The other day a friend called me to urgently assist him. He has a property in London and was having some issues with the council; unfortunately he is stuck in Nigeria due to visa issues and cannot get to London for 3 months.
He told me that his sister lives in London and he trusts her to deal with the property pending being able to go to London himself. The first thing that came to mind was a “Power of Attorney”.
We have seen an increase in the use of Powers of Attorney, with the increase in commercial transactions. There are many instances where there is a need for an individual or a company to act on behalf of another and there is need for speed. (i.e property developers who have no intention of holding the property for long periods of time or to protect a purchaser pending the perfection of title to property).
This article explores the meaning and use of Powers of Attorney.
What is a Power of Attorney?
A Power of Attorney is legal agreement governed by general Contract Law; it is a formal document used by one person (the “Donor”) to grant authority to another person (the “Donee”) to act for him or her, usually under certain circumstances.
Similar to Agency, a Power of Attorney can be granted in many instances, including the following
- Instituting a court action;
- Sale and lease of property;
- Protection of an infant or minor;
- Protection of persons of unsound mind; and
- Signing of documents for unavailable persons.
Where the Donee acts on behalf of the Donor, it is deemed that the Donee has acted in the name and on behalf of the Donor, thus the act is as good as having been done by the Donor themselves.
Types of Power of Attorney
- General Power of Attorney – general in nature and covers all activities; and
- Specific Power of Attorney – also known as Limited Powers of Attorney, grants limited powers to the Donee with regard to specific matters only.
Creation of Power of Attorney
The beautiful thing with Powers of Attorney is that there are no formalities required with the formation of same. The Donee may be appointed by deed, in writing or orally. However, where the Donee will be required to execute deeds on behalf of the Donor (usually land related matters), then the Donees appointment must be by deed. The Donee is responsible for keeping accurate records of all transactions done on behalf of the Donor and owes a fiduciary duty to the Donor.
It is for the Donor to determine the extent of the powers he wishes to grant the Donee, as well as the appropriate time frame. There are instances where the power of attorney expires on a specific date stipulated in the power of attorney document, or on the occurrence of a specific event.
Powers of Attorney may also be terminated by written cancellation of same upon the Donor deciding that he or she no longer requires the services of the Donee. However, where the Power of Attorney has been stated as being irrevocable and given for valuable consideration, then the powers conferred by same cannot be terminated by the Donor, and will still be valid, even in the event of the death, lunacy, insanity and or bankruptcy of the Donor; thus if relating to property, will no longer form apart of the Donor’s estate.
Revocation of a Power of Attorney
Where the Power of Attorney is revocable, it may be done in 3 ways:
- Express revocation – the general principal governing agency is that whoever appoints an agent may disengage the agent at any point.
- Implied Revocation – where the Donor has gone ahead and is now dealing with the subject matter of the Power of Attorney in such a way that it can be said that the Donor has made it impossible for the Donee to effectively discharge the authority conferred to him by the Power of Attorney.
- Revocation by operation of law – if the donor suffers death, insanity, bankruptcy or other legal incapacity, then it is deemed that the Power of Attorney has been revoked by operation of law.
Power of Attorney Fraud
There are some instances where a Donee is granted the Power of Attorney to assist with legal, medical or financial decisions and thus has access to personal information, funds and property.
Power of Attorney fraud occurs when the Donee takes advantage of the contractual relationship and makes decisions on the Donors behalf that financially benefits the Donee, without the Donor’s express consent.
In order to prevent this type of abuse it is important that the Donee is a close and trusted person. It is also important that Powers of Attorney are not granted in secret. The Donor is always advised to inform close relatives of their decision to grant the authority to the Donee.
There are many Nigerians in diaspora who have properties in Nigeria facing difficulties with the management, with a power of attorney they can assign some of their rights to the property to a family member who will then be able to execute and take certain decisions on their behalf.
The only downside is an incompetent lawyer drafting a document which is irrevocable and grants the right to sell.