Suppose an incapacitated person with dementia is moved into an assisted living facility, making it unnecessary for them to continue to live in their home. Because they previously granted an agent power of attorney, the agent has been able to act on their behalf in financial matters since their incapacitation.
The agent is considering selling the principal’s home, since the principal will not be returning to it. However, they are unsure whether doing so would be within their rights as an agent.
Can a power of attorney sell a house? The response to this question is complicated, and we would need more information to correctly assess the situation.
What we can say for certain is that powers granted under powers of attorneys can vary considerably from document to document. The best way to understand what a power of attorney restricts and allows would be to have the document accurately interpreted by a power of attorney lawyer.
When an agent is found to be making decisions that go beyond the authority they’ve been granted, the consequences can be severe — which is why it’s crucial for agents to take proactive steps to ensure any decisions they are making on behalf of the principal are proper.
It’s also crucial for a principal and their loved ones to pay attention to the agent’s actions. It is not uncommon for agents to misuse their authority to benefit themselves and others they are close to at the expense of the principal.
Powers of attorney can be tricky. On the one hand, they may protect the principal’s finances from taking a hit if something goes wrong (e.g., a car accident leaves them temporarily incapacitated). On the other hand, irreversible financial harm could result if they are misused.
Find out when it is appropriate for an agent to use their power of attorney to change ownership of property and when it is not, from this article by Keystone Law Group.
Can a power of attorney transfer money to themselves? Read our article to learn under what circumstances an agent can use a principal’s money.
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What Is a Power of Attorney?
A power of attorney (POA) is a legal document a principal signs to authorize an agent (also known as an attorney-in-fact) to make decisions on their behalf.
A health care power of attorney authorizes an agent to act on the principal’s behalf in medical matters. A general power of attorney authorizes an agent to act on the principal’s behalf in financial and legal matters.
Powers of attorney can vary in terms of how and when they take effect. A durable power of attorney takes effect upon signing and remains in effect until the principal’s death. A springing power of attorney takes effect only after the principal has been declared incapacitated by their treating physician. A nondurable power of attorney takes effect upon signing but automatically is revoked upon the principal’s incapacitation.
While powers of attorney can serve countless purposes, most people sign powers of attorney to designate someone they trust to make decisions for them in the event their mental competence declines in the future. A power of attorney cannot be signed by a person who has already lost competence.
Even though decisions surrounding health care can be difficult, the terms of health care powers of attorney tend to be unambiguous. The terms of general powers of attorney, on the other hand, may leave room for interpretation. For example, are agents under a general power of attorney permitted to make decisions surrounding a principal’s real properties?
Continue reading to discover the answer to this question, as well as many more.
What Is a POA in Real Estate?
A power of attorney in real estate grants an agent the authority to make specific real estate transactions on the principal’s behalf. For example, a principal may sign a power of attorney for property to authorize their agent to sell one of their real properties if they are unable to complete the sale themselves.
A power of attorney that is enacted for a specific purpose and only remains in effect for a specified period of time is known as a limited power of attorney. A power of attorney for property generally falls under the umbrella of limited powers of attorney.
A principal doesn’t necessarily need to sign a power of attorney for property to enable an agent to carry out real estate transactions on their behalf. Terms can be included in a general power of attorney document to provide an agent with this right.
Can a Power of Attorney Be Used for Real Estate Transactions?
As we’ve already mentioned, only some powers of attorney authorize agents to make real estate transactions on behalf of the principal. Furthermore, even if a power of attorney does grant an agent this right, the agent may be limited in terms of the types of real estate transactions they can make.
In general, agents can find information surrounding their right to carry out real estate transactions on the principal’s behalf in the terms of the power of attorney document. If there are no terms granting an agent the right to carry out real estate transactions, agents should assume they do not have this right.
If an agent has been granted the authority to make decisions surrounding a principal’s property, it’s likely they are either under a power of attorney for property or a general power of attorney.
In the following sections, we go over specific situations involving powers of attorney and property, and the rights an agent may have in each situation.
Can a Power of Attorney Sell Property Before Death?
If the terms of a power of attorney specifically grant an agent the authority to sell the principal’s property, they generally will have the authority to sell the principal’s property before death.
