2017 Seminar Series. Powers of Attorney and Real Estate Transactions

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1 2017 Seminar Series Powers of Attorney and Real Estate Transactions Benjamin V. Ipock Title Counsel Attorneys Title 8000 Regency Parkway, Suite 165 Raleigh, NC (919)

2 Benjamin V. Ipock Ben joined Attorneys Title in 2015 and serves in the role of title counsel for the Raleigh, NC office. Prior to his current position Ben was in private practice in Gastonia, NC with the law firm of Morrow & Ipock, P.A. and J. Ben Morrow, P.A. His practice primarily focused on residential real estate, estates and special proceedings before the Clerk of Court. Before transitioning to property law, Ben was an Assistant Public Defender for the Judicial District 27A in Gaston County. He earned his Bachelor of Science in Textile Management from North Carolina State University (2007) and a Juris Doctorate from the Charlotte School of Law (2011). Ben was admitted to the North Carolina State Bar in August 2011 and is proud to be a member of the Wake County Real Property Lawyers Association, Real Estate Lawyers Association of North Carolina, Wake County Bar Association, North Carolina Bar Association and the North Carolina Land Title Association where he currently is serving on the executive board as treasurer.

3 POWERS OF ATTORNEY & REAL ESTATE TRANSACTIONS JULY 12, 2017 THE BASICS Power of Attorney An instrument granting some authority to act as agent/ attorney-in-fact for the principal/ grantor. Common Types: General Specific/ Limited Statutory Short Form from NCGS 32A-1 Military Primary authority derived from Chapter 32A (for now) 1

4 TYPES OF POWERS OF ATTORNEY General POA with very broad powers and provisions with very few limitations. Generally includes all of the provisions and powers of the statutory short form POA. Specific/ Limited/ Special POA executed for a specific purpose, transaction, duration or other limited function. Statutory Short Form State promulgated general power of attorney form within the General Statutes containing a list of 15 enumerated powers can be selected and optional provisions related to being durable or not, duration, and incapacity. Military POA executed in compliance with 10 USC 1044a-b PARTIES Principal person who authorizes another to act on his or her behalf as an agent. Agent/ Attorney-in-Fact person to whom power is granted and who is authorized to act for or in place of the principal Could be one or more person(s) who may either act independently or be required to act together Successor/ Substitute Attorney-In-Fact Designated person to assume role of primary agent in certain circumstances. Don t forget the Notary Public for proper acknowledgement! 2

5 DURABLE POWER OF ATTORNEY Defined in Article 2, 32A-8 A durable power of attorney is a power of attorney by which a principal designates another his attorney-in-fact in writing and the writing contains a statement that it is executed pursuant to the provisions of this Article or the words "This power of attorney shall not be affected by my subsequent incapacity or mental incompetence," or "This power of attorney shall become effective after I become incapacitated or mentally incompetent," or similar words showing the intent of the principal that the authority conferred shall be exercisable notwithstanding the principal's subsequent incapacity or mental incompetence. 32A-9. Registered durable power of attorney not affected by incapacity or mental incompetence. WHEN DOES POA BECOME EFFECTIVE When does POA become effective Most commonly upon proper execution and acknowledgement Springing/ Conditional/ Contingent Effective on the occurrence of an specific event or condition 'This power of attorney shall become effective after I become incapacitated or mentally incompetent.' When principal is deemed incompetent? How is this determined? Physician or other person named by principal or attending physician? POA does not have to be recorded to be valid 3

6 TERMINATION OF POWER OF ATTORNEY Termination Death of Principal Revocation by Principal or appointed Guardian Incapacity of Principal unless durable Defined expiration date in the instrument Divorce perhaps, currently only for healthcare POA s under NCGS 32A-20(c) Purpose accomplished Agent/ Attorney-In-Fact dies, resigns, removed or incapacitated GRANTING AUTHORITY Specific authority over general is preferred for real estate transactions. Example from Limited Power of Attorney to Sell Property: Execute all necessary documents that might be required in connection with the sale of real property located in County, North Carolina, commonly known as and described on the attached Exhibit A. This power of attorney includes, but is not limited to, the grant of authority for execution of a warranty deed, lien affidavit, an offer to purchase and contract, HUD-1, Closing Disclosure or other required settlement statement, executing any affidavit that might be required for issuance of a new title insurance policy, or other necessary documents to complete the transaction. In addition, my attorney-in-fact shall be authorized to employ a registered surveyor, pest inspectors, contractors and any other individual needed to perform work or render any services in connection with the closing of the sale of the above described real property. This power of attorney shall not be affected by my subsequent incapacity. If possible identify the property using address, legal description, or some other identifier. 4

