Housing Counsel: Take precautions when using power of attorney

October 26, 2012

You are about to settle on your new home but find you have to be out of town on the day of closing. What can you do?

First, you can try to postpone the settlement. But that may not be acceptable to the seller, and your lender may tell you that your loan lock cannot be extended.

Next, you can ask the settlement attorney to provide you with all of the papers that are necessary, and you can sign them in advance. Unfortunately, all too often, the documents needed for settlement are not available until moments before the actual settlement time — and sometimes even afterward.

So your title attorney tells you to give someone a power of attorney, authorizing that person to act on your behalf.

There are many different kinds of powers, such as general, specific or durable. Every homeowner should have separate durable powers of attorney for health and financial matters. However, this column will address only the power involved with real estate transactions.

You are the principal. You authorize someone to act on your behalf and sign all necessary documents as if you personally were present. That person is your “attorney in fact.”

Powers of attorney are authorized by state (or District) law, and you have to use the correct form. It will not be acceptable just to sign a paper saying “I hereby authorize Jane to represent me at settlement.”

Let’s look at the various state laws.

Every state allows real estate transactions to be conducted using the proper form of power of attorney. The District was the last jurisdiction in the country to allow such powers. There was concern that elderly people — not understanding what the document was — would give away their home by signing such a power of attorney. Accordingly, in 1994, over the objection of many people (including this columnist), the D.C. Council authorized powers of attorney.

In all caps and bold, it says: “This power of attorney authorizes the person named below as my attorney-in-fact to do one or more of the following: to sell, purchase, lease, grant, encumber, release or otherwise convey any interest in my real property and to execute deeds and all other instruments on my behalf, unless this power of attorney is otherwise limited herein to specific real estate.”

Be sure the power of attorney you sign has that language, otherwise the form may not be correct.

This document must be signed by the principal and notarized. The title attorney must have the original, which will be recorded among the land records before the legal documents that have been signed by the attorney in fact.

In Maryland, as of 2010, you have to use a fairly lengthy form and check off what your attorney in fact can — and cannot — do. The form also provides advice and guidance for the agent: “When you accept the authority granted under this power of attorney, a special legal relationship is created between you and the principal. This relationship imposes on you legal duties that continue until you resign or the power of attorney is terminated or revoked.” The instructions further make it clear that the agent must “act with care, competence, and diligence” and “do nothing beyond the authority granted in this power of attorney.”

This document must be recorded among the land records in Maryland where the property is located.

Virginia has enacted the Uniform Power of Attorney Act, and there is no specific form required. There is, however, an “Agent’s Certification” form which the attorney can sign to confirm that the principal is still alive and has not revoked the power. This is optional, but many title attorneys — to protect themselves as well as the principal — require that this be signed by the attorney-in-fact.

There are cases where the attorney-in-fact has used the power to take property for his or her own use. In the 1980s, a family owned several properties in the District. One of the family members — a young man — persuaded his grandfather to sign power of attorney over to him. The grandfather was in the hospital at the time recuperating from an operation. The young man arranged to convey his grandfather’s interest in all properties to himself. He then approached his grandmother, requesting that she sign a power of attorney, but she refused. The young man proceeded to kill his grandmother and ultimately went to jail.

Powers of attorney are fraught with problems. Title attorneys and title insurance companies are reluctant to accept them, and will insist on making sure that the proper form and correct language is included in the document. You should not use the forms that can be obtained free of charge (or even for a fee) on the Internet. If you need to provide a power of attorney for your real estate transaction, get the proper form from the settlement attorney that will be handling the closing.

Make sure you know who your attorney-in-fact is, and that you trust him or her. Make sure you carefully read the document, and if you don’t understand certain terms, ask your own attorney for an explanation. If your attorney-in-fact will have the authority to sign all settlement documents only for a specific piece of property, make sure this is spelled out very clearly in the document. And if you do not want your agent to have access to any moneys, put that limitation directly in the document you sign.

Benny L. Kass is a Washington lawyer. This column is not legal advice and should not be acted upon without obtaining legal counsel. For a free copy of the booklet “A Guide to Settlement on Your New Home,” send a self-addressed stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036.

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