That said, the power of attorney may include rules or conditions surrounding the sale of property, so it’s important for agents to carefully consult the power of attorney document before proceeding with a sale. Additionally, agents must try to sell the property for at least market value.
To prevent property disputes and accusations of power of attorney abuse, it may be a good idea for agents to discuss any proposed sales of property with the principal prior to finalizing them, even if the terms of the power of attorney don’t require them to do so. If the principal is incapacitated, agents may wish to discuss proposed sales of property with the principal’s loved ones or a power of attorney lawyer.
Can a Power of Attorney Sell Property to Himself/Herself?
Unless a power of attorney specifically grants an agent the authority to sell property to themselves, it generally would be considered self-dealing for them to do so. Self-dealing entails a fiduciary acting in their own best interests instead of acting in the best interests of the person they represent; it is a form of power of attorney abuse.
Why might it be problematic for an agent to sell a principal’s property to themselves? Suppose a buyer is offering a higher price than what the agent is willing to pay for the principal’s property. The agent may be tempted to not inform the principal of the higher offer in order to purchase the property for a cheaper price.
Put simply, an agent selling a principal’s property to themselves amounts to a conflict of interest, which they have a fiduciary duty to avoid.
Can a Power of Attorney Sell a House for Below Market Value?
It generally is not permitted for a power of attorney to sell a principal’s house or other properties for below market value unless doing so would be in the best interest of the principal.
Suppose a principal’s health has declined to the point they require around-the-clock care in an assisted living facility. If the principal’s finances are insufficient in covering the costs of the facility, and no offers have come in for the principal’s house that are at or above market value, it may be appropriate for the agent to sell the principal’s house for below market value.
If an agent is unsure about whether or not it would be appropriate for them to facilitate a sale of the principal’s house for below market value, they should discuss the decision with a power of attorney lawyer, who can help them determine the best course of action.
Can a Durable Power of Attorney Sell Property?
Whether a durable power of attorney can sell property depends on the terms of the power of attorney document. If the document explicitly provides for an agent to sell the principal’s property, they generally can proceed with facilitating sales.
If a power of attorney is durable, it simply means that it takes effect upon signing and remains in effect until the principal’s death. As such, if an agent under a durable power of attorney has been granted the authority to sell the principal’s property, they generally will not have to wait until the principal’s incapacitation to make sales; they can begin immediately.
Can a Power of Attorney Sell Property After Death?
Under no circumstance can a power of attorney sell property after the principal’s death. If an agent proceeds to sell property after a principal’s death, not only would the sale be considered invalid, but it could result in a fiduciary misconduct claim being brought against the agent.
Even though power of attorney terms can vary considerably from document to document, the common denominator across all power of attorney documents is that they expire upon the principal’s death.
Put simply, if an agent uses their power of attorney for any purpose after they’ve become aware of the principal’s death, they are effectively abusing their power of attorney.
If an agent is using their power of attorney to sell property after the principal’s death, it is crucial the executor/administrator of the principal’s estate file a claim to recover the property and hold the agent responsible for any damage that resulted from their misuse of the power of attorney.
Learn how Keystone recovered millions from a deceased principal’s financial abusers who, in addition to committing countless other acts of elder financial abuse, continued to use their powers of attorney to steal from the principal’s financial accounts after he died.
Can a Power of Attorney Transfer Property?
Whether a power of attorney can transfer property depends on the terms of the power of attorney document. In general, if an agent has the authority to carry out real estate transactions on behalf of the principal, they also can transfer property on behalf of the principal.
Take the example of a principal who had sold a property they own to a friend. To change title on the property, a deed transfer would need to be completed. An agent under a general power of attorney or power of attorney for property may have the authority to complete the deed transfer on the principal’s behalf.
That said, it’s crucial agents consult the terms of the power of attorney to ensure any transfers of property they plan to complete fall within the confines of their authority.
Can a Power of Attorney Transfer Property to Themselves?
A power of attorney can transfer property to themselves only if the power of attorney document specifically authorizes them to do so.
Then again, it is rare for a power of attorney to authorize an agent to make such a transaction, since the agent transferring the principal’s property to themselves generally would not benefit the principal in any way.
In most cases, if an agent transfers property to themselves, it is considered unethical. Not only could such a transaction make them liable to a power of attorney abuse claim in probate court, but it could land them with charges in criminal court as well.
