With South Africans living and travelling abroad, the power of attorney (POA) is a useful legal tool that can make the sale or purchase process of property much easier and quicker when the buyer or seller is unavailable or unable to attend to the transaction details in person.
According to Claude McKirby, Co-Principal, Lew Geffen Sotheby’s International Realty, a POA allows a person, known as the ‘principal’, to appoint another person, the ‘agent’ or ‘attorney’, to act on their behalf with regards to a specific transaction.
"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," McKirby said.
"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."
While POA offers convenience and can be helpful, it also comes with responsibilities and risks.
Therefore it is crucial to understand exactly when you might need it and what the possible pitfalls to watch out for.
McKirby said: "Ensuring that your POA is correctly drafted, legally valid and appropriately limited can prevent potentially serious issues like unauthorised actions or financial loss."
According to McKirby, there are two different types of power of attorney documents that are common in property transactions:
General Power of Attorney: This 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: This 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.
McKirby said that for a power of attorney to be legally binding in South Africa, certain steps and requirements must be followed:
- Drafting the document properly: The POA document must clearly outline the powers granted to the agent, making sure that there is no ambiguity. "It’s advisable to work with a conveyancing attorney or notary to ensure the document is precise and legally sound," McKirby said.
- Signatures and witnesses: The principal must sign the POA in the presence of two witnesses and the witnesses should be adults who are not related to either party or have any stake in the property transaction.
- Certification for overseas principals: If the principal is overseas, the POA must be signed and certified by a notary public in that country, according to McKirby. Plus, an apostille or certification by the relevant South African embassy may be needed to validate the document in South Africa.
- 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.
- Revocation clause: If you want to have the right to revoke the POA then you will need to include a clear revocation clause in the document. This clause will allow you to end the agent’s authority if circumstances change or if you feel it is no longer necessary.
Here are some key issues you need to be mindful of:
Fraud and misuse
A power of attorney grants significant control, so it is important to select an agent you trust completely. Fraudulent use of a POA can result in financial loss, so you should consider including restrictions in the POA document to limit the agent's actions if necessary.
Expiry and revocation
A POA expires if the principal passes away or is declared mentally incapacitated in South Africa. If you anticipate that the transaction might take a long time, think about having a contingency plan.
McKirby said: "You can also revoke the POA at any time but be sure to communicate this in writing to all parties involved."
Scope of Authority
Avoid granting too much power if it’s not necessary, according to McKirby.
A special or limited POA can lower the risks by focusing on specific tasks, instead of granting the agent broad, undefined authority.
Valid identification and documentation
McKirby said that when acting on behalf of the principal, the agent will need to present identification and a copy of the POA. The agent needs to understand what documents are needed and double-check that the POA is properly certified and up to date.
Legal advice
Property transactions can be complex, therefore seeking legal advice when setting up a POA can help you avoid costly errors.
A conveyancing attorney can assist you in drafting a document that meets your needs and mitigates risks.
IOL Property