7 FORM OF EXECUTION Execution and acknowledgment of instruments by attorneys or attorneys-in-fact. Form of Execution: [Name of Principal] By: [Seal] [Name of attorney-in-fact] Attorney-in-fact for Principal FORM OF CERTIFICATE OF ACKNOWLEDGMENT OF INSTRUMENT EXECUTED BY ATTORNEY-IN-FACT. When an instrument purports to be signed by parties acting through another by virtue of the execution of a power of attorney, the following form of certificate shall be deemed sufficient, but shall not exclude other forms which would be deemed sufficient in law: North Carolina, County. I (here give name of the official and his official title), do hereby certify that (here give name of attorney-in-fact), attorney-in-fact for (here give names of parties who executed the instrument through attorney-in-fact), personally appeared before me this day, and being by me duly sworn, says that he executed the foregoing and annexed instrument for and in behalf of (here give names of parties who executed the instrument through attorney-in-fact), and that his authority to execute and acknowledge said instrument is contained in an instrument duly executed, acknowledged, and recorded in the office of (here insert name of official in whose office power of attorney is recorded, and the county and state of recordation), on the (day of month, month, and year of recordation), and that this instrument was executed under and by virtue of the authority given by said instrument granting him power of attorney; that the said (here give name of attorney-in-fact) acknowledged the due execution of the foregoing and annexed instrument for the purposes herein expressed for and in behalf of the said (here give names of parties who executed the instrument through attorney-in-fact). WITNESS my hand and official seal, this day of, (year) (Official seal.) Signature of Officer 5

8 RECORDING - NCGS Recording required for power of attorney for any recorded instrument affecting real property. Original or certified copy should be recorded before transfer in either the Register of Deeds where principal is domiciled or the county where real property lies. Non-resident POA can be recorded in any county where principal owns real property or has business reasons. If real property lies in more than one county or a county other than where principal is domiciled, then POA can be recorded in either county and the instrument of transfer shall refer to the recordation specifically by reference to book, page, and county where recorded. EVALUATION FOR VALIDITY Properly executed and acknowledged Recorded (or will be) Proper granting of authority for the transaction Currently in effect Durable or not Principal must be living Specific authorization for gifts No self-dealing If possible, verify the transaction with the principal. 6

9 REVOCATION & RENUNCIATIONS Revocation must be signed by principal and acknowledged. If POA was recorded, the revocation should be as well. If attorney has indication that POA may have been intended to be revoked or authority may be in question, the attorney should further investigate RELIANCE & REFUSAL 32A-40. Reliance on power of attorney. (a) Unless (i) a person has actual knowledge that a writing is not a valid power of attorney, or (ii) the action taken or to be taken by a person named as attorney-in-fact in a writing that purports to confer a power of attorney is beyond the apparent power or authority of that named attorney-in-fact as granted in that writing, a person who in good faith relies on a writing that on its face is duly signed, acknowledged, and otherwise appears regular, and that purports to confer a power of attorney, durable or otherwise, shall be protected to the full extent of the powers and authority that reasonably appear to be granted to the attorney-in-fact designated in that writing, and no person so dealing in good faith with that named attorney-in-fact shall be held responsible for any breach of fiduciary duty by that attorney-in-fact, including any breach of loyalty, any act of self-dealing, or any misapplication of money or other property paid or transferred as directed by that attorney-in-fact. (b) a person can, but is not required to prior to acceptance, request an affidavit of the attorney-in-fact in accordance with 32A-40(b). Sample form in 32A-40)d). 32A-41. Penalty for unreasonable refusal to recognize power (b) Acceptance of a power of attorney shall mean (i) acknowledging the validity and authenticity of the document, and (ii) allowing the attorney-in-fact to conduct business in accordance with the powers that reasonably appear to be granted in the document. 32A-42. Protection for third parties. 7

10 MILITARY POWER OF ATTORNEY The execution and validity of a Military POA is controlled by 10 USC 1044a and 10 USC 1044b, regardless of state law or requirements. 1044a & b extends notary acknowledgment powers to a large number of persons defined in the statute 1044b requires all military POA to contain the following preamble: This is a military Power of Attorney prepared pursuant to Title 10, United States Code, Section 1044b, and executed by a person authorized to receive legal assistance from the military services. Federal law exempts this power of attorney from any requirement of form, substance, formality, or recording that is prescribed for powers of attorney by the laws of a state, the District of Columbia, or a territory, commonwealth, or possession of the United States. Federal law specifies that this power of attorney shall be given the same legal effect as a power of attorney prepared and executed in accordance with the laws of the jurisdiction where it is presented. MILITARY POWER OF ATTORNEYS Military POA s should still be recorded if used for real estate transactions. If recording is not possible, check with your title insurance company. Bartholomew v. Blevins, No (6th Cir., May 17, 2012) Original vs. Copy of Power of Attorney Kentucky recorders office rejected copy of a power of attorney for purposes of recording a deed and mortgage 6 th circuit distinguished a copy of a notarized instrument from original notarized instrument, un-notarized instrument copy lacks essential element of a military power of attorney and does not qualify for [the statute s] protections 8