Can a Power of Attorney Gift Property?
It is not appropriate for a power of attorney to gift a principal’s property unless the power of attorney document expressly grants the agent this right.
Suppose an elderly grandmother on the verge of dying wishes to leave her grandchildren her residence. She does not have a will or trust, so she wants to initiate the property transfer while she’s still alive through her power of attorney. As long as she’s included terms in her power of attorney that provide her agent with the right to gift property, the agent will be able to gift the property to her grandchildren on her behalf.
Can a Power of Attorney Buy Property?
Whether an agent has the authority to buy property on behalf of a principal depends on the terms of the power of attorney document. If the terms explicitly grant the agent the authority to buy property, they generally can proceed with making a purchase.
That said, an agent must be careful when buying property, as any purchases that are not in the best interests of the principal could be construed as power of attorney abuse. If an agent is uncertain about whether a purchase of property would be in the best interest of the principal, it is recommended they consult with a power of attorney lawyer prior to making the purchase.
How to Handle Misuse of Power of Attorney for Real Estate Transactions
A well-drafted power of attorney document will clearly state what rights an agent has and doesn’t have when it comes to changing ownership of a principal’s property. If the terms of a power of attorney are ambiguous in any way, the agent should have them interpreted by a power of attorney lawyer or the court.
When an agent defies the terms of a power of attorney by making a decision surrounding the principal’s property that go beyond the authority they’ve been granted, a power of attorney abuse claim may need to be brought against the agent to hold them responsible for their misconduct and undo the damage they caused.
In the following sections, we go over what steps to take if a power of attorney is misused in a real estate transaction.
Determine Who has Authority to File a Power of Attorney Abuse Claim
Power of attorney abuse claims can only be filed by certain categories of individuals. Whether you can file a power of attorney abuse claim on behalf of a principal boils down to whether the principal is alive and competent.
If the principal is alive and competent, they can revoke the power of attorney on their own upon discovering the power of attorney abuse. They, likewise, can file a power of attorney abuse claim to recover any property the agent wrongfully transferred and possibly even damages. If the principal is alive and competent, only they have the authority to file a power of attorney abuse claim.
If the principal is alive but incompetent, their family members could file a power of attorney claim on their behalf to try to have the power of attorney voided by the court. Additionally, they could try to recover any property the agent wrongfully transferred and possibly even damages.
A principal’s loved ones may also wish to file a separate claim for conservatorship over the principal to protect them against further abuse. If their conservatorship petition is approved, the conservator can litigate against the agent to recover property and damages as well.
If a principal is deceased, it generally will have to be the executor/administrator of their estate who files a claim against their former agent to recover property and damages.
Gather Evidence of Alleged Power of Attorney Abuse
To prove an agent was engaged in power of attorney abuse when making a real estate transaction, you will need evidence. While the power of attorney document itself may serve as proof that an agent went beyond the authority they’d been granted, it’s likely even more evidence will be needed to successfully prove your claim.
Suppose a sibling is abusing their power of attorney by selling a property belonging to your parent (the principal) for below market value. Because such a transaction generally would not be in your parent’s best interest, if your sibling were to proceed with it, he would be violating his power of attorney obligations to family.
In this situation, it’s likely you not only would need the power of attorney document to prove the claim against your sibling, but also documentation from both appraisers and real estate agents to demonstrate to the court the disparity between the true value of the property and its final sale price.
Gathering evidence to support a power of attorney abuse claim can be a cumbersome process. Luckily, power of attorney lawyers are always available to help streamline it.
Consult with a Power of Attorney Lawyer
While nothing in the law prevents you from pursuing a power of attorney abuse claim on your own, working with a power of attorney lawyer is likely to garner you a more desirable outcome.
Power of attorney lawyers have the experience to effortlessly detect red flags in an agent’s accountings and real estate transactions. They also will know what steps to take to stop power of attorney abuse and recover any property or money that was lost as a result of it.
If you are successful in proving your power of attorney abuse claim, you may be able to recover your attorney’s fees and costs from the agent as well.
