This article discusses the impact of a power of attorney on a property transaction. It discusses about the different types of power of attorneys, the method by which it is revoked and the procedure required to be followed by the buyer in a conveyancing transaction to ensure that he gets a good title.
A power of attorney is a document that allows a donor (or seller/buyer in this context) to appoint someone else to perform certain actions on his behalf. For instance, if the seller is going abroad and will not be available to sign the documents, he can appoint someone else to execute the same on his behalf through a power of attorney.
Types of power
There are five different types of Power of Attorneys:
a) General Power of Attorney: This is granted under S10 of the Powers of Attorney and allows the donee to deal with all of the donor’s assets.
b) A Special Power of Attorney: Under this power, the donee is allowed to deal with only certain assets or categories of assets.
c) A Trustee Power: This is given when the property is held in a trust
d) An Enduring Power: This is given under the provisions of the Enduring Powers of Attorney Act 1985. Such a power endures through the mental incapacity of the donor, provided it is registered.
e) A Lasting Power: This power has replaced the enduring power of attorney, since 1st October 2007.
Revocation of Power
A power can be revoked expressly by the donor, or is automatically revoked on the death, bankruptcy, or mental incapacity of the donor. But a registered enduring power of attorney will last and cannot be revoked except by an order of the court. A buyer (and subsequent buyers) who buys from such an attorney gets a good title provided;
- The power authorises the transaction which takes place between the attorney and the buyer, and
- Is valid and is subsisting on the date of completion of transaction.
The buyer should make sure that the power was not revoked on the date of completion of transaction with the attorney.
Copy of Power
A buyer can always ask for a certified copy of the power of attorney related to the title, even when the transaction involves unregistered land and the power is dated before the root of title.
Terms of the Power
The buyer should also read the terms of the power clearly to understand if the donee is indeed authorised to undertake the transaction. While a general power of attorney allows the donee to take any action that a donor would perform, the buyer should read the terms of other types of powers of attorney to check if the donee is authorised to execute the particular transaction in relation to the particular property.
Power of Attorney in transaction of a registered land
The certified copy of the power of attorney should be submitted when applying for registration of the disposition. Such a certified copy of the power should be certified on all the pages for Land Registry purposes. When a transaction between a buyer and the attorney does not take place within 12 months after the grant of power, the buyer has to make a statutory declaration that he did not have knowledge of the revocation of the power of attorney.
Power of Attorney in transaction of an unregistered land
General, special and trustee Power
A buyer buying unregistered land through a power of attorney shall receive good title to the property, provided he proves that he acted in good faith without knowledge about the revocation. Since death of the donor is one of the reasons for revocation, a buyer who has knowledge of death of the donor cannot claim a good title to the property. A subsequent buyer gets a good title and can claim protection if,
- The dealing with the attorney and the earlier buyer (the person who dealt with the attorney) took place within 12 months of the grant of power,
- The person who purchased the land from the attorney had made a statutory declaration within three months of the transaction that he did not have knowledge of the revocation of power.
Enduring and lasting Powers
The enduring power of attorney earlier granted by the Enduring Powers of Attorney Act 1985 was replaced by provisions in the Schedule 4 of the Mental Capacity Act 2005. An enduring power takes effect like any ordinary power until the time the donor is mentally incapacitated. Upon the incapacity of the donor, the attorney’s power to act on behalf of the donor becomes limited to acts that are beneficial to the donor and the estate until it is registered with the Office of the Public Guardian. Once the power is registered, the power becomes irrevocable except by the court.
A buyer buying property from an attorney who holds an enduring power has to first make sure that the power is registered with the Office of the Public Guardian. If the power is registered, the attorney should produce a certified copy of the original as evidence for the content and the registration of the document.
Since 2007, enduring powers have given way to lasting powers. Under the Mental Incapacity Act of 2005, lasting powers give authority to the attorney on issues that deal with the donor’s personal welfare, property, and other affairs. The lasting power should be in the form prescribed in the Act, and it should also be registered with the Office of Public Guardian. A Public Guardian is an officer who is appointed by the government to deal with people who have been authorised for dealing with issues concerning the mentally incapacitated.
When a buyer buys property from a person with a lasting power, he has to make sure that the lasting power is registered with the Office of the Public Guardian and should also check whether the attorney is acting within his scope.
Unless it is proved that the buyer already knew that the lasting power was invalid or had previous knowledge about the circumstances in which attorney’s power to act would be terminated, a buyer’s right to a good title will be protected. Similarly, a subsequent buyer’s rights will also be protected if the sale by the attorney to the first buyer was within a year of the date on which the power was registered, or if the first buyer makes a declaration within three months of the completion of the subsequent purchase that he had no reason to doubt on the authenticity of the power or the authority of the attorney to sell the property.
Existing enduring powers shall continue to be valid and shall operate, irrespective of the fact that they are registered or not.
The Trustees Delegation Act 1999
Prior to 1st March 2000, trustees were not allowed to use the general power of attorney and could only use the trustee power granted under s25 of the Trustee Act 1925. Such a power could not be delegated for more than a year, and could not be given in favour of a sole human co-trustee; it could only be given in favour of a stranger. This was a huge headache for co-owners who held the land under an implied trust. For instance, when husband and wife held a property as co-owners, they could neither use a general power, nor could appoint the other as an attorney. But, they could appoint the other partner as an enduring attorney.
Powers created before 1st March 2000
Unless the donor has a beneficial interest in the land, enduring powers that were created in favour of sole trustees before 1st March 2000 stopped being effective in relation to the trust property when registered with the Office of the Public Guardian, or on 28th February 2001, whichever is earlier. And if the donor has a beneficial interest in the property, the power will continue to be effective in relation to the trust property.
Powers created on or after 1st March 2000
The Trustee Act 1925 S25 was amended to allow general power of attorney for trustees. Such a general trustee power of attorney can be delegated only for a year, and can also be an enduring power. Co-owners can now appoint a sole-owner as an attorney. They can now either give a general trustee power or an ordinary general power. But the person acting both as a trustee and as an attorney for the other trustees cannot give a valid receipt for the money. The receipt of two trustees is required to overreach the beneficial interests in the trust.
Thus, if one of the two co-owners chose to appoint an attorney and execute a deed to sell a land, the co-trustee will not be able to give a valid receipt and may need a stranger to issue one. This rule cannot be avoided by using an enduring power.
Photo courtesy: NatalieMaynor
