BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Power of Attorney
A Power of Attorney (“POA”) is a written instrument, executed by a natural person (who has the capacity to contract), known as the “Principal,” that grants authority to act as an “Attorney-in-Fact”(“AIF”), and sometimes referred to as the “Agent” of the Principal
In California, POA’s are governed by the Power of Attorney law (Probate Code 4000-4545).
TYPES OF POWERS OF ATTORNEY: A POA can be a General POA, granting broad powers, or a Specific POA, granting only power for a specific act such as selling a parcel of real property. A General POA grants to the AIF all the authority to act in all legal matters that the Principal would have.
If the Principal dies or becomes mentally incapacitated, then the POA becomes void.
However, a POA can also be a Durable POA, meaning that it survives the mental incapacity of the Principal. A Durable POA is valid if:
1. The Principal had the mental capacity to enter into the POA at the time it was created; and
2. It meets the criteria of the Durable Power of Attorney law (Probate Code 4124)
TERMINATION OF A POWER OF ATTORNEY: A POA may be terminated by:
1. The death of the Principal
2. The mental incapacity of the Principal unless it is a Durable POA
3. The revocation of the POA by the Principal
4. The resignation of the AIF
5. The mental incapacity of the AIF
6. The death of the AIF
7. The term specified in the POA if there is a time limit
8. The subject of the POA is extinct (e.g., the principal no longer owns the
Property that the AIF was authorized by the POA to sell)
UNIFORM STATUTORY POWER OF ATTORNEY: The Probate Code provides for a uniform form for a POA. (Probate Code 4401-02) These forms are often available from an escrow company.
PRACTICE TIPS:
1. If you have a seller or buyer who is acting under a POA, always obtain a copy early on and take it to the escrow office you will be using to determine if they will accept it.
2. Some escrow companies will not accept an older POA because it may have been terminated for one of the reasons specified above, and will require that a new one be executed.
3. If you are dealing with an AIF under a Durable POA, and the Principal is mentally incapacitated, the escrow company will also want to verify that the Principal had the mental capacity to execute the POA when it was signed. If the Principal was mentally incapacitated at the time the POA was executed, it is invalid. It may require the signature of an attending doctor who knows the medical history of the Principal who can verify in writing the mental capacity of the principal at the time the POA was signed.
4. If a seller owns title in their individual name (as opposed to a trust) and is determined to be mentally incapacitated, that seller cannot sign a POA at that time as it would be invalid. There will have to be a Conservator appointed for the seller. This can take weeks; so it is essential to have this taken care of before doing any steps to list and market the property.
5. TRUSTEE SELLERS: A trustee CANNOT delegate their trustee powers by way of a POA to another person unless there is specific authority to do so in the trust document itself. If you are dealing with an AIF under a POA and the Principal is a trustee of a trust selling a property in the trust, immediately take the POA and trust document to the escrow officer. Most often you will find that escrow will not accept the POA, and the trustee must sign the contract and closing documents.
6. A seller who wishes to grant a POA to a third party to execute contract purchase and sale documents CANNOT delegate their disclosure duties to the AIF. All disclosure documents must be signed by the actual seller, not the AIF.
7. If you are dealing with a seller or buyer who wishes for you, as their agent, to accept a POA to act as the client’s AIF for purposes of the sale, do NOT accept. It is a conflict of interest for you to do so. This is because you only get a commission if the sale closes so that could be alleged to be a conflict of interest if the principal or their family later claim they would have been better off not selling.
DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.