Not all Power of Attorney documents created equal

The topic of “Power of Attorney” comes up pretty frequently in our office. On an almost daily occurrence, clients ask whether or not a Power of Attorney is sufficient for a client’s upcoming real estate settlement.  

Or, at the 11th hour we are informed someone who should be at settlement will not be attending settlement, and then come to find out their Power of Attorney is insufficient.  

Government mortgage entity Fannie Mae also issued new guidelines regarding the use of Powers of Attorney for purchase transactions earlier this year, so it seems like a good time to revisit the topic of Power of Attorney and discuss the differences between various types of Powers of Attorney.

What is a Power of Attorney?

A Power of Attorney is a written document which grants authority to an agent to act on behalf of a principal, in the event that the principal is unable to make decisions or act on his or her own behalf.  

There are several different kinds of Powers of Attorney, and it is important to understand the differences between them.

A General Power of Attorney is one that allows an agent to make all personal and business decisions on behalf of the principal.  It gives the broadest authorizations to the agent, and it is often used to allow the agent to make medical, legal, financial or business decisions for the principal.

In stark contrast, a Specific or Limited Power of Attorney is one that is narrowly drafted to give an agent power to conduct a specific transaction with specific powers.  For example, a principal could have a specific Power of Attorney drafted authorizing his agent to sell his property at 123 Main Street, Washington, DC, including the authority to sign all documents related to the sale, to include the HUD-1 Settlement Statement, Deed, etc.

In addition, a Durable Power of Attorney is one that remains in effect even if the principal becomes mentally incapacitated.  In order for any Power of Attorney to be accepted as a Durable Power of Attorney, specific language must be included in the body of the document (not just the caption of the document) stating that it shall “not be affected by subsequent disability or incapacity of the principal, or lapse of time.”  If the specific language is not included in the document itself, the agent’s power to act on behalf of the principal will end if the principal becomes mentally incapacitated.

As each of the jurisdictions in the DC metro area have different requirements for drafting a real estate power of attorney, we strongly recommend that if you require the use of a power of attorney for an upcoming real estate transaction, you contact our office so that we can provide you with the required form for that particular jurisdiction.  

Or, if you already have a power of attorney, please forward a copy to our office for review, well in advance of settlement, to ensure that all the statutory requirements have been included for that jurisdiction.