File a Power of Attorney Abuse Claim
If you are working with a lawyer, they will be able to file a power of abuse claim with the court for you. If you are not, you will need to file your claim with the court on your own by drafting a petition that contains your reasons for filing a claim, evidence to support your claim and the remedies you are seeking.
Once the court has your petition, it will set a date for an initial hearing. You should attend this initial hearing with your lawyer, who can compellingly present your case to the judge.
Many people will opt to resolve their matter in mediation (i.e., a type of hearing in which a neutral third party assists parties with reaching an agreement), since mediation can save litigants time and money.
Your lawyer will be able to tell you whether mediation is a good option for you after learning more about your case.
Tips for California Powers of Attorney for Property
If you have been designated as someone’s agent, it means that person entrusted you with making important decisions about their assets. To maintain their trust, there are some tips you can follow to ensure every action you take on the principal’s behalf is permitted and in line with their best interests.
Here are some tips for agents who have been authorized to make real estate transactions:
- Carefully interpret the terms of the power attorney; get a lawyer’s help if you need it.
- Consider whether the proposed real estate transaction would be in the best interest of the principal by asking yourself who would benefit from it.
- When appropriate, consider discussing the proposed real estate transaction with the principal (if they are competent) or their loved ones (if they are incompetent).
- Consult with a power of attorney lawyer prior to making a significant real estate transaction to ensure the decision falls within the bounds of your authority.
By following the tips above, you can steer clear of power of attorney abuse claims — which can be expensive to defend and make you personally liable for damages and possibly even the other party’s attorney’s fees and costs if they are successful in proving their claim.
FAQs on Power of Attorney and Property Rights
Check out our FAQs below for responses to more specific questions surrounding an agent’s ability to change ownership of a principal’s property. If you can’t find the answers you’re looking for there, request a free consultation with our power of attorney lawyers to discuss your matter with them directly.
Can a power of attorney make improvements/repairs to property?
An agent under a general power of attorney typically is permitted to make necessary improvements or repairs to a principal’s property, as long as doing so is not forbidden by the terms of the document.
In many cases, it is an agent’s responsibility to make improvements or repairs to the principal’s property, as they have a duty to preserve the principal’s assets. For example, if one of the principal’s properties contains mold, the agent may need to hire a mold removal company to get rid of it — particularly if the principal is incapacitated and cannot take care of this task on their own.
When making necessary improvements/repairs to a principal’s property, the agent generally can use the principal’s assets to cover costs.
Can a power of attorney change a life estate deed?
Life estate deeds allow a tenant to have use and enjoyment of a real property for their lifetime after the property owner’s death. A tenant under a life estate deed cannot transfer or sell title to the property.
Suppose a decedent marries for the second time and dies shortly after. They may have signed a life estate deed to allow their spouse to continue residing in the property they shared. In this instance, the decedent’s agent would not be able to change the life estate deed, since powers of attorney expire upon the principal’s death without exception.
On the other hand, if the property subject to a life estate deed is being held by a principal’s living trust, an agent may have the authority to alter it, but the terms of the power of attorney should explicitly provide the agent with the authority to make changes to the principal’s trust while the principal is alive.
Is there a power of attorney for home closing?
While there is not a power of attorney specifically designed for home closing, it may be possible for an agent under a general power of attorney or power of attorney for real estate to close a home on behalf of a principal, but only if the power of attorney expressly authorizes them to do so.
Is there a power of attorney for finances and property?
A general power of attorney (also known as a financial power of attorney) can grant an agent authority over both the principal’s monetary assets and real property assets.
That said, unless specific language is included in a general power of attorney to grant the agent the authority to buy, sell or transfer real property, the agent will not have this right. In other words, an agent under a general power of attorney does not automatically have the right to change ownership of the principal’s real properties.
Have questions about powers of attorney and property rights? We can provide clarification.
Powers of attorney can be complex to navigate. Some allow for an agent to make real estate transactions, whereas others don’t.
A power of attorney lawyer at our firm can clarify the terms of a power of attorney for agents to help them stay within the confines of the authority they’ve been granted when making decisions surrounding the principal’s real estate.
In the same vein, a power of attorney can help the appropriate parties litigate if an agent misuses their powers to make real estate transactions they were not authorized to make.
Learn how the probate lawyers at our firm can help resolve your power of attorney matter by requesting a free consultation.
