When a couple is thinking about making an LPA for their property & financial affairs it is quite common for them to want to appoint each other as their attorneys.
Often, they want to appoint each other as sole attorneys initially. While they may be happy for their children or other trusted people to act too, it is common that they only want them to act if the spouse becomes unable to. This is usually a sensible enough approach, but there is one small issue that clients should be made aware of. There can be difficulties if the property needs to be sold after an owner has lost capacity.
What is the issue?
Trusts are pervasive in English & Welsh law. While it is not something we tend to consider in our day to day life, it is a fact of land law that every property that is jointly held is held on a trust of land. The joint owners of the property hold the property as trustees, in most cases on trust for themselves either as joint tenants or tenants in common.
Where a property is held on a trust of land at least two trustees are required to give good receipt for any capital arising from its sale. This is where we face problems with joint owners of property appointing each other as their sole attorneys. Two distinct signatures are required on the transfer documents, so an attorney cannot sign both for themselves in their capacity as a trustee, and also for the incapacitated owner in their capacity as their attorney.
How is this resolved?
The attorney will be the continuing trustee as they are still a capable co-owner of the land. Where the attorney is a continuing trustee the Trustee Delegation Act 1999 allows them to appoint a new trustee to act with them solely for dealing with the property transfer. Once the property is held by two capable trustees it can be sold, as good receipt can now be given.
So, in reality it’s a minor nuisance and easily worked around but being faced with this issue unexpectedly as an attorney can certainly be daunting. If clients own their property jointly and wish to appoint each other as sole attorneys it is therefore best that they are made aware of this.
Of course, the easiest way to avoid this issue at all would be for them to consider naming an additional attorney to act alongside the other spouse. This way there would always be two separate trustees able to sign any transfer documents, as the joint owner could sign for themselves and the incapacitated owner’s other attorney could sign on their behalf. This avoids any panic or delays when it comes to selling the property after an owner has lost capacity.
19 September 2020
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