A Power of Attorney (POA) can be a very useful tool in real estate transactions. The POA can help expedite the process and execute documents when another party is unable to attend the closing. However, there are a few things to be aware of before relying on a POA for your real estate transactions.
What is a Power of Attorney?
A Power of Attorney is a legal document that allows an individual (the principal) to give another person (the agent or attorney-in-fact) the power to act on their behalf. Typically, a Power of Attorney refers to legal affairs, but a POA can also represent the principal in business or financial matters, real estate transactions, and in other private affairs. With a real estate POA, the principal signs the Power of Attorney document prior to the real estate closing, and then the agent signs all of the necessary real estate paperwork on behalf of the principal.
Make Sure You Have the Correct Power of Attorney Documents
Power of Attorney forms can be flexible; the principal can authorize different duties and responsibilities to the POA for specific lengths of time. There can be POA forms for finances, business, medical, and real estate. Before you begin the closing process, you should make sure that the POA forms enable the agent to sign real estate documents on the principal’s behalf for the property in question. It’s also a good idea to check for clauses about the principal’s mental competency; sometimes, the POA form specifies that the agent cannot sign any real estate forms if the principal is no longer mentally competent. (Note: The principal must be competent to sign the POA documents; they cannot sign the documents after an illness or emergency.)
A Power of Attorney is For Individuals Only
If the principal party is a company or a corporation, a Power of Attorney is probably not the appropriate legal document to use. If an LLC, for example, is trying to buy or sell property and the LLC’s manager cannot attend the closing, that manager cannot use a POA for the transaction. They cannot give someone else their corporate powers to sign on their behalf.
The same is true for trustees, a personal representative of an estate, or general partners in a partnership. These individuals are acting in a fiduciary capacity to their entity (the trust, estate, partnership), and they cannot delegate those fiduciary duties with a Power of Attorney. Instead, the principal would likely need a corporate resolution or similar legal document.
The Power of Attorney Should Be Recorded Where the Property is Located
It’s a general rule that the Power of Attorney form has to be recorded (filed) in the same county where the property is located. That document must be an original, signed by the principal, and notarized. The court and the title company will not accept photocopies.
If the principal knows that they are entering into a real estate transaction, they should allow plenty of time for the Power of Attorney forms to be properly recorded. It can take a while to prepare the document and then have it signed and notarized. This is especially true if the principal is out of the country. It’s a good idea for the principal to let the parties know ahead of time that they’re using a Power of Attorney. That way, the parties can make sure the proper POA documents are in place before scheduling the closing.
Have Questions? Contact Brian M. Douglas & Associates’ Real Estate Team
If you’re planning to use a Power of Attorney for your future real estate transactions, it’s important to consult an attorney with any questions about the POA forms. When you sign a POA, you’re giving someone else the authority to sign and make decisions on your behalf – so you want to make sure that the documents reflect your wishes. Boilerplate forms can be detrimental to your legal needs. If you have additional questions or would like to schedule an appointment, call (770) 933-9009 or contact us online.
