Not Even Superheroes Have the ‘Power of Attorney’

By Terry S. Prillaman, Jr.

As children, many of us dreamed of having superhero powers, such as the power to fly, the power of X-ray vision, or the power to run faster than a speeding bullet. While these powers are of the fantasy realm, there is nothing unrealistic about the legal term, power of attorney (POA), which is so commanding and impressive, not even Superman holds its power.

In the title insurance and real estate world, we see POAs daily, raising many questions as to the type, execution, necessary language, scope, and validity. Navigating POAs is one of the most challenging aspects of title work. Here are some answers to frequently asked questions (FAQs) about POAs.

What is a power of attorney (POA)?

By definition, a POA is a written, legal document where a person (known as the “principal”) grants another person (for our purposes, an agent or attorney-in-fact) the right, authority, or power to act on their behalf to make certain decisions and execute documents. While these powers can be related to property, medical, or financial decisions, we focus on real estate in this article.

What are the different types of POAs?

Durable POA: A durable POA remains valid even AFTER the principal loses the mental or physical ability to act on his own behalf.
Springing POA: A springing POA only becomes effective upon a certain circumstance occurring, such as a medical doctor making a diagnosis that the principal lacks the ability to make property decisions for themselves.
Specific POA: Sometimes called a special or limited POA, a specific POA gives an agent the authority to act only about a specific power – such as to sell or mortgage a specific parcel of real estate – and for a specific length of time.
General POA: A general POA grants much broader powers and authority to the agent than the specific POA, and may include powers regarding real estate, stocks, bonds, bank accounts, insurance, business decisions, and making gifts.

What language is necessary in a POA document?

It is important to scrutinize the terms and scope of the POA document in advance of any real estate closing and determine the type of power granted: Durable, special, or general. Like most real estate matters, local laws, regulations, and customs apply here. Some states only require a reference to their statute to give the necessary powers to the agent. Others require specific language for the powers to be granted. For example, the words “sell and convey” may be necessary for an agent to execute a deed to transfer title. Some courts have held that the word “sell” by itself only gives the agent the power to negotiate the terms of sale.

You should also review the POA to determine if it was drafted under the laws of a different state than where the real estate is located, or if it was just executed and acknowledged in a different state. For example, if your property is in Illinois, but the POA was drafted under the laws of Florida, then all the Florida laws for execution, language, and validity would be applicable to the POA. But if it was an Illinois POA and only executed in Florida, then Illinois’ POA laws control the transaction. However, a validly executed Florida POA would be acceptable for use in an IL transaction.

We can’t emphasize enough how critical it is to read the POA in advance of your closing. The following example – whether myth or reality – is part of title insurance lore, and should be heeded:

There once was a husband who had a POA from his wife to buy their home. The husband proudly came to the closing with the wife’s written POA ready to execute all the documents and mortgage. The title agent had to stop the closing when they read the POA for the first time because it was a limited POA with ONLY one power granted to the husband: The authority to pick out the new drapes for the house! A power of drapery?

What is the proper execution of a POA?

Most states have statutes that govern and outline the proper signing of a POA. Some states only require the principal to sign the POA with their signature acknowledged before a notary. Others require a witness to also sign the POA, and some even require two witnesses to sign.

At the time of the execution of the POA, the principal must be of sound mind and not acting under duress.

What are the best practices for use of a POA?

Although using a POA is not uncommon in real estate transactions, it is not the usual or customary way to transfer or encumber title to real property. Use of a POA requires a title agent to look at matters and facts outside of the immediate transaction. POAs are often associated with elder abuse or fraud, so a deeper dive into the facts of your closing is critical.

Threshold questions agents should consider and investigate include:

What were the circumstances under which the principal signed the POA?
Was the principal competent at the time of execution?
Is the principal’s signature valid, or is it a possible forgery?
Was the principal aware of the nature of the document he or she was signing?
Was the POA intended for the subject transaction or for some other purpose?
Has the POA been revoked by the principal or by operation of law?
What is the relationship between the principal and the attorney-in-fact?

Best practices for use of a POA include:

Use the POA sparingly and only for necessity and not convenience.
The title agent should have direct communication with the principal.
The communication should be documented in your closing file.
The communication should confirm the principal’s wishes and that the POA is still valid.
The title agent should confirm why the principal cannot execute the documents personally.
If the POA is older than 1 year, obtain an affidavit from the attorney-in-fact.

Can entities (trusts, corporations, limited liability companies, etc.) grant powers of attorney?

The answer to this question depends on the type of entity involved.

Trustee of a trust: Generally, no, a trustee cannot grant to another person or entity the powers that have already been delegated to them under the trust. A trustee’s powers are fiduciary in nature, so they may not be authorized to give someone else this power. However, if the trust gives the trustee specific powers to employ or appoint an attorney-in-fact, and gives the trustee the specific power to act regarding property (sell, convey, purchase, encumber), then it may be possible for a trustee to grant a POA. If it does, then the POA must be executed by the trustee in their official capacity as trustee, not as an individual. Doma underwriting counsel can assist with the review of the trust document.
Limited liability company (LLC): Generally, no, an LLC cannot grant authority under a POA. However, this may be possible if the LLC operating agreement gives the principal (LLC “member”) the authority to act in accordance with the transaction, including appointing an attorney-in-fact. The best thing to do here is to get a resolution signed by the members of the LLC giving a specific individual the authority to execute the documents for the transaction.
Corporation: Generally, no, a corporation cannot grant authority through a POA. The best thing is to get a resolution from the board of directors of the corporation granting the authority to act in accordance with the transaction.

Can a POA be used after the principal is deceased?

The answer to this question, in all cases, is NO, NEVER, NEGATIVE, NYET!

While an agent, spouse or other relative may believe or hope that the POA is still is valid, the authority granted in the POA immediately terminates upon the principal’s death. The same is true even if the instrument in question is a so-called durable POA. If the principal is deceased, a POA may not be relied upon, and the title agent must refuse to close and insure. There are no exceptions.

Should the POA be recorded?

If the POA is used to execute a recordable document (most commonly the deed, or deed of trust/mortgage) then it shall be recorded immediately prior to the documents executed using the POA. Some states have statutes requiring that the POA be recorded. Even without a statute requiring recordation, it is best to always keep the chain of title clear by recording the POA. This avoids title clouds on the back end when there is no recorded proof of authority for the agent or attorney-in-fact.

How does the agent sign the documents using the POA?

There is frequent confusion about how to execute the document when using a POA.

If the principal is Clark Kent and the attorney-in-fact is Bruce Wayne, the documents should be signed in one of the following ways:

Clark Kent by Bruce Wayne, his agent; or
Clark Kent by Bruce Wayne, his attorney-in-fact.

Final reminders

While having a POA may not be a superpower you’ve dreamed about, it is a power not to be taken or given lightly. If a POA is to be used in your real estate or title transaction, you should stop and carefully review the language and manner of execution. Question its use for your transaction. Is it necessary, or only convenient? Doma Title Insurance agents can contact local Doma underwriting counsel with any questions at [State Abbreviation][email protected].

“The most important part of this rapid response plan is the word rapid,” Schreiber said. “You have a limited window to recover the funds. Fraudsters are not going to leave the funds in the bank where you wired them to, which makes recovery all the more difficult. In most instances, the money is unrecoverable within a matter of hours, or at most, two or three days.”

Terry S. Prillaman, Jr., is Vice President, Midwest and Mid-Atlantic Regional Underwriting Counsel for Doma Title Insurance, Inc.

Coming soon: A new look