POWERS OF ATTORNEY

An individual (the principal) may, by execution of a proper instrument, confer authority upon another person (the agent) to deal with property or make personal and health care decisions for the principal. The authority so conferred is known as a "power of attorney." Illinois has enacted a Power of Attorney Act, which is divided into three sections: The Durable Power of Attorney Law, the Statutory Short Form Power of Attorney for Property Law, and the Powers of Attorney for Health Care Law. This article will give an overview of each act as it relates to real estate and provide ATG's underwriting guidelines for relying upon each type of power of attorney at a closing.

Durable Power of Attorney

The Durable Power of Attorney Law allows the principal to specify the event or time that the power of attorney will begin and terminate, the mode of revocation or amendment, and all other terms applicable to the agent and persons dealing with the agent. The power will control even if it is inconsistent with the Act. The Act applies to all powers exercised in Illinois and to all other powers if the principal is a resident of Illinois at the time the power is signed or exercised or if the power indicates that Illinois law is to apply.

The power may be revoked or amended by the principal at any time. If not revoked or amended, it will continue until the death of the principal, notwithstanding an earlier disability, incapacity, or guardianship of the principal after the power is signed.

Third parties who act in good faith reliance on a copy of the power will be fully protected and released to the same extent as though they had dealt directly with the principal as a fully competent person. The third party may request from the agent an affidavit establishing the continuing validity of the power, but good faith reliance on the power will protect the third party without the affidavit.

Power of Attorney for Property Law

The Statutory Short Form Power of Attorney for Property Law sets forth a form that a principal may use to give an agent powers with respect to property and financial matters.

Please note that, effective June 9, 2000, the Illinois Statutory Short Form Power of Attorney was changed such that it must be witnessed by one person other than the notary. The witness must sign in the presence of both the principal and the notary.

To be accepted by ATG, an Illinois Statutory Short Form Power of Attorney must meet the following conditions.

 

  • it must be the entire Statutory Short Form;

     

  • the agent must be an individual, not a law firm or partnership;

     

  • the signature must be witnessed by a person other than the notary; and

     

  • the lender must approve it if the buyers have an agent signing the mortgage for them.

If one of the above conditions is missing, please call the Underwriting Department to discuss the problem.

When the agent executes a deed or mortgage pursuant to a power of attorney, the grantor or mortgagor clause should state the agency, such as: "John Smith [principal] by Joe Jones [agent], his attorney-in-fact." The agent should sign the deed using the same words as contained in the grantor/mortgagor clause.

When the notary acknowledges the signature of the agent, the acknowledgment should read: "Joe Jones [agent], as attorney-in-fact for John Smith [principal]."

Of course, the marital status of the principal must be stated in the grantor/mortgagor clause, and if the property is the homestead of the principal, the principal's spouse must join in the conveyance.

Power of Attorney for Health Care Law

An agent possessing authority to make health care decisions on behalf of a principal under the Powers of Attorney for Health Care Act, 755 ILCS 45/4-10, may be able to dispose of a principal's property in order to pay health care costs under Section (b)(3) of the Act. However, the language of this section limits an agent's ability to control the principal's property "as [is] authorized by the statutory property power."

An agent granted powers under the Statutory Short Form Power of Attorney for Property Law Act may conduct financial transactions on behalf of a principal in the areas of real estate, banks, stocks and bonds, or any other dealings detailed in the agency. Section 45/4-10(b)(3) of the Act discusses the financial aspects of the health care power of attorney. The full text of this Section reads as follows:

The agent is authorized to contract for any and all types of health care services and facilities in the name of and on behalf of the principal and to bind the principal to pay for all such services and facilities, and to have and exercise those powers over the principal's property as are authorized under the statutory property power, to the extent the agent deems necessary to pay health care costs; and the agent shall not be personally liable for any services or care contracted for on behalf of the principal. (Emphasis added). 755 ILCS 45/4-10(b)(3).

In summary, a health care agent may only dispose of the principal's property if he or she possesses additional fiduciary powers granted by the principal separately under the statutory property power. While the Statutory Short Form Power of Attorney for Property Law outlines many different types of property-related powers, none of those powers becomes "authorized" for use until the principal grants them to the agent.

Therefore, when assessing a health care agent's ability to dispose of a principal's property, first look for the existence of property powers in the agent, and then look for any limitations placed on the agent's property powers by the principal.

ATG's Underwriting Guidelines

When using the Illinois Statutory Short Form Power of Attorney, you need not seek approval from the ATG Underwriting Department if the form complies with our guidelines, above. If the form does not comply with our guidelines, please call an underwriter or staff attorney to discuss it. Please take the following steps when presented with a non-statutory power of attorney at a closing:

 

  1. Determine the reason the power of attorney is being used.

     

  2. Obtain approval from both ATG and the lender.

     

  3. Make sure that the power of attorney contains a description of the real estate to be conveyed and specifically grants the authority to execute the documents in connection with the closing. It should be executed close in time to the closing. If the power of attorney does not contain this level of detail, please fax it to the Underwriting Department for approval.

     

  4. For Seller: Record the power of attorney prior to the deed if the agent is to sign the deed and other seller's documents. If the agent is to sign only the RESPA and other miscellaneous documents, and the seller has already signed the seller's documents, the power of attorney need not be recorded.

     

  5. For Buyer: Record the power of attorney prior to the mortgage.

Attorney in Fact/Attorney at Law:

 

  1. An attorney in fact is an agent authorized by a proper power of attorney to act on behalf of the principal.

     

  2. An attorney at law is a person admitted to practice law in his or her state by virtue of a license, authorized to represent clients in court, and to draft legal documents.

What to do when you have only a copy of the power of attorney? If the power of attorney is the statutory short form, then you may rely upon a copy. The person dealing with an agent who presents a copy of the power of attorney can demand that the agent furnish an affidavit stating that the power of attorney is a true copy of the original and that, to the best of the agent's knowledge, the principal is alive and the relevant powers have not been altered or terminated.

You need not check to make sure the principal is still alive, still competent, and still authorizes the power of attorney. However, if you receive information to suggest that the principal is dead, not competent, has revoked or amended the power of attorney, or has filed bankruptcy, you must request additional information and proof to establish the continuing validity of the power. If the power specifies either a beginning or ending time of the event for its effectiveness, you must ascertain whether the time has passed or the event has occurred. If you ever have any doubt about relying upon a power of attorney, ask the agent to sign an affidavit verifying the continued effectiveness of the power of attorney.

Please note that the United States Department of Housing and Urban Development (HUD) has indicated that every power of attorney used in Federal Housing Authority (FHA) transactions must be transaction-specific (see HUD circular letter 87-2). The Illinois statutory form will generally not be transaction-specific and you should be aware of the requirements of HUD when the sellers or buyers will not attend the closing. The power of attorney in those circumstances must give a specific direction for the particular transaction, which includes date, time, address, dollar amounts, type of transaction, and anything else germane to the transaction.

© ATG UB0800vol5no4

 

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