11 FIDUCIARY POA S Should be approached with caution and avoided if possible. Fiduciary duties of executors, administrators, guardians and trustees generally cannot be delegated to an attorney-in-fact. Trust Trustee duties are not delegable unless the trust itself specifically provides for delegation. ENTITIES A corporation acting through its board of directors can appoint an attorney-in-fact to act on its behalf if the authority granted is in the ordinary course of business Execution of corporate instruments; authority and proof LLC s Look to Operating Agreement for authority of managers to delegate authority via POA. Partnership by resolution under partnership agreement Individual power of attorney of a person who is also an officer of a corporation, trustee of a trust or in some other fiduciary capacity does not authorize that attorney in fact to act for the individual in their fiduciary capacity 9

12 LENDERS AND FINANCING Make sure buyer/ borrower gives lender plenty of advance notice that a POA is desired Seek written authorization and approval from lender Strict compliance with lender s closing instructions is required Only use where absolutely necessary SELF-DEALING & GIFTS An attorney-in-fact does not ordinarily have authority to convey property to himself. No presumption of authority Without express authority in power of attorney the attorney-in-fact has no power to make a gift of property, real or personal. Gifts to charities 32A-2(14) and 32A-14.1 Gifts to attorney-in-fact 32A-2(15) 10

13 UPCOMING CHANGES SB 569 SB-569 North Carolina Uniform Power of Attorney Act Presented to Gov. Cooper June 29, 2017 Effective date, pending enactment, is January 1, 2018 Articles 1, 2, 2A, 2B and 5 of current Chapter 32A will be repealed and replaced with new Chapter 32C 32C New Statutory Short Form Power of Attorney 32C Effect on existing powers of attorney will now reference Chapter 32C attorney-in-fact has been substituted for agent 32C EFFECT ON EXISTING POWERS OF ATTORNEY. 32C Effect on existing powers of attorney. (a) Except as otherwise provided in this Chapter, the following apply on the effective date of this Chapter: (1) This Chapter applies to a power of attorney created before, on, or after the effective date of this Chapter unless there is clear indication of a contrary intent in the terms of a power of attorney or unless application of a particular provision of this Chapter would substantially impair rights of a party. (2) This Chapter applies to a judicial proceeding concerning a power of attorney commenced on or after the effective date of this Chapter. (3) This Chapter applies to a judicial proceeding concerning a power of attorney commenced before the effective date of this Chapter unless the court finds that application of a provision of this Chapter would substantially interfere with the effective conduct of the judicial proceeding or prejudice the rights of a party, in which case that the particular provision of this Chapter does not apply and the superseded law applies. (4) A rule of construction or presumption provided by this Chapter applies to powers of attorney executed before the effective date of this Chapter unless there is a clear indication of a contrary intent in the terms of a power of attorney or unless the application of the rule of construction or presumption would substantially impair rights of a party created under North Carolina law in effect prior to the effective date of this Chapter in which case the rule Page 32 Senate Bill 569-Ratified of construction or presumption does not apply and the superseded rule of construction or presumption applies. (b) If a right is acquired, extinguished, or banned upon the expiration of a prescribed period that commenced under law of this State other than this Chapter before the effective date of this Chapter, that statute continues to apply to the right even if it has been repealed or superseded. (c) References to prior statutes and powers of attorney, whether executed on or after the adoption of this Chapter shall be deemed to refer to the corresponding provisions this Chapter unless application of the rule of construction would substantially impair substantial rights of a party. (d) Notwithstanding the provisions of this Chapter, the powers conferred by former G.S. 32A-2 shall apply to a Statutory Short Form Power of Attorney that was created in accordance with former G.S. 32A-1 prior to January 1, 2018." 11

14 RESOURCES, STATUTES & DOCS Attorneys Title - Power of Attorney Article NCGS Chapter 32A Statutory Short Form Power of Attorney 32A-1 Affidavit of Attorney In Fact 32A-40(d) NCGS Chapter 47 NCGS Chapter 10B Notary Acknowledgment for Execution by POA SB-569 Uniform Power of Attorney Act Navy JAG Legal Assistance Manual for 10 USC