- August 11, 2009
- All New York State Office Counsel, Managers and Agents
- Power of Attorney
Please be advised that the General Obligations Law concerning Powers of Attorney ("POA") has been amended; it was originally slated to be effective March 1, 2009, although the new law will take now take effect September 1, 2009.
Under the new statute (GOL 5-1501 et seq) the POA is automatically durable unless it expressly provides that it is terminated by the incapacity of the principal.
The new form POA differs in at least 2 major aspects from the traditional POA. The first aspect is that in addition to the principal's signature, the agent must now also execute the POA and have it acknowledged in order for the POA to be effective, and it is not effective until the agent signs it; if multiple agents must act together per the power, the POA is not effective until the last agent executes it. All signatures, both the principal(s) and agent(s), must be acknowledged for the POA to be effective.
Of course, the next question then becomes whether a lapse of time between the execution of the POA by the principal and the execution by the agent will have any dire consequences; kindly be advised that the principal and agent need not execute the POA contemporaneously; the POA is not invalid due to a lapse of time between the date of the signature and acknowledgement of the principal and the signature and acknowledgement of the agent.
The second major aspect in which POAs have changed is that pursuant to GOL 5-1504, a party cannot, without reasonable cause, refuse to honor a statutory short form POA that is properly executed. The pertinent statutory section and a key exception are set forth below.
GOL 5-1504: No third party located in this state shall refuse, without reasonable cause, to honor a statutory short form power of attorney executed in accordance with 5-1501B of this title, including a statutory short form power of attorney which is supplemented by a statutory major gifts rider, or a short form power of attorney properly executed executed in accordance with the laws in effect at the time of its execution. Reasonable cause, defined in subdivision 3 shall include, but not be limited to:
(9) the refusal by a title insurance company to underwrite title insurance for a transfer of real property made pursuant to a major gifts rider or non-statutory power of attorney that does not contain express instructions or purposes of the principal. (emphasis added)
Section 1504, subdivision 2, makes it unlawful for a third party to unreasonably refuse to honor a properly executed POA; a special proceeding established by GOL Section 5-1510 of this title shall be the exclusive remedy for a violation of this section.
GOL 5-1505 defines the standard of care for the principal and sets forth the fiduciary duty the agent owes to principal-by way of example, and one that is frequently encountered in title-an agent cannot transfer the Principal's property to himself/herself absent the specific authority to do so in the POA; in addition, the agent must keep a record of all receipts, disbursements, etc. while acting as agent.
GOL 5-1506 reviews the Compensation for agent; agents are generally not compensated unless the power provides for otherwise; however an agent may be entitled to be reimbursed for reasonable expenses.
GOL 5-1507 is a section that is of particular importance to the title insurer and as such is specifically set forth below:
Section 5-1507. Signature of agent. 1. (a) in any transaction where the agent is acting pursuant to a power of attorney and where the hand-written signature of the agent or principal is required, the agent shall disclose the principal and agent relationship by:
(1) signing "(name of agent) as agent for (name of principal)"; or (2) signing "(name of principal) by (name of agent), as agent"; or (3) any similar written disclosure of the principal and agent relationship. (Emphasis added)
(b) a third party shall incur no liability for accepting a signature that does not meet the requirements of this subdivision.
2. When the agent engages in a transaction that purports to be on behalf of the principal, the agent is attesting that:
(a) the agent has actual authority to engage in the transaction;
(b) the agent does not have, at the time of the transaction, actual notice of the termination or revocation of the power of attorney, or notice of any facts indicating that the power of attorney has been terminated or revoked;
(c) if the power of attorney is one which terminates upon the principal' s incapacity, the agent does not have, at the time of the transaction actual notice of the principal's incapacity, or notice of any facts indicating the principal's incapacity.
(d) the agent does not have, at the time of the transaction, actual notice that the power of attorney has been modified in any way that would affect the ability of the agent to engage in the transaction, or notice of any facts indicating that the power of attorney has been so modified.
3. The attestation of the agent pursuant to subdivision two of this section is not effective as to any third party who had actual notice that the power of attorney had terminated or been revoked prior to the transaction.
As can be seen above, the traditional "John Doe by Jane Doe, his/her attorney in fact" is no longer required, although it can be assumed that it is still legally sufficient as long as it connotes a principal-agency relationship. In addition it is interesting to note the balance of this section defines the agent's liability is contingent upon actual notice that the POA has been revoked, etc. This is why it is very important for title closers to verify the POA is still effective.
Section 5-1508 speaks of co-agents; co-agents must act together unless the POA states differently; however in an emergency to avoid irreparable damage to the principal an agent may act alone if the other agent is unavailable due to some temporary capacity.
