Tuesday, November 30, 2010

Using A Power of Attorney

Winter Park Home, Volume 8 / Issue 4, 2010

Occasionally clients tell me that they cannot be present for a real estate closing, and ask if they can sign their documents in advance. Depending on the circumstances, particularly if the individual is the Seller, the closing agent may be able to accommodate this request and have the documents signed prior to the actual closing date. However, there are other situations where this cannot be done. In some situations, a duly prepared and executed real estate Power of Attorney can be used, whereby a second person is authorized to sign on behalf of the individual who cannot be present. In this column, I address the use of Powers of Attorney solely as they relate to the sale, mortgaging, and leasing of real property.

A Power of Attorney is a written instrument in which one person, known as the “Principal,” delegates his authority to another person, known as the “Attorney-in-fact,” to act as an agent of the Principal to sign documents on behalf of the Principal. This Attorney-in fact may execute only those documents that the Principal has authorized his agent to sign on his behalf. Powers of Attorney, or “POAs”, are recognized by chapter 709 of the Florida Statutes, which prescribes the types of POAs and the rules under which they can be used. POAs can be general or specific in nature.

A general Power of Attorney often includes language reciting the authority of the agent to “sell and convey any and all real property owned by me in the State of Florida.” This is generally recognized as sufficient authority for the Attorney-in-fact to sign a Purchase and Sale Agreement for property owned by the Principal at the time the POA was executed, and also to execute a deed and other documents necessary to transfer the property. The language in a POA must be sufficient to describe the acts which the Attorney-in-fact may undertake on the Principal’s behalf. If, in the above example, the POA only recites the authority to sell all real property owned by me, under Florida law this authority is not sufficient for the Attorney-in-fact to execute the deed to convey the real property. Additionally, in the above example, the authority to “sell and convey any and all real property owned by me in the State of Florida” does not include real property that may be subsequently acquired by the Principal. If the Principal intends to include subsequently acquired property, the POA must include this authority.

A Specific Power of Attorney is more detailed. It identifies the real property that is subject of the transaction, the documents that are to be signed on behalf of the Principal, and typically defines the duration of the POA. An example is a POA in which the Attorney-in-fact is authorized to execute a Mortgage, Promissory Note and other related documents for a loan from ABC Bank that does not exceed a specified amount, and which recites that the documents must be signed by no later than a certain date, after which the POA can no longer be used. Ideally, unless the Principal wants to provide blanket authority to his agent, the parameters of the authority should be limited to the particular transaction.

There are also execution formalities for a Power of Attorney. The general rule is that the POA must be executed with the same formalities as the document that is to be signed by the Attorney-in-fact. For example, a deed requires two witnesses and a formal notarial acknowledgement. A POA authorizing an agent to sign a deed on behalf of the Principal must therefore include two witnesses and the acknowledgment. There are, however, exceptions to this rule. Typically mortgages do not have to include witnesses. Florida law, however, provides that a POA used to mortgage homestead property must be executed with the formalities of a deed, i.e. also include two witnesses. Durable Powers of Attorney, which will be discussed in a subsequent article, must also be executed with the formalities of a deed.

There are preliminary issues to address when relying upon a Power of Attorney. If the POA is to be used for a mortgage, the Lender must first be contacted to determine if the Lender will allow its use. A number of Lenders, in fact, uniformly refuse to permit the use of any Power of Attorney. If a Lender authorizes use of a POA, oftentimes the Lender requires use of its own form of POA. In those cases it must also be determined whether the Lender’s POA is sufficient for the contemplated transaction. Lender’s forms are sometimes inconsistent with Florida law, and need to be modified, before a closing agent can rely on its use.

Another question to ask is why the parties want to use a POA. Although there are many good reasons why a person cannot be present at a closing (e.g. out of the country on military duty), a Power of Attorney should never be relied upon solely for the Principal’s convenience. The closing agent should determine the reason why the seller, purchaser, or mortgagor cannot be present for the closing.

Additionally, in today’s marketplace, there is an underlying concern whether the Principal is in fact who he says he is. There are numerous examples of “Sellers” or “Mortgagors” providing POAs – only to later learn that the POA is fraudulent. Even if it is determined that the Seller or Mortgagor is who he says he is, the better practice, which our office always follows, is to also obtain a copy of the Principal’s driver’s license or passport to support the fact that the Principal did in fact sign the POA.

Any individual wishing to create a Power of Attorney should always consult with his attorney to determine the appropriate scope of any grant, and that it is prepared with the appropriate formalities.

In my next column, I will describe the use of a Durable Power of Attorney, and the proper execution of documents by the Attorney-in-fact.

Visit our website for more information on this subject.

Frank Pohl founded Pohl & Short, P.A. based upon the belief that a high quality small commercial law firm was needed in the Orlando, Florida area as an alternative to the large commercial law firms. He still believes that client responsiveness and satisfaction has a place in a fast changing legal profession. Frank has been involved in the Central Florida community for more than twenty-five years. He has been a dedicated past board member of many local organizations over the years. Frank graduated magna cum laude with a B.G.S. Degree from the University of Miami in Coral Gables, Florida; attended the University College at the University of London as an undergraduate studying British literature and British history; obtained his Juris Doctorate Degree in 1979; and obtained a Masters of Law and Letters Degree (LL.M.) from New York University School of Law in 1980. Frank is a member of The Florida Bar, the California Bar, and the District of Columbia Court of Appeals. He is also admitted to the U.S. Supreme Court. He has served on the Orange County Bar Association Real Estate Committee and is a member of the The Florida Bar’s Real Property and Corporation and Business Law Section. He has also served on the Florida Bar Grievance Committee.

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