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Power of Attorney

DEFINITION

Authorization for a party to act on behalf another party. In the context of real estate, a power of attorney would typically be authorized by the principal to the agent to perform tasks required to execute the transaction.

EXPLANATION

Power of attorney is a legal document that allows one person to give another person the authority to act on their behalf in specified matters. An attorney-in-fact is the party given authority by a power of attorney. A power of attorney agreement must be signed in the presence of a notary public or two verified witnesses (California Civil Code 4121 (b)).

The responsibilities and limits of the power of attorney agreement are specified by the creator. The creator may grant a general power of attorney that bestows broad decision-making power upon the attorney-in-fact and allows them to conduct any activity on the creator’s behalf. This may include the right to sign, make payments, and accept money on behalf of the creator. Alternatively, the creator may only grant specific power (California Civil Code 4123 (a)). Specific power means that the attorney-in-fact only has the right to perform only activities designated within the power of attorney agreement.

Granting a power of attorney offers a few key benefits that include: saving time for the principal, reducing stress, and having the ability to divert financial responsibilities when the principal is busy or otherwise incapacitated.

In the context of real estate, a client may grant power of attorney to their real estate agent in order for that agent to conduct real estate transactions on their behalf. This is often granted to a real estate agent who has worked with the principal in the past; who is the principal’s family member; or when the principal is simply too busy to conduct their own transactions.

Typically, most real estate power of attorneys fulfill a specific, temporary role. For example, if a property owner goes out of town while their property is being sold, they may grant their real estate agent power of attorney so that the agent may accept an offer and/or sign closing documents on the client’s behalf.

When a property is bought or sold by an agent who has power of attorney, the county recorder’s office requires a copy of the agreement to verify its accuracy. Much like a standard real estate agreement, power of attorney implies a fiduciary duty on behalf of the agent to act in good faith.

Remainderman and Power of Attorney

Life estates terminate upon the death of the life estate holder. Life estate agreements typically designate an heir, power of attorney, or third party to whom the life estate’s financial interests will pass. This individual is known as a remainderman.

Case Law As It Relates to Power of Attorney

Case Review: Sheetz v. Edmonds (1988)

In the case, Sheetz v. Edmonds (1988) 201 Cal.3d 1432., a property manager was found to be operating without a license.

Rose Sheetz was employed by the Lein family to manage twenty-three of their residential and commercial properties. Sheetz was responsible for soliciting new leases, managing existing ones, and negotiating leases, and collected rents. Sheetz did not have the proper licensing to do this.

When this information was brought to the attention of the Real Estate Commissioner, James Edmonds, he issued Sheetz with a warning to desist her managerial duties. Sheetz was a friend of the Leins, and they signed a power of attorney to empower Sheetz to continue managing their properties.

An administrative law judge subsequently ruled that Sheetz could be subject to fines, penalties, and possible jail time if she failed to stop managerial duties on the Leins’ properties. In response, Sheetz sued Edmonds.

Sheetz contended that the power of attorney agreement sanctioned her to continue her managerial activities. The Superior Court disagreed, saying that Sheetz had instead used the power of attorney to evade the real estate license requirements. Sheetz appealed. The Court of Appeals agreed with the lower court’s ruling. The appellate court claimed that power of attorney only applied to isolated transactions, not multiple properties on an ongoing basis. It ruled that Sheetz could not act as a real estate agent without the proper licensing.

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