Section 5-1509 provides for the appointment of a monitor in the event the principal so desires one; a monitor or monitors in the POA shall have the authority to request and compel the agent to provide a record of all receipts, disbursements and transactions entered into by the agent on behalf of the principal; there is no fiduciary responsibility; there is no fiduciary duty on the monitor.
Section 5-1510 provides for the commencement of a special proceeding to compel an agent to turn over receipts and to maintain a proceeding against any party "who may be required to accept a" POA.
Section 5-1511 is a key section in the new statute and is set forth in its totality below.
Section 5-1511. Termination or revocation of power of attorney; notice. 1. A power of attorney terminates when:
(a) the principal dies;
(b) the principal becomes incapacitated, if the power of attorney is not durable;
(c) the principal revokes the power of attorney;
(d) the principal revokes the agent's authority and there is no co-agent or successor agent, or no co-agent or successor agent who is willing or able to serve;
(e) the agent dies, becomes incapacitated or resigns and there is no co-agent or successor agent or no co-agent or successor agent who is willing or able to serve;
(f) the authority of the agent terminates and there is no co-agent or successor agent or no co-agent or successor agent who is willing or able to serve;
(g) the purpose of the power of attorney is accomplished; or
(h) a court order revokes the power of attorney as provided in section 5-1510 of this title or in section 81.29 of the mental hygiene law.
2. An agent's authority terminates when:
(a) the principal revokes the agent's authority;
(b) the agent dies, becomes incapacitated or resigns;
(c) the agent's marriage to the principal is terminated by divorce, annulment or declaration of nullity, unless the power of attorney expressly provides otherwise. If the authority of an agent is revoked solely by this subdivision, it shall be revived by the principal's remarriage to the former spouse; or
(d) the power of attorney terminates.
3. A principal may revoke a power of attorney;
(a) in accordance with the terms of the power of attorney;
(b) by delivering a written, signed and dated revocation of the power of attorney as follows:
(1) to the agent, and the agent must comply with the principal's revocation notwithstanding the actual or perceived incapacity of the principal unless the principal is subject to a guardianship under article eighty-one of the mental hygiene law; and (2) to any third party that the principal has reason to believe has received, retained or acted upon, the power of attorney.
4. Where the power of attorney has been recorded pursuant to section two hundred ninety-four of the real property law, the principal shall also record a written revocation pursuant to section three hundred twenty-six of the real property law. Notwithstanding the recording of a revocation, a third party must have actual notice of the revocation for the revocation to be effective.
5. Termination of an agent's authority or of the power of attorney is not effective as to any third party who has not received actual notice of the termination and acts in good faith under the power of attorney. Any action so taken, unless otherwise invalid or unenforceable, shall bind the principal and the principal's successors in interest. A financial institution is deemed to have actual notice after it has had a reasonable opportunity to act on a written notice of the revocation or termination following receipt of the same at its office where an account is located.
6. Unless the principal expressly provides otherwise, the execution of a power of attorney revokes any and all prior powers of attorney executed by the principal.
The above section again sets forth the actual notice requirement that a third party must have that the POA has been revoked.
Section 5-1512. Powers of attorney executed in other jurisdictions.
A power of attorney executed in another state or jurisdiction in compliance with the law of that state or jurisdiction or the law of this state is valid in this state, regardless of whether the principal is a domiciliary of this state.
Section 5-1513 is the actual new form POA, a copy of which is annexed to this bulletin.
Section 5-1514 is the provision that establishes the Statutory Major Gifts Rider ("SMGR"); simply stated it authorizes an agent to make gifts and transfers of the Principal's property, including real estate.
Under the new law, an agent who has a statutory short form POA without an SMGR has limited authority to make gifts, such as making changes to bank accounts. To expand this limited authority, the principal must check the major gifts box on the POA and execute the SMGR simultaneously (i.e. the same day) with the POA; if they are not executed simultaneously the SMGR is void. The SMGR then allows the agent to make gifts in various amounts as set forth in the SMGR. Assuming the proper box is checked, the SMGR also allows the agent to make gifts to himself/herself.
The SMGR must be in 12 point type or greater; it must by executed and dated by the principal, the principal's signature acknowledged and there must be 2 "disinterested" witnesses (who are not recipients of any of the gifts/items under the SMGR).
In the event of a divorce, annulment or decree that a marriage is void, the authority for an agent to make a transfer or gift to the Principal's spouse is automatically revoked.
A copy of the SMGR is annexed hereto.
As always, please feel free to contact Stewart Agency Legal Services with any questions or suggestions you may have.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.