Property & Enduring Powers of Attorney
by The FindLaw Team
In the context of property, a person (the donor or principal) who wishes to permanently grant the management of their financial affairs to another (the donee, agent or attorney) may grant an enduring power of attorney.
The concept of a “power of attorney” has its roots in the relationship between an agent and a principal (eg between a property owner and their real estate agent) although this area of law is now very comprehensively covered by the Powers of Attorney Act 1998 (Qld). Powers of attorney now have wide application and relevance in the context of health and guardianship law, although this article focuses on the use of these documents in property dealings.
What is an Enduring Power of Attorney?
An enduring power of attorney (as distinct from a power of attorney) is where a person permanently grants the management of their personal or financial affairs to another person. The attorney (that is, the person who receives the management power under the document) may have restrictions placed on when (and under what circumstances) they may exercise their powers of financial management, but typically the power is wide and might extend to such property-related matters as:
- Buying property in the principal's name (with the use of their funds);
- Leasing the principal's property and choosing particular tenants;
- Dealing with the principal's other assets; and
- Making investment decisions, including selling the principal's house or subdividing the land.
Enduring powers of attorney are popular for older adults who may be close to losing the ability to manage their own financial affairs. A traditional weakness of the principal agent relationship was that if the principal lost their mental capacity to make decisions, the agent might be placed in the position of no longer having legal authority to act for them. An enduring power of attorney is designed to avoid this potential loss of capacity (and indeed may be specifically setup to come into effect upon the principal losing their mental capacity).
Because of the potentially wide nature of authority under an enduring power of attorney, the courts require a high level of assurance that the principal had an understanding of what they were doing when granting the power. Numerous challenges to enduring powers of attorney have succeeded on the basis that the principal either had no real understanding of what the document was, or that the contents of the enduring power of attorney were not adequately explained to them. It is important to stress that this is “enduring”, meaning that the attorney's power can only be withdrawn while the principal has the same mental capacity to grant the power. As a result, if the principal granted an enduring power of attorney and subsequently lost their mental capacity to make decisions, they would be unable to revoke the attorney's powers.
How do Enduring Powers of Attorney relate to Property & Conveyancing Law?
A clear application of enduring powers of attorney in property law is in relation to conveyancing. Under the Land Title Act 1994 (Qld), all enduring powers of attorney used in conveyancing must be registered. It is also possible for the principal to specify restrictions on the attorney's abilities to deal with their property (such as only allowing the sale of their property under certain market conditions). When the enduring power of attorney is registered, the Registrar of Titles will accept documents lodged by the attorney in relation to property as if they had been lodged by the principal.
An enduring power of attorney thus allows an attorney to effectively stand in the principal's shoes. Because of their wide-reaching effects, it is highly recommended that a person considering granting an enduring power of attorney receive independent legal advice as to implications of the grant (and how this could impact on their personal financial situation).