Executing a Power of Attorney – who can you trust?

Power of attorney
Buyers and sellers are regularly advised to execute a power of attorney (in Spanish Poder) to allow someone else (known as the attorney) to do various tasks in their name such as:-

• apply for NIE numbers
• open bank accounts
• sign contracts
• apply for mortgages or loans
• sign mortgage and/or property deeds on completion
• Set up or transfer utility accounts etc

General or specific power
Powers of attorney are executed before a notary and will either be general or specific and can be executed either in Spain or in the grantor’s own country. Those executed outside Spain need to be legalised in the country of execution to be valid for use in Spain.

• A general power of attorney (in Spanish Poder General) will be a lengthy document and the power is pretty much unlimited. Clients are advised it is always best to grant a general power because situations change and unforeseen complexities arise in a transaction.
• A specific power of attorney as its name implies grants only a limited power to do either one task or a number of tasks.

Risks
Up until now UK/Irish buyers and sellers have not given much thought to executing powers of attorney and have simply accepted that this is the norm in Spain. But the Irish, in the wake of two highly publicised rogue solicitors, are now extremely hesitant in granting a power to anyone on the basis if you can’t trust a solicitor then who can you trust?

What happened in Ireland was that two Irish solicitors were using their clients’ accounts to fund property deals and were abusing legal undertakings that allow loans to be drawn down on the word of a solicitor, thereby managing to obtain multiple mortgages on the same property without their clients’ knowledge. The Law Society of Ireland has since closed their respective law practices and clients and banks are now pursuing legal action in the High Court in Dublin. Although the properties involved in the multiple mortgaging scams would appear to be mainly Irish based the publicity has left the Irish in a very nervous disposition as one of the solicitors involved was a high profiled overseas property lawyer and developer.

General advice on executing a power of attorney
A power of attorney should never in any circumstances be given to the estate agent from whom a property is being purchased if only for the obvious reason the estate agent acts for the seller. Neither should a person selling execute a power of attorney in favour of an estate agent as there have been numerous reported incidences of estate agents abusing their powers by under-declaring the selling price and pocketing the difference. Likewise there have been many reported incidences of Spanish solicitors abusing their powers when acting under a client’s power of attorney.

In truth here are more arguments against executing a power of attorney than in favour and most solicitors would privately advise clients never to execute a power of attorney. But if at the end of the day there is no alternative then thought should be given to having a specific power of attorney drafted and which will automatically lapse after a specific time period. With proper planning on the part of the solicitor there is no reason why a buyer or seller could not attend the notary in person for completion.

Revoking a Power of Attorney
All redundant powers of attorney should be formally cancelled or revoked. It is an extremely risky practice to just ignore their existence. If the power of attorney was executed in Spain then the grantor should go to the notary where the power was executed and have it revoked. The notary will, in due course, ask the person to whom the power was granted to attend and to return the copy and then the original on the notary’s file is marked revoked. Destroying the copy does not revoke the power since the attorney could go to the notary and obtain a new copy as the original signed power always remains with the notary. If the power of attorney was executed in UK or Ireland then it is revoked by destroying the original executed document as the notary does not hold the original executed document.

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Article originally published in Spanish Homes magazine – June 2008