Beware the Power of Attorney

We lawyers have allowed to exist another of those terrible misnomers in the law that misleads more than it leads. This one is called the “Power of Attorney”. The document called a Power of Attorney (POA) creates the appointment of an Attorney in Fact, a concept far different from an Attorney at Law. Last week I saw an email written by an experienced Realtor to another telling her that a lease amendment was probably valid because the Seller’s attorney had signed it in all the proper places. That statement makes any real estate lawyer ask the question, “Do you mean to imply that because someone’s lawyer signed a document, that signature suffices to legitimize the agreement?” Is it possible there is a misunderstanding? In fact, there is.

There is a monumental difference between the document that the Realtor had buried deep in his memory (a “Power of Attorney”), and the document that actually appeared in this transaction. That Realtor was confusing the power of an “attorney in fact” and the power of an “attorney at law”. The Seller or Buyer may authorize someone - really anyone competent and of adult age - to be an “attorney in fact” and sign documents for the Seller. And either Seller or Buyer may hire a person to act as his “Attorney at Law”. What they do is different.

An attorney in fact is authorized to act as an agent on behalf of another by way of the power expressed in a document called a “power of attorney”. The person granting the power to act is called the Principal. (The power he grants to another could also be called a “proxy”, and in the corporate world, it is.) Florida law prescribes a form for this appointment. An agent’s powers are not presumed, but are required to be spelled out in the form.

A POA can be used in a transaction if the Principal will be unavailable for one reason or another. For instance, sometimes a parent will give a child a power of attorney to act for the parent when the parent is getting older and it is inconvenient for the parent to transact business that the child can more easily do for the parent. A parent may also give another person his written power of attorney to make a medical decision for the child in the parent’s absence on a class fieldtrip. An investor may give his broker his power to execute a trade on behalf of his Principal. Usually, the document appointing an attorney in fact authorizes an agent to take specific limited actions on behalf of the Principal. While this article is not intended as a primer on the mechanics of a POA, one important limitation to know is that the power can be used only for the benefit of the Principal and not as a means to defraud the Principal. If you are in the real estate business and an agent holding a POA seeks to use the POA to convey title to himself, for instance, unless some valid reason for that is documented, doing so will likely create uninsurable title.

Please talk with your lawyer if you are asked to grant a POA. That piece of paper will convey to another person significant power to act for you in every legal way, even in ways you did not intend. You should consider limiting the POA by being specific about the rights given to your Attorney in Fact and by limiting the time given him to use those rights (put an expiration date in the POA). Finally, if you have given a POA to someone and the need for that appointment has passed, get the paper back and destroy it. While it floats around someone may act upon it in ways you do not intend.

Any third party, such as a bank, Realtor, or real estate closer who acts on that written grant of power must be careful to ascertain the POA is properly authenticated and should read the document and follow it precisely. Failure to do so will generally render the action taken voidable, if not void. If you are a person expected to take action described in a Power of Attorney document, make sure the action you take is expressly authorized in the appointing document. Otherwise, you may be acting on your own, without authority, and may become liable as the Principal.

The intent of this article is simply to point out the differences between the power an attorney possesses because he or she is an attorney and the power granted to an agent under a Power of Attorney that makes the agent the “attorney in fact”. An attorney at law holds only the authority to make representations for the client in pleadings before a court. Whatever other right of expression he holds, he holds only because a client specifically granted the attorney the power to speak for the client. The attorney at law has no privilege to sign a binding legal contract on behalf of his clients. One who relies on a contract signed by a lawyer on behalf of his client may have a claim against the lawyer, but none against the client.

Always keep a copy of the document you used to authorize an action taken for another, and in real estate transactions never fail to record a copy of that document.