(Jim) We have been asked to write about probate issues and how these can affect a real estate closing. These may include powers of attorney, guardianships and the probate of estates. That’s a lot of ground to cover…but can’t the topic generally be summed up by simply saying ‘dead men can’t own real property?’

(Kerrie) We usually think of probate as having to do with dead people, but it is really larger than that.

(Jim) Right. The jurisdiction of the probate courts in Ohio includes the issuance of marriage licenses, declaring people insane and dealing with dead people. Hmmm, I see some irony there.

(Kerrie) Our marriage license was issued in the British West Indies, so we don’t have to worry, right Dear?

(Jim) Umm…sure, but getting back on topic, I think that powers of attorney seem to cause a lot of confusion even though these documents are not strictly a probate issue. What can you tell our readers about these documents?

(Kerrie) A power of attorney is an authorization given by one person, the principal, to another, the attorney in fact, to act on behalf of the principal as if the grantor were acting on his or her own behalf. In other words, if the grantor is capable of executing the document, then the attorney in fact can as well. The exception to that rule would be the grant of a Durable Power of Attorney for Health Care, but that’s another topic.

(Jim) Does this power of attorney need to be in writing?

(Kerrie) Since we are dealing with real property, any agreement that affects real property must be in writing signed by the party to be charged. There are two types of powers of attorney that can be used for real property purposes. The first is a general power of attorney. This document authorizes the attorney in fact to transact any business that the principal could transact including the signing of a real estate contract and the execution and delivery of a deed. We see these most often between a husband and wife or between an elderly parent and child.

(Jim) That seems like a very broad power. I suppose you really must trust someone to give them that much power over your property. What if I just wanted someone to handle a specific matter.

(Kerrie) That’s a limited power of attorney. For example, the power may be limited to the sale of a particular property or to the refinance of a particular mortgage. The limited power of attorney is generally safer. As title attorneys we prefer to see a limited power of attorney rather than a general. If someone signs a power of attorney for the express purpose of the sale of a certain residence, we do not have to worry that the attorney in fact is selling without the knowledge and consent of the principal.

(Jim) You mean that if the attorney in fact sells his mother’s house without her knowledge and consent the sale would not be valid or the title would be defective?

(Kerrie) The law does protect innocent purchasers who had no knowledge of any wrong doing. The title would probably be good. But who wants to end up in a lawsuit by siblings against the brother who sold mom’s house.

(Jim) Another reason to buy owner’s title insurance, I suppose. What are some other problems with powers of attorney?

(Kerrie) Well, there is always a question of validity. Assume someone shows up at a closing with a power of attorney for his wife. We have to accept it at face value, unless there is some reason to suspect that it is not valid. Lenders generally do not like to have borrowers sign by power of attorney, for the reason I just mentioned. They do not want one of the borrowers coming back later claiming that the power was invalid, etc. Another thing that we see very often is self-dealing, that is, the power of attorney tries to convey the property to himself. This cannot be done unless the terms of the power of attorney expressly permit this conveyance. Most forms do not allow this. The scenario usually goes like this: Mom is ill, possibly terminal. To avoid probate, the son with her power of attorney conveys the property to himself. He later wants to sell. The conveyance was void, but his mother, the actual owner in title is now deceased. He now must open an estate for mom, the exact thing he wanted to avoid.

(Jim) That brings up an important point. A power of attorney is valid only as long as the principal is alive. It cannot be used after someone’s death. Until recently a power of attorney did not survive incompetency. So if someone became mentally ill, the power of attorney was deemed revoked. Now if the power of attorney document states that it is durable, that is, it survives mental incompetence, we no longer have to inquire into the principal’s mental state. The same goes for the grantor who is sane but unconscious and cannot speak for himself or herself.

(Kerrie) Another issue regarding real estate sales is that the power of attorney must be recorded and it must be recorded before the deed. Sometimes the power of attorney is filed after the deed. This requires a quitclaim from the principal, if you can find him or her. I once had to track down a seller who was in the military and his wife signed documents at the closing for him by his power of attorney that did not get recorded. We sent the quitclaim to a military post office box, the only address we could find. The deed eventually came back and had been signed in Kuwait. We got lucky on that one.

(Jim) As a title attorney, I see problems arise from the failure of the closing agent to make sure that the documents have been properly prepared for signature by an attorney in fact. For example, the deed may have been prepared for a husband and wife to sign. The husband shows up at the closing with a power of attorney from his wife. He signs the deed for himself and on behalf of his wife. The notary clause never gets changed to reflect that he signed for his wife. Then the deed has not been properly acknowledged and is defective. Luckily, this type of defect can be cured by an affidavit of the notary. If, of course, you can find the notary.

(Kerrie) So that covers powers of attorney, what about other probate issues like guardianships and probate estates.

(Jim) Those are really complicated and I suggest that we cover those in a later article. But that’s just my opinion.

(Kerrie) And mine.

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Jim and Kerrie Matre are married partners in the law firm of Matre & Matre Co., LPA. The firm generally limits its representation and practice to all legal issues related to real estate, construction law and corporate representation.

This article is written to introduce the reader to common real estate legal concepts. It is not intended to be legal advice to any specific party. As always, consult your attorney regarding your specific situation.

Have questions? Email them at either kmatre@matrelaw.com or jmatre@matrelaw.com