The Power and the Glory: Powers of Attorney in Real Estate Transactions Richard L. Black Senior Texas Underwriting Counsel Austin, Texas (800) 252-9229 richard.black@stewart.com
For Escrow Officer Credit please email password and attendees names to ken.wrider@stewart.com for certificates (please do this as soon as possible and make sure the correct spelling of the name(s) is included as to how it should appear on the certificate). Attorneys e-mail bar card number to Ken Wrider for CLE credit. Send to your training administrator if applicable.
ADDITIONAL HOUSEKEEPING INFORMATION Because of recent opinions expressed by the Texas Insurance Department concerning rebates, legal credit is available only to attorneys who own title agencies, are employed by a title insurance agent or a Stewart entity. Fee attorneys who have an Escrow Officer license may also obtain CLE credit. We welcome any other lawyers to listen, but cannot provide continuing education credit to you. If you are claiming legal credit for this web conference, please provide in your email to Ken Wrider which category you are in. We regret any inconvenience but we must take reasonable steps to protect us and you from enforcement actions by the Insurance Department.
The Power and the Glory: Powers of Attorney in Real Estate Transactions Richard L. Black Senior Texas Underwriting Counsel Austin, Texas (800) 252-9229 richard.black@stewart.com
Powers of Attorney-2 BASIC TERMINOLOGY AND DEFINITIONS: (1) Agent : One who acts on behalf of another by express authorization. (2) Attorney-in-Fact : Person who is appointed by a Power of Attorney to act for another. (3) Power : Short-hand for Power of Attorney. (4) Principal : Person who grants power of attorney to his/her agent and attorney-in-fact.
Powers of Attorney-3 BASIC TERMINOLOGY AND DEFINITIONS: (continued) (5) Special Power of Attorney a/k/a Specific Power of Attorney : Authority granted to the attorney-in-fact is specified or limited. (6) General Power of Attorney a/k/a Universal Power of Attorney : Authority granted to the attorney-in-fact is broad and varied. (7) Joint Power of Attorney : Authority is granted to two or more attorneys-in-fact who may be required to act jointly or who may be permitted to act separately (when a Joint Power does not stipulate that individual attorneys-in-fact may act independently, all must act together).
Powers of Attorney-4 WHICH ARE THE BEST POWERS OF ATTORNEY FOR TITLE INSURANCE PURPOSES? In order of preference: (1) Special Power of Attorney specific to the transaction (power to sell and convey and/or mortgage and encumber particular real estate identified by legal description); (2) Texas Statutory Durable Power of Attorney; or (3) General Power of Attorney that clearly expresses a general power to sell and convey or mortgage and encumber real estate (or, alternatively, to execute contracts, deeds, and Deeds of Trust).
Powers of Attorney-5 What is a Durable Power of Attorney? One containing a statement to the effect that the Power will not terminate in the event of disability or incapacity of the principal. What is a Statutory Durable Power of Attorney? One that conforms to the requirements of the Texas Durable Power of Attorney Act (Chapter XII, TEXAS PROBATE CODE). Is there an actual statutory form for a Statutory Durable Power of Attorney? See TEXAS PROBATE CODE 490.
Powers of Attorney-6 KEY ELEMENTS WHEN REVIEWING A STATUTORY DURABLE POWER OF ATTORNEY: (1) Powers granted (not withheld by being crossed out in the form): (a) (b) (c) Real property transactions for proper real estate conveyancing authority (broadly defined in TEXAS PROBATE CODE 492). Banking and other financial institution transactions for closing/escrow authority (broadly defined in PROBATE CODE 496). Best option: No powers crossed out!
Powers of Attorney-7 KEY ELEMENTS IN REVIEWING A STATUTORY POWER OF ATTORNEY: (2) When does the Statutory Durable Power of Attorney become effective? Quoting from the statutory form:... CHOOSE ONE OF THE FOLLOWING ALTERNATIVES BY CROSSING OUT THE ALTERNATIVE NOT CHOSEN: (A) (B) This power of attorney is not affected by my subsequent disability or incapacity. This power of attorney becomes effective upon my disability or incapacity. IF NEITHER (A) NOR (B) IS CROSSED OUT, IT WILL BE ASSUMED THAT YOU CHOSE ALTERNATIVE (A).
Powers of Attorney-8 KEY ELEMENTS IN REVIEWING A STATUTORY POWER OF ATTORNEY: (continued) (3) Special Instructions: (a) Power to gift property requires principal s initials in front of this sentence: I grant to my agent (attorney in fact) the power to apply my property of make gifts, except that the amount of a gift to an individual may not exceed the amount of annual exclusions allowed from the federal gift tax for the calendar year of the gift. (b) SPECIAL INSTRUCTIONS:... ON THE FOLLOWING LINES YOU MAY GIVE SPECIAL INSTRUCTIONS LIMITED OR EXTENDED THE POWERS GRANTED TO YOUR AGENT. (ALWAYS READ ANYTHING PUT IN THE SPECIAL INSTRUCTIONS BLANKS!)
