Power of Attorney (PoA) is an important legal document in real estate and property related transactions.
However, not many people understand the importance of documents. Autoscale team would explain the power of attorney and its significance.
What is Power of Attorney :
A power of attorney is an instrument that is used by people (principle) to confer authority on somebody else to legally act on their behalf. Depending on the requirement, the principal can decide the level of authority given to the agent. The power of attorney may cover any or all aspects of property and asset management, money matters etc. Hence, the power of attorney can be classified as general or special, depending on the authority given to the agent by the principal. We will discuss types of power of attorney in more detail below.
Who are the principal and agent?
As a person who is empowering another person to act on your behalf, you will be the principal and the other person is the agent. This is a very serious matter and should be handled with care. Give a power of attorney when absolutely necessary to do so. Remember that your agent will act for you and his actions will have legally binding implications for you. You cannot walk away from the consequences so choose your agent wisely.
Importance of Power of Attorney :
At time because of geographical locations or busy schedule, it becomes necessary for us to depend on others for getting our things done. Granting a Power of Attorney is a legal process that involves the drafting of a document which assigns to another person the power to act as your legal representative. Real estate it very unpredictable industry. At times you may be required to sign certain documents within short span of time and delays are usually costly. To avoid such situations, if you have authorized someone else to sign on your behalf, things can be pretty smooth.
Types of Power of Attorney :
A Power of Attorney can be general, giving the agent the authority to conduct any type of business on behalf of the principal, or specific, and limited to the transactions expressly outlined in the document.
1) General Power of Attorney
A General Power of Attorney gives your agent the authority to handle all your affairs during a period of time when you are unable to do so, such as when you are traveling out of the country or when your physical and/or mental health are compromised. A General POA can be included as part of your estate plan to ensure that your financial affairs will be tended to in the event that you are unable to do so.
A General Power of Attorney is typically very broad, giving the agent extensive powers and responsibilities. Powers typically include (but are not limited to):
1. Buying, selling, or managing real estate and other property
2. Entering contracts, Settling claims
3. Availing loans etc.
2) Special, Specific or Limited Power of Attorney
A Special, Specific or Limited Power of Attorney gives your agent the authority to conduct a specific act or acts on your behalf. Because this type of Power of Attorney is limited to the act or acts designated in the document, it is especially important to be very clear about the powers you wish to appoint to your agent.
You may use a Special Power of Attorney to appoint an agent to act on your behalf in the event that you become ill or disabled, are embarking on extended travel, or are otherwise unable to handle a specific type of task. You may designate any of the powers listed above (under General POA) to your agent, or any other powers you deem necessary.
What type of Power of Attorney should be executed for real estate?
It is advised to use Special Power of Attorney for real estate matters. It limits the scope of the powers granted to the agent. However, if you trust your agent, you can also execute GPA which covers more generic powers.
Use of Power of Attorney in real estate field :
1. To sell, exchange, lease, collect rents, grant, bargain, or borrow and mortgage .
2. To execute all deeds, bonds, contracts, mortgages, notes, checks, drafts, money orders;
3. To manage, compromise, settle, and adjust all matters relating to real estate;
4. To represent Principle in various legal fora such as consumer forum.
Is it possible to revoke a Power of Attorney?
Of course! The power of attorney can be revoked in the following cases:
– As a principal you can revoke the power of attorney.
– You and the agent may mutually agree to revoke the power of attorney as well.
– You and the agent may mutually agree to revoke the power of attorney once the goal of giving the power of attorney is complete.
– The power of attorney is automatically revoked in the event of death, bankruptcy, and insanity (principal).
The basic principles to remember :
– It is NOW mandatory to have the POA registered specifically for property matters.
– The general rule of power of attorney is that it should be strictly construed.
– An agent cannot by his acts bind the principal to a larger extent than he is empowered to do under the power of attorney.
– Fraud by the power agent does not bind the principal. He cannot be sued or otherwise held responsible for fraud by the agent.
– If the power does not authorize the agent to carry on a business except with limitations any act done by him in excess of such power will not bind the principal.
– For example power to dispose of property does not confer a power to mortgage the property.
– You should be careful while authorising an agent as attorney to avoid inconvenience and expense of any legal proceedings in the future.
Property Knowledge By Autoscale