Power of attorney: Convenience, risks, and what you need to know

Power of attorney: Convenience, risks, and what you need to know

With so many South Africans living and travelling abroad, the power of attorney (POA) is a useful legal tool that can make the sale or purchase process much easier and quicker when the buyer or seller is unavailable or unable to attend to the details of the transaction in person.

 In a nutshell, a POA allows one person, known as the 'principal', to appoint another person, the 'agent' or 'attorney', to act on their behalf with regards a specific transaction and it comes in handy for a number of reasons.

Over and above the principal being located overseas or in another province, they may suffer from health or mobility issues or if there are time constraints and meetings to attend, a busy professional might find it expedient to appoint an agent.

And in complex transactions or deals involving multiple parties, a POA can streamline the process by allowing an experienced representative such as an attorney to act on your behalf.

However, although a power of attorney offers convenience and can be immensely helpful, it also comes with responsibilities and risks so it's essential to understand exactly when you might need it and what potential pitfalls to watch out for.

Ensuring that your POA is correctly drafted, legally valid and appropriately limited can prevent potentially serious issues like unauthorised actions or financial loss.

There are different types of power of attorney documents available in South Africa, each with specific functions but according, two are most commonly in property transactions:  A General Power of Attorney grants broad authority, allowing the agent to perform a range of actions on your behalf, including buying, selling, or managing property. However, it can be risky if not carefully managed, as it provides sweeping powers.

A Special or Limited Power of Attorney limits the agent's powers to specific actions, such as signing property transfer documents. This is often preferred in property transactions, as it provides protection by limiting the scope of authority.

He cautions that for a power of attorney to be legally binding in South Africa, certain steps and requirements must be followed:

1. Drafting the Document Properly: The POA document must clearly outline the powers granted to the agent, ensuring there is no ambiguity. It's advisable to work with a conveyancing attorney or notary to ensure the document is precise and legally sound.
2. Signatures and Witnesses: The POA must be signed by the principal in the presence of witnesses. Generally, two witnesses are required, and they should be adults who are not related to either party or have any stake in the property transaction.
3. Certification for Overseas Principals: If the principal is overseas, the POA must be signed and certified by a notary public in that country. Additionally, an apostille or certification by the relevant South African embassy may be needed to validate it in South Africa.
4. Filing the Document with Relevant Authorities: Depending on the transaction, the POA may need to be registered with the deeds office, especially if it involves the transfer of property. Ensure your agent or conveyancing attorney files the necessary documents.
5. Revocation Clause: If you want to retain the right to revoke the POA, include a clear revocation clause in the document. This allows you to end the agent's authority if circumstances change or if you feel it is no longer necessary.

Using a POA in a property transaction comes with certain risks and considerations, so it's important to understand exactly where the potential risks lie and what issues to be mindful of in order to avoid unnecessary delays or costly errors in judgement.

He lists the following key issues to be mindful of:

1. Fraud and Misuse: A power of attorney grants significant control, so it's crucial to select an agent you trust completely. Fraudulent use of a POA can result in financial loss, so consider including restrictions in the POA document to limit the agent's actions if necessary.
2. Expiry and Revocation: In South Africa, a POA expires if the principal passes away or is declared mentally incapacitated. If you anticipate that the transaction might take a long time, consider a contingency plan. You may also revoke the POA at any time but be sure to communicate this in writing to all parties involved.
3. Scope of Authority: Avoid granting too much power if it's not necessary. A special or limited POA can reduce risks by focusing on specific tasks, rather than granting the agent broad, undefined authority.
4. Valid Identification and Documentation: When acting on behalf of the principal, the agent will need to present identification and a copy of the POA. Make sure the agent understands what documents are needed and double-check that the POA is properly certified and up to date.
5. Legal Advice: Property transactions can be complex and seeking legal advice when setting up a POA can help avoid costly errors. A conveyancing attorney can assist you in drafting a document that meets your needs and mitigates risks.

At the end of the day, a power of attorney can be a valuable tool, enabling transactions to proceed seamlessly even when the buyer or seller is unavailable, however, it's essential to understand the legal requirements, usually best to limit the agent's authority to what is needed, and work with a trusted individual.

By taking the time to carefully draft and validate the POA, you can protect your interests, avoid potential issues, and ensure your property transaction is completed without unnecessary delays or risks.

Extract from Property 24