POWER OF ATTORNEY Facts and Issues

​We’ve had several Power of Attorney (POA) issues arise recently, so this week’s Broker Corner is a review of facts and issues to watch for in selling or buying real estate with a POA.
 
A POA to purchase or sell real estate must be in writing.
Since a contract for the sale of land must be in writing, the power of attorney giving someone the authority to sign a real estate contract on someone else’s behalf also must be in writing.
 
A POA must be witnessed and notarized if it to be used for the sale or purchase of real estate, but it is not required to be recorded.
Because a deed must be witnessed and notarized, the power of attorney must also be witnessed and notarized. A party may (but is not required to) record a power of attorney. If a party chooses to record the POA, the power of attorney may be recorded as a supporting document for the property deed.

​Durable or Non-Durable
 
A POA can be Durable or Non-Durable. A Non-Durable Power of Attorney is only valid as long as the principal is capable of acting for him or herself.  It ends automatically when the principal becomes mentally incapacitated or dies.  The Representative then cannot act under the POA. Any action the Representative takes after the Principal becomes incapacitated is void. Of course, exactly when a Principal becomes incapacitated is a matter for interpretation and can be fraught with emotion and challenge.  The judgement of incapacity may require resolution by a physician, an attorney or a judge.

On the other hand, a Durable Power of Attorney remains in force even after the principal becomes mentally incapacitated. A Durable POA ends automatically when the principal dies or the POA is revoked.
 
Whether the POA should include a durable power is the Principal’s choice.  A Principal may choose not to include the power in a business situation or may choose to include it in a family situation.  Or vice versa.  Principal’s choice.
 
 
Title Companies and lenders generally will require a POA that is specific to the property in the transaction.
A party that grants a POA to sell property should be specific to a particular piece of property.  If the description is only general, title companies are reluctant to insure the title. The POA should describe the property with the same specificity as a purchase contract requires.  However, the terms of the sale are left to the discretion of the representative and do not have to be included in the POA.
 
The POA will be examined closely by the closing attorney.  Many title companies require their own form of POA.  If possible, it is recommended to get the correct format from the closing attorney (or lender) as soon as possible.
 
In the case of a POA designed to purchase real estate, in addition to requiring the specific property in the POA, the POA should also include the express power to sign mortgage documents.  Again, lenders may require their own form of POA, so it is best to obtain the right format as soon as possible.
 
Consequences of an Insufficient POA or a Terminated POA
 
 
A power of attorney terminates by express revocation by the principal, by the appointment of a new agent, or by the death of the principal or agent.   The POA does NOT automatically terminate if the principal becomes incapacitated after granting a properly written POA.  
 
Spouse Has No Implied Power of Attorney to Sign for Other Spouse
One spouse does not have a power of attorney by virtue of marriage to sign a real estate sales contract for the other spouse. If a spouse is going to be unavailable to sign a real estate sales contract, that spouse should execute a power of attorney in favor of the other spouse. Some builders include a provision in their contracts that once the contract is initially signed by both spouses, the signature of one spouse thereafter on any amendment or addendum to the contract will automatically bind the other spouse. This type of provision is particularly helpful both in new build contracts or other residential contracts when both parties may not be available to execute new documents. Per Seth Weissman in The Red Book.
an example of this type of provision follows:
 
Special Stipulation: One Buyer Has Power to Sign for Other Buyer
“Each undersigned Buyer, by signing below, does hereby appoint the other Buyer or Buyers herein to act as his or her authorized agent of and power-of-attorney for said Buyer(s) for the purpose of signing any amendments hereto and all other documents contemplated herein, including but not limited to any notices given hereunder, and authorizes the taking of all such actions on behalf of Buyer with respect to this Agreement. All parties agree that if any Buyer signs any document contemplated above, said Buyer shall be signing for himself or herself and for all other buyers, regardless of whether the Buyer indicates that he or she is acting in a representational capacity. This appointment and grant of this power-of-attorney may only be terminated upon written notice to Seller and shall only be effective upon actual receipt of said notice.”
 
 
Should the Real Estate Agent Act as the Representative for a Client?
It is not recommended that a listing or a buyers’ agent also be a representative on a POA.  There are 4 clear reasons.

1.  Conflict-of-interest. You get a commission if the deal closes vs. Acting in the best interest of the client.
2.  The real estate agent arguably becomes a principal in the transaction. Without previous disclosure of principal status, being the representative can open you to a GREC violation.
3. Real estate agents are not fiduciaries in Georgia. By accepting the representative status of a POA, you are increasing your duty of care to the highest level of care, thereby increasing your liability and potential to be sued. 
4. E&O insurers often have exclusions in the policies for real estate brokers acting as principals, whether for their own property or pursuant to a POA.

If a client asks that you be a representative under a POA, usually to sign documents at closing, you should immediately call a member of the Broker Team for guidance.
 
Last, if you find yourself in a transaction that requires the use of a POA, ask to see the document. If you are unsure of whether the POA includes the express actions required to complete the transaction, call a member of the Broker Team.  Handling POA issues up front will save time and frustration later!
 
 
References:
Weissman, Seth. The Red Book on Real Estate Contracts in Georgia,  BookBaby. Kindle Edition.