Powers of Attorney-9 HOW ARE GENERAL POWERS OF ATTORNEY CONSTRUED? Powers of Attorney are subject to the rule of strict construction: (1) A general power to sell authorizes the attorney-infact to negotiate terms of sale, but not necessarily to convey title. (2) A general power to sell does not include the power to mortgage, to lease, or to make gifts of the principal s property. (3) A general power to sell is limited to sales for cash unless the Power of Attorney authorizes sales on credit extended by the principal.
Powers of Attorney-10 HOW ARE GENERAL POWERS OF ATTORNEY CONSTRUED?: (continued) (4) The power to convey authorizes the attorney-in-fact to transfer the principal s title to land. (5) The power to sell and convey land is not the power to sell and convey minerals. (6) The power to execute a mineral lease is not the power to transfer the principal s mineral ownership.
Powers of Attorney-11 WHEN IS A POWER OF ATTORNEY REQUIRED TO BE RECORDED? (1) For underwriting purposes when the principal is competent: Always record evidence of the Power of Attorney s existence (best form of proof is the original Power, but a copy proven up by affidavit is also acceptable). (2) As a matter of law when the durability of the Power is being relied on (principal is incompetent), the Power of Attorney must be recorded in the county where the real estate is located. TEXAS PROBATE CODE 489: Recording Durable Power of Attorney for Real Property Transactions. A durable power of attorney for a real property transaction... shall be recorded in the office of the county clerk of the county in which the property is located.
Powers of Attorney-12 WHAT EVENTS AUTOMATICALLY TERMINATE A POWER OF ATTORNEY? (1) Expiration of the Power s stated term of duration, if any; (2) Incapacity/disability of the principal when the Power was not made durable; (3) Judicial appointment of a guardian of the principal s estate; (4) Divorce or annulment when the Power was given by one spouse as principal to the other spouse as attorney-in-fact during the time of their marriage; or (5) Death of the principal.
Powers of Attorney-13 WHAT ISSUES ARE INVOLVED WITH VOLUNTARY REVOCATION OF A POWER OF ATTORNEY? (1) Revocation by filing in particular records: A Power of Attorney may stipulate that it is revocable only by the filing of a written revocation in the records of a particular county. If the principal is not competent, the named records should be searched for a revocation, even when the county is not the one where the subject land is located. (2) Revocation by delivery to the attorney-in-fact: A Power of Attorney may state that it is revocable by delivering notice of revocation personally to the attorney-in-fact. Absence of revocation must then be confirmed with both the principal, if competent, and the attorney-in-fact.
Powers of Attorney-14 TWO-STEP PROCEDURE FOR CONFIRMING THAT A POWER OF ATTORNEY IS STILL EFFECTIVE: (1) Direct personal contact with the principal: (a) best done between execution of documents and disbursing funds, but can be made as early as forty-eight (48) hours before closing, and (b) confirms that he/she is still living (and competent if the Power is not durable), has not revoked the Power, and knows that it is being used in the pending transaction; (2) Confirming affidavit from the attorney-in-fact, obtained at closing and preserved in the issuing title agent s Guaranty File (see Affidavit Regarding Power of Attorney-Texas in the Texas Forms Section of Virtual Underwriter).
Powers of Attorney-15 HOW DOES AN ENTITY GRANT A POWER OF ATTORNEY? (1) Corporation: By Resolution of the Board of Directors certified by the corporate secretary and acknowledged by him/her for recording, designating an agent and attorney-in-fact for the corporation and defining his/her authority; (2) Limited Partnership: By Power of Attorney from the Partnership as principal and executed by the General Partner pursuant to either (a) the Limited Partnership Agreement or (b) consent of the Limited Partners; (3) Limited Liability Company: By Power of Attorney from the LLC as principal and executed by the Manager pursuant to either (a) the LLC s Articles of Organization or Regulations or (b) consent of the Members.
Powers of Attorney-16 CAN A FIDUCIARY GIVE A POWER OF ATTORNEY TO A THIRD PARTY? General Rule: Because fiduciary powers are vested in the fiduciary personally (trustee, executor, administrator, or guardian), such powers cannot be delegated to another party. As to trustees, see West v. Hapgood, 174 S.W.2d 576 (Tex. 1943); as to executors, see Terrell v. McCown, 43 S.W.2d 2 (Tex. 1897). Exceptions to the General Rule: (1) The appointing document (trust agreement/declaration for a trustee, or decedent s will for a executor) expressly allows delegation of the fiduciary s powers;
Powers of Attorney-17 CAN A FIDUCIARY GIVE A POWER OF ATTORNEY?: (continued) Exceptions to the General Rule: (continued) (2) The Power of Attorney is limited to ministerial (mechanical) tasks and does not include any discretionary (decision-making) powers; or (3) The fiduciary-principal expressly ratifies the actions done by his/her appointed third-party attorney-in-fact after those actions have been performed.
Powers of Attorney-18 CAN A FIDUCIARY GIVE A POWER OF ATTORNEY? (continued) In order to utilize a fiduciary s Power of Attorney, a real estate closing can be made completely ministerial : (a) (b) (c) (d) Full copy of the closing package is sent to the fiduciaryprincipal. The fiduciary-principal approves and authorizes his/her attorney-in-fact in writing to execute the documents at closing. All changes to the closing documents, however small, are pre-approved in writing by the fiduciary-principal. Prior to disbursement of funds, the fiduciary-principal executes a written ratification of all acts done at closing by the attorney-in-fact, transmits a copy to the settlement agent, and puts the original ratification in transit to the settlement agent.
Powers of Attorney-19 WHAT IS SELF-DEALING? General Rule: When executed by the same attorney-in-fact on behalf of the principal as transferor, deed or other transfer of interest to an attorney-in-fact personally is presumed to be a breach of the fiduciary duty owed by agents to principals. Exceptions to the General Rule: (1) The Power of Attorney can expressly permit selfdealing by the attorney-in-fact, either broadly or under limited circumstances. (2) Another Exception to the Self-Dealing Rule: After the fact, the principal can ratify the self-dealing action of his/her agent.
Powers of Attorney-20 CAN A POWER OF ATTORNEY BE USED FOR A HOME EQUITY LOAN OR A REVERSE MORTGAGE? TEXAS ADMINISTRATIVE CODE, Rule 153.15(2), Location of Closing under 50(a)(6)(N), Art. 16, TEXAS CONSTITUTION: A lender may accept a properly executed power of attorney allowing the attorney-in-fact to execute closing documents on behalf of the owner.
Powers of Attorney-21 CAN A POWER OF ATTORNEY BE USED FOR A HOME EQUITY LOAN OR REVERSE MORTGAGE?: (continued) Underwriting guidelines (Virtual Underwriter, Section 8.02.2): (1) Power of Attorney must be dated on or after January 1, 1998. (2) Attorneys-in-fact are no longer limited to spouses. (3) Preferably, the Power is specific to the loan transaction, identifying the property by legal description and address, referring to it as the principal s homestead, and stating that the Power is for execution of the Home Equity Loan or Reverse Mortgage; (4) A non-specific Power with a clearly-stated power to mortgage and encumber may be acceptable (obtain underwriter approval).
Powers of Attorney-22 WHAT ISTHE PROPER METHOD OF EXECUTING A DOCUMENT BY POWER OF ATTORNEY? Basic Rule: The instrument executed by the attorney-in-fact must reflect on its face that the attorney-in-fact is exercising the Power of Attorney in order to act on behalf of the principal. Best mode of execution: John J. Smith John J. Smith By: Bob B. Jones Bob B. Jones, his attorney-in-fact
Powers of Attorney-23 WHAT IS THE PROPER METHOD OF EXECUTING A DOCUMENT BY POWER OF ATTORNEY?: (continued) Next-best mode of execution: John J. Smith by Bob B. Jones, attorney-in-fact John J. Smith by his attorney-in-fact, Bob B. Jones Defective execution: Bob B. Jones Bob B. Jones, attorney-in-fact for John J. Smith
Powers of Attorney-24 WHAT IS THE PROPER ACKNOWLEDGEMENT FOR AN ATTORNEY-IN-FACT? TEXAS CIVIL PRACTICE AND REMEDIES CODE 121.008(b): (b) Short forms for certificates of acknowledgment include: (2) For a natural person as principal acting by attorneyin-fact: State of Texas County of This instrument was acknowledged before me on (date) by (name of attorney-in-fact) as attorney-in-fact on behalf of (name of principal). (Signature of officer) (Title of officer)
THANK YOU! For Escrow Officer Credit please email password and attendees names to ken.wrider@stewart.com for the certificate (please do this as soon as possible and make sure the e-mail includes the name(s) as it should appear on the certificate). Please be aware that due to TDI's strict policies on issuing credit, you must pay close attention to the password given at the end of the webinar as we are unable to give it out once the presentation has been terminated off of Webex. Attorneys email bar card number to Ken Wrider for CLE credit Next Texas TIPS Online October 18, 2012, Spooky Claims 2012 by Susan Withers 28