title underwriter will need to be obtained before the Power of Attorney can be utilized. Most lenders and title insurance underwriters will require a “Specific Power of Attorney” containing the legal description of the subject real property, and the following specific powers: “to protect, conserve, lease, encumber, grant, bargain, sell, and convey, execute any closing settlement statements, deeds, mortgages, notes, or other documents necessary to effectuate the sale and conveyance or mortgage of the following described real property: [legal description provided here].”

Consideration should also be given to the time and expense involved in having a Power of Attorney drawn, executed, accepted for use, and the original recorded in the Public Records. In addition, the Agent will be required to sign an affidavit certifying that the Power of Attorney is still valid and in effect (among other specifics too lengthy to be repeated here).  A common misconception is that a Power of Attorney survives the death of the Principal. A Power of Attorney is invalid once the Principal dies.

A Power of Attorney is a powerful legal document that gives the authority for someone to act in someone else’s legal capacity. A Power of Attorney may give another person the right to do almost any legal act that the maker of the Power of Attorney could do if personally present. It should be carefully considered and prepared by a lawyer to meet the Principal’s specific circumstances. Pre-printed forms may fail to provide the protection desired, and are strongly discouraged. As always, should you have any questions regarding the foregoing we urge you to consult with your local real estate attorney.

Sincerely,
Berlin Patten Ebling, PLLC

 

Article Authored by Mark C. Hanewich, mhanewich@berlinpatten.com

Please note that we have relocated from our former downtown Sarasota office to our new Sarasota headquarters as of Monday, August 17th which is located at 3700 South Tamiami Trail just across from South Gate Mall. This will only impact business handled from our Sarasota location, as our Venice and Lakewood Ranch offices will remain the same. Thank